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)
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Work in progress

Employer Wage-Setting Power: Evidence from Matched Survey-Administrative Data

-with Antoine Bertheau

We ask all firms in Denmark whether they pay high or low wages, and if so, why. We match our representative survey of firms with linked administrative labor market data and firm’s financial data. We first document that firms that think they are high-paying firms are more likely to be high-wage firms using an objective measure of wage policies (AKM firm fixed effects). We then continue to open the black box of the firm’s wage-setting in two ways. First, by exploiting a novel administrative dataset, we show that high AKM fixed effects firms are more likely to hire directly from other firms (poaching), have higher overtime work hours (relative to normal hours), and higher pay components for bad job characteristics. We then elicit a variety of beliefs on the reasons to pay high wages. The most common reason to pay high wages is to alleviate search frictions and retain incumbent employees. In contrast, compensation for negative job characteristics is the least common reason to pay high wages.