How Much Should we Trust Estimates of Firm Effects and Worker Sorting? (with Stéphane Bonhomme, Thibaut Lamadon, Elena Manresa, Magne Mogstad and Bradley Setzler)
Many studies use matched employer-employee data to estimate a statistical model of earnings determination with worker and firm fixed effects. Estimates based on this model have produced influential yet controversial conclusions. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the United States and several European countries while taking advantage of both fixed effects and random effects methods for bias correction. We find that limited mobility bias is severe and that bias correction is important.
For code cf. here.
The Two Faces of Worker Specialization (with Zsófia Barany)
We study how worker specialization—the distance between a worker’s skill set and those prevalent in the labor market—shapes employment outcomes. Using US and French data, we first document that specialized jobs are characterized by asymmetric skill profiles and a scarcity of nearby employment opportunities. We incorporate these features into a random search model with multidimensional skills, mismatch penalties and skill complementarity. We show that specialization lowers job-finding rates due to a lack of suitable jobs, but raises re-employment wages via improved productivity. Empirical evidence from displaced workers in both countries confirms these predictions. Our findings reconcile competing views in the literature by showing that specialization entails trade-offs and is neither uniformly beneficial nor harmful.
Life-Cycle Wage Growth and Firm Productivity in Developed and Developing Economies (with Juan Munoz)
Life-cycle wage growth varies significantly across countries. We examine the role of the local distribution of firm productivity in shaping life-cycle wages by introducing a random search model that disentangles the effects of firm productivity distribution, on-the-job learning, and labor market frictions. Estimates of the model for Brazil, Colombia, and the United States suggest that the shape and scale of the firm-type distribution are key factors in explaining life-cycle wage growth. Counterfactual simulations suggest that equating the firm-type distribution in Brazil and Colombia to that of the United States would substantially reduce the cross-country gap in workers’ life-cycle wage trajectories.
Revise and resubmit at IER
The Role of Workers in Knowledge Diffusion Across Firms (with Anders Akerman)
We study how worker mobility contributes to aggregate productivity growth by diffusing knowledge across firms. We develop a multi-worker-firm framework with random search and on-the-job mobility in which firm productivity improves through in-house innovation and through hiring workers from other firms. Using Swedish matched employer--employee and product-level data, together with event-study evidence based on shift-share international trade shocks, we show that the extent and direction of worker mobility affect firm productivity. We estimate that mobility-driven knowledge diffusion accounts for over 44% of growth in average firm productivity. Our results suggest that lower worker mobility, and more mobility from less productive firms, can depress growth in average firm productivity.
Under review.
Wage Bargaining and Wage Posting Firms (with Jean-Marc Robin)
This paper studies the coexistence of two wage-setting regimes: wage posting and offer matching/wage bargaining. Based on a job-ladder model with both firm types, we develop a novel theoretically-informed maximum-likelihood clustering and estimation procedure that treats firms' wage-setting regimes as latent. Using German employer survey data to benchmark the classification and Austrian matched employer--employee records for estimation, we obtain consistent evidence across settings. Bargaining firms account for about 28% of firms in Austria and 24% in Germany; they are more productive and exhibit greater within-firm wage dispersion. The model explains job-to-job wage declines as workers transition from posting to bargaining firms, leading to inefficient mobility and output losses ranging from 13% to 36% of total output changes driven by job-to-job mobility. Counterfactuals show that segmenting labor markets by wage-setting regime raises wages relative to the mixed economy.
Under review.
Separations on the Job Ladder (new version with Lewin Nolden)
Using matched employer-employee data from Italy, Germany, and Austria, we document a U-shaped relationship between within-job wage changes and separations: workers experiencing both wage cuts and wage gains are more likely to leave their employer. The pattern disappears once wage changes are standardized within tenure groups, pointing to a compositional job-ladder mechanism. To interpret this fact, we develop and estimate a random-search model with worker and firm heterogeneity, learning, persistent match productivity, and on-the-job renegotiation. History-dependent learning drives heterogeneity in wage-change volatility, while renegotiation capital stabilizes wages as workers move up the ladder. Learning frictions reduce aggregate output by 1.3%.
Under review.
Gender Differences in Amenities, Wages, and Firms (with Yana Gallen, Nabanita Datta Gupta and Kristian Stamp Hedeager)
We study the role of amenities in explaining the gender wage gap by linking Danish firm-level data on amenity provision to administrative earnings records. We supplement this with an incentive-compatible preference elicitation survey measuring workers' willingness to pay for specific job attributes. We first document gender differences in hours, scheduling, and commuting distance. We show that many of these gender differences expand after parenthood. We show that after parenthood, women move toward firms with lower wage premia, but these shifts largely disappear once we control for firm-level amenities. We then estimate willingness to pay for amenities using an incentivized hypothetical preference elicitation survey. We find that women strongly dislike evening and on-call work and value proximity to home and schedule flexibility for family reasons. This means that the gender gap in compensation is 38% smaller when we include the value to workers of amenities related to temporal and spacial flexibility, relative to when we only measure monetary earnings.
Lost Knowledge and New Products: Event-Study Evidence from Worker Deaths (with Anders Akerman)
Do worker-embodied knowledge stocks shape firms’ ability to expand product scope? We study unexpected worker deaths as plausibly exogenous shocks to firm knowledge and trace their consequences for product entry. Using linked employer- employee data with complete employment histories, we recover product-specific knowledge from workers’ prior production experience and estimate an event study. When a worker with experience in a particular product dies, the firm’s probability of entering production in this product line falls by about 0.4 percentage points, roughly one-fifth of the baseline rate, with the largest decline in the first post-event year and incomplete recovery thereafter. We interpret the findings as evidence that the loss of embodied knowledge constrains product expansion and, in the aggregate, may dampen growth.
Draft coming soon!
Inheritance taxes and family firms in Germany (with Charlotte Bartels, Theresa Buehrle, Gedeão Locks and Duncan Roth)
While tax avoidance has been identified as the primary behavioral response to inheritance and gift taxation, relatively few is known about the potentially negative externalities of inheritance and gift tax avoidance on production, employment and output of firms being transferred from one generation to the next. In this paper, we study the effect of business gift tax avoidance on firm growth and employment in Germany. Since 2009, the German inheritance and gift tax law creates an incentive to downsize before a firm transfer. We estimate excess separations before ownership transfer of family firms to quantify the efficiency cost of inheritance and gift tax avoidance in Germany, where family firms represent the backbone of the economy. We find that affected firms cut a small but significant amount of employment before transfer.
Draft coming soon!
Worker Specialization and the Aggregate Economy
How does the quality of job matches affect the aggregate economy? In this paper, we study how specialization, i.e. the growing adaptation of workers to their job, can amplify business cycles. On the one hand, specialization can increase output and job stability when aggregate productivity is high. On the other hand, worker specialization can decrease the odds of job finding after displacement when aggregate productivity is low. To quantify their impact, we solve and estimate a random search model with multidimensional skills and aggregate shocks using neural networks. We estimate the model on French and US data. Differently from the literature, our estimation procedure with neural networks allows fitting of any empirical moment vector as a plug-in, facilitating cross-country comparisons about the importance of specialization.
Ongoing Projects:
The Option Value of Distance: Wages and Commuting in a Spatial Labor Market (with Elena Mattana). Recipient of AUFF NOVA grant and SAB grant.
Acqui-Hires
ANR (2024) grant Project FIRMSIZE