Productivity Shocks, Long-Term Contracts and Earnings Dynamics
This paper examines how employer and worker specific productivity shocks transmit to wages and employment. I characterize the optimal contract in an equilibrium directed-search model. I provide conditions for identification. I estimate the model on Swedish matched employer-employee data.
A Distributional Framework for Matched Employer Employee Data
We propose a framework to estimate earnings distributions and worker and firm unobserved heterogeneity while allowing for complementarities and rich mobility and wage dynamics. We estimate our model on Swedish data. We find that log-addivity provides a good approximation for earnings. We find strong sorting, small firm effects and evidence of endogenous mobility.
Discretizing Unobserved Heterogeneity
We develop two-step and iterative panel data estimators based on a discretization of unobserved heterogeneity. We view discrete estimators as approximations, and study their properties in environments where population heterogeneity is individual-specific and un-restricted. Two applications suggest computational and statistical advantages of the method.
Imperfect Competition and Rent Sharing in the U.S. Labor Market
The paper uses the universe of tax record from the Internal Revenue Services to evaluate the size of rents captured by worker and firms in the U.S. labor market. Within a structural model where firms have wage-setting power we show that the size of rents is linked to the pass-trhough of firm shocks to employees' earnings. Our estimates suggets that workers are willing to pay 17% of their earnings to keep their current job versus moving to their second best.
How much should we trust estimates of firm effects and worker sorting
A large number of studies use matched employer-employee data to estimate the wage model with worker and firm effects introduced by Abowd, Kramarz, and Margolis (1999, AKM). These studies tend to draw two conclusions. First, firms play an significant role in wage determination, with a typical finding that about 20 percent of the variance of wages is attributable to variation in firm premia. Second, the correlation between firm and worker effects tends to be positive but relatively small, indicating modest sorting of high-wage workers to high-wage firm. In this paper, we provide empirical evidence on the sensitivity of these conclusions to statistical bias issues. Using data from the US and several European countries, and making use of fixed-effects and random-effects econometric methods for bias reduction, we re-examine the contribution of workers, firms, and worker-firm sorting to wage inequality. We find that bias matters. In contrast with AKM estimates, corrected estimates suggest that firm premia explain between 5 and 10 percent of log-wage dispersion, and that sorting is substantial.
Matching, Sorting, and Wages
This paper analyzes the allocation of workers to firms in an economy with search friction and sorting. We present a model with two sided heterogeneity, training costs, on-the-job search and vacancy creation. We provide a constructive proof for the non-parametric identification of the model, and evaluate the properties of the associated estimator with a Monte-Carlo simulation. Finally we estimate the model using GMM on the matched employer-employee data from Sweden to decompose the sources of income inequality and quantify the output loss due to search frictions.
Search and the SSP program
We develop an equilibrium search model with all the characteristics of the the Canadian welfare system and the Self Sufficiency Program. In this experiment, a group of lone mothers on income assistance for longer than 12 months are offered a wage premium if they find a full-time job within a year. Using the SSP experimental data and Labor Force Survey data we estimate a model with endogenous search effort, full time and part time work, heterogeneity in disutility of work and match heterogeneity. We extend the classical firm-worker wage bargaining problem to work in the presence of non-convex budget sets introduced by non-linear policies. The model is then used to quantify the crowding out effects associated with extending the SSP program to all women in the economy.
On the Folk Theorem with One-Dimensional Payoffs and Different Discount Factors
Proving the folk theorem in a game with three or more players usually requires imposing restrictions on the dimensionality of the stage-game payoffs. We show that all players having different discount factors can substitute for such restrictions.