Two-tier collective wage bargaining in a frictional labor market (pdf)
Collective wage bargaining in many countries combines industry-level agreements with firm-level negotiations. This paper develops a general equilibrium model of such “two-tier” bargaining in a monopsonistic labor market with search frictions. The model highlights a novel mechanism: the centrally negotiated wage floor, which serves as the outside option in local bargaining, either renders local negotiations redundant or endows workers with bargaining power analogous to partial strike rights. When the central wage floor is sufficiently high, it binds and determines local wages. When it is low, firms voluntarily negotiate higher wages to retain workers, making the floor non-binding. Surprisingly, in this case, a higher floor results in lower wages as it weakens workers' threat to leave. Which regime emerges in equilibrium depends on model parameters, with more elastic labor supply favoring a non-binding wage floor. The findings offer a new perspective on the interaction between minimum wages and bargaining institutions.
Identity capital and wealth accumulation (with Per Krusell, Fredrik Paues)
Reject & Resubmit, Review of Economic Dynamics (pdf)
We develop a theory of identity capital. Identity is built up around a ``life project'' that can take many forms and in which individuals invest time and/or money; identity capital is a stock measure capturing these investments. In this paper, we focus on the life project of building a firm and its possible relevance for (i) the high propensity to save of rich entrepreneurs, and (ii) the rise of risky portfolio shares in wealth. To this end, we introduce identity capital into a dynamic consumption-savings model with uninsurable idiosyncratic risk. The key model feature is a utility asymmetry: we assume that decumulating, or losing, identity leads to a utility loss, while building it up renders no utility gain. We find that identity management makes individuals reluctant to downsize when the firm's financial prospects are weak as well as to invest when they are strong. The model also implies that, at least in parts of the wealth-identity space, the risky portfolio share increases in wealth, a result that is hard to obtain in standard models with constant relative risk aversion.
A note on employment and wages in individual and collective bargaining
This note employs search-and-matching theory to study two common wage-setting regimes: collective bargaining at the firm and individual bargaining at staffing agencies, from which firms rent workers. When firms face decreasing returns to labor in production, both regimes yield identical employment levels, despite union wages exceeding staffing wages. Intuitively, under collective bargaining, although the higher wage works to raise the marginal cost of labor, firms have an incentive to hire additional workers to reduce the bargained wage for all employed workers, offsetting the higher wage. As a result, marginal labor costs---and thus employment---are the same across regimes.
Firm production, markups, and misallocation (with Timo Boppart)
Accounting for rented labor and capital (with Timo Boppart)
Staffing agencies and in-house bargaining (pdf)
with Ann-Sofie Kolm and Per Krusell, Journal of Monetary Economics 2026, Vol 160