Working Papers

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. (Draft available here)
^{- Media Coverage: SUERF Policy Brief}

Work in progress

Why productive firms have higher returns to tenure

Job Market Paper - Draft coming soon!

I argue that the well documented positive relationships between wages and tenure and wages and firm-level productivity partly originate from the same mechanisms. 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, while starting wages have a relatively weak connection to firm-level productivity. I show that these differences across firms are not due to composition effects or “high potential” workers sorting into productive firms, but is a causal effect of being employed at productive firm. I further find that 45 pct. of these gains from tenure are transferable, so that part of the rewards from tenure, will also be present when workers switch to a new employer. Additionally, I show that this is even the case when workers face an involuntary separation, indicating that these gains reflect heterogeneity across firms in the rate at which employees acquire general human capital.

Firm Beliefs About Wage Setting

-with Antoine Bertheau

This paper yields new insights into why similar workers are paid differently by surveying Danish firms on their belief about wage setting and linking responses to administrative data. We first assess whether firms correctly perceive their actual position on the wage distribution by asking whether they pay higher or lower wages than firms competing for the same workers and comparing the answers to objective wage measures. We find that a substantial minority of firms misperceive their position on the wage distribution. Innacurate belief is more likely to occur for smaller and younger firms. Innacurate beliefs is associated with higher workers' separation rate. We then document firm’s motives to set higher or lower wages than their competitors. The main motive for setting high wages is in line with search models, i.e., to retain and attract new employees. Efficiency wage and rent-sharing motives come next. Compensating for negative job characteristics is the least common motive to set high wages.