Abstract: Using three European matched employer-employee data sets, I show that workers experiencing high positive or negative changes in wages subsequently have a high propensity of job separation. In all three data sets, a change in wages of 10 percentage points above or below the median coincides with roughly 30% higher odds of job separation. The pattern is more pronounced among low experience workers. Theoretically, I rationalize the empirical finding as a result of information and labor market frictions in a random search model with two-sided heterogeneity and symmetric learning about worker ability. In the framework, workers with low experience have a high initial volatility of wage changes and move between firms to enjoy productivity benefits. I allow for additional channels of wage growth through contract renegotiation and dynamic match productivity and let firms differ in the volatility of production shocks. In the model, workers can partially reduce their wage exposure to productivity shocks by accumulating wage negotiation capital such that the volatility of wage changes falls endogenously on the job ladder. An uneven distribution of volatile firms along the job ladder further increases wage stability with experience. I thereby show that the job ladder does not only determine worker's level of wages but can also account for part of its variability.
- Inheritance Reform and Labor Dynamics in Germany
Abstract: A provision in the inheritance tax law in Germany from the year 2009 allowed firms to avoid taxation of business wealth upon firm owner transitions when avoiding cuts to the wage bill. I estimate the effect of the reform on employment and productivity within firms experiencing owner transitions in Germany. I find a positive effect on employment growth for firms particularly affected by the reform. I analyze distributional consequences of the reform.
- Labor Productivity and Sector Dynamics
Abstract: The sign-switch of the correlation of labor productivity and hours worked since the mid 1980's has been studied at the aggregate level of the economy. This paper extends the analysis to the sector level and argues that sector dynamics drive changes in the labor productivity correlations. At the cross-section, I find support for the impact of the manufacturing share on the labor productivity correlations. I explore this relation in a time-series analysis and find that labor productivity correlations have been systematically different in the manufacturing and the service sector since the 1960s. Moreover, I find different dynamics in both sectors over the same horizon. Based on the experience of changes in the relative size of the two sectors, as well as changes in the interrelation between sectors over the same time period, I examine if sector dynamics can account for the labor productivity puzzle. In a theoretical model, I study the ability of input-output linkages as well as changing sector sizes to bring about changes in the labor productivity correlations. The model can replicate comparative dynamics of the labor productivity correlations and finds changes in the input-output matrix a powerful driver of changes in labor productivity correlations.
- Regulation Change, Labor Reallocation and Knowledge Spillover: Evidence from Changes in Financial Reporting Standards (with Jung Ho Choi and Hans Christensen)