Abstract: This paper studies how firms respond to the unexpected loss of experienced workers, using a natural experiment induced by a pension reform that triggered unanticipated early retirements. Exploiting matched administrative and survey data, I construct firm-level exposure measures to quantify the impact of this negative labor supply shock. Exposed firms experience persistent shifts in workforce composition, reductions in capital stock and technology adoption. The effects are most pronounced among smaller firms. The findings highlight how experience loss constrains capital use and slows technology adoption, underscoring limits to substitutability between capital and experienced labor. 

Abstract: This paper examines the determinants of cross-sectional and lifecycle inequality using a lifecycle earnings process model that incorporates earnings mobility and non-employment risks across birth cohorts and over time. We show that changes in unobserved skill prices and the variance of individual fixed effects across cohorts are the primary drivers of inequality. While non-employment risk contributes little to cross-sectional inequality, it is central to explaining lifecycle inequality. To explain the increase in the variance of fixed effects, we interpret these within a Roy model as realized productivity influenced by both ability and task choice. We provide evidence that technological change can amplify inequality beyond the canonical skill price channel by strengthening the mapping from ability to productivity through within-occupational task sorting.