Working Papers

Firms, Productivity, and Returns to Tenure

Job Market Paper - (Newest Version)

I show that the well-documented positive relationships between wages and tenure and wages and firm-level productivity are connected. Using an extension of Abowd et al. (1999) and Danish administrative data, I find that workers at more productive firms tend to see larger increases in wages over time. In contrast, starting wages are only weakly related to firm productivity. I show that these differences across firms are not due to composition effects or “quick learner” workers sorting into productive firms, but are a causal effect of being employed at a productive firm. A third of these gains from tenure are portable when switching employers even when separating involuntarily, indicating that these differences in returns partly reflect heterogeneity across firms in the rate at which employees acquire general human capital. Worker mobility patterns suggest that non-portable gains are primarily driven by differences in the rate of learning about worker-firm match quality. Finally, I show that firm-specific returns significantly influence the cost of job loss, with a real earnings loss nearly twice as large for workers displaced from firms in the top quartile of the returns distribution compared to those from the bottom quartile.

Work in progress

Aggregate Demand Shocks and Prices — Micro Evidence and Macro Implications

-with Tobias Renkin

We estimate the response of domestic prices and total output of Danish manufacturing firms to persistent firm level demand shocks resulting from heterogeneity in firms' exposure to different export destinations. Our results suggest supply curves are steep - a demand shock that increases output by 1% raises prices by 0.3%. We then augment the production side of a simple New Keynesian model with firm level demand shocks, and identify key parameters from matching firm behavior in the model to our estimates. We show that a model that can fit firm behavior produces a relatively steep Phillips curve in the aggregate. Our preferred estimate for the slope of the Phillips curve suggests that a monetary policy shock that increases output by 1% results in 0.4% higher price level.

Firm Beliefs About Wage Setting

-with Antoine Bertheau

This paper yields new insights into why similar workers are paid differently by surveying a representative sample of Danish firms and linking responses to administrative data. We find that a substantial minority of firms—about 35 percent —have inaccurate beliefs about their position on wage distribution. Inaccurate beliefs are more likely to occur for smaller and younger firms. We study implications of firms' inacurate beliefs by building a tractable monopsony framework. Using our survey, we elicit firms' motives for setting high wages. The dominant motive aligns with wage posting models, i.e., to retain and attract new employees. Compensating for negative job characteristics is the least common motive.

Wage effects of labor market tightness

I study the impact of labor market tightness on wages. Using Danish data on vacancies and unemployment at the occupational level and firm-level data on the occupational composition of employees, I construct novel firm-specific measures of labor market tightness. Using these measures, I estimate the causal impact of labor market tightness on wages at the firm level. I find a positive effect on wages in response to changes in tightness. The results are in line with the qualitative implications of the canonical search and matching model of the labor market.