The Return to Big City Experience: Evidence from Danish Refugees --- joint with Fabian Eckert & Conor Walsh --- this version: April 2019
This paper provides the first causal evidence of an urban wage premium. We exploit a government policy of quasi-random settlement of political refugees across labor markets in Denmark between 1986 and 1998. Refugees initially earn similar hourly wages across regions, but those placed in Copenhagen see their wages grow 30% faster with each year of experience. Greater accumulation of experience at high-wage establishments and differential sorting across occupations drive this dynamic premium. An estimated spatial model of earnings dynamics further attributes an important role to sorting on unobserved ability within cities.
We study the impact of labor income taxation on workers' job search behaviour and the implications it has for the equilibrium allocation of heterogenous workers across heterogenous firms. The analysis is conducted within a complete markets equilibrium on-the-job search model with two-sided heterogeneity, endogenous job search effort and hiring intensity, equilibrium wage formation, and firm entry and exit. In a nutshell, by appropriating part of the gain from finding a better paid job, income taxation reduces the return to job search effort and distorts workers' job search effort, which, in turn, distorts the equilibrium allocation of labor. The model is estimated on Danish matched employer-employee data, and is used to evaluate a series of tax reforms in Denmark in the 1990s and 2000s, to provide new insights into the elasticity of taxable labor income, and to identify a Pareto optimal income tax reform.
Work in Progress:
This paper presents evidence about employment dynamics of heterogenous workers across heterogenous firms in Denmark from 1986 to 2013. We compare firms at the top and at the bottom of the size, wage, and productivity distributions in terms of job-to-job mobility and mobility involving a period of non-employment. Several regularities stand out. First high-wage, high-productivity and (young) small firms grow via job-to-job mobility at all times. Second, high-wage, low-productivity and (young) small firms sharply contract during the Great Recession. This is mainly driven by a decline in hiring. We proceed by documenting which workers in terms of education are reallocated over the cycle. We find that less-educated workers are more likely to be reallocated directly to high-paying firms than more educated workers in booms. In recessions, less-educated workers are more likely to be laid off from all types of firms relative to more educated workers. We relate our findings to empirical implications of new developments of search and matching literature that seek to explain the cyclical pattern of employment reallocation.
Research Assistant Work:
I worked as a research assistant for Henning Bunzel during my undergraduate studies. We created the current version of the Danish Spell dataset which is a matched employer-employee dataset at the daily level. The dataset is widely used in the field of labor economics to study e.g. structural search models of the labor market.