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This study shows how costly is inflation to workers.

How costly is inflation to workers? Answers to this question have focused on the path of real wages during inflationary periods. We argue that workers must take costly actions (“conflict”) to have nominal wages catch up with inflation, meaning there are welfare costs even if real wages do not fall as inflation rises. We study a menu-cost style model, where workers choose whether to engage in conflict with employers to secure a wage increase. We show that, following a rise in inflation, wage catch-up resulting from more frequent conflict does not raise welfare. Instead, the impact of inflation on worker welfare is determined by what we call “wage erosion”—how inflation would lower real wages if workers’ conflict decisions did not respond to inflation.

As a result, using observed wage growth to measure worker welfare understates the costs of inflation. We conduct a survey showing that workers are willing to sacrifice 1.75% of their wages to avoid conflict. Calibrating the model to survey data, incorporating conflict significantly raises the costs of inflation for workers.

Find here draft of the working paper.

This paper demonstrates that labor market regulations shape trade competition in labor-intensive activities.

This paper demonstrates that labor market regulations, such as minimum wages or payroll taxes, shape trade competition in labor-intensive activities. I exploit data from a large European trade program where firms from different countries supply labor services at the same location but face different payroll taxes and minimum wage rules. Country case-studies and model-consistent gravity estimates show large trade responses to tax and regulatory reforms, with an elasticity of trade in services to labor costs larger than one. The results imply that absent regulatory and fiscal harmonization, export competitiveness depends, in part, on domestic labor market policies. 

This paper studies how family and firm investments interact to explain gender gaps in career achievement.

This paper studies how family and firm investments interact to explain gender gaps in career achievement. Using Danish administrative data, we first document novel evidence of this interaction through a “spousal effect” on firm-side career investments. This effect is accounted for by family labor supply choices that shape worker characteristics, which then influence firms’ training and promotion decisions.

Our main theoretical contribution is to develop a quantitative life cycle model that captures these family-firm interactions through household formation, families’ joint career and fertility choices, and firms’ managerial training and promotion decisions. We then use the estimated model to show that the interaction between families and firms in the joint equilibrium of labor and marriage markets is important when evaluating firm-side and family-side policy interventions. We find that gender-equal parental leave and a managerial quota can both improve gender equality, but leave implies costly skill depreciation, whereas the quota raises aggregate welfare, in part through adjustments in marital sorting towards families that invest in women.

This paper quantifies the share of dismissals distorted by conflict and identifies the drivers.

Dismissal costs are shaped by firm and worker behavior. While they might coordinate to minimize costs, adversarial separations may also entail cost-seeking actions ("conflict").

This paper quantifies the share of dismissals distorted by conflict and identifies the drivers. Our strategy exploits the choice between two modes of separation in France: personal dismissals and ''separations by mutual agreement'' (SMAs). Since SMAs waive dismissal red tape costs and enable severance pay bargaining, they should always be preferred to dismissals in an efficient bargaining model. In contrast, we find that only 12% of potential dismissals are resolved through SMAs. We then identify the sources of conflict that lead to the choice of the costlier separation mode in 88% of dismissals.

Our survey of HR directors reveals three crucial drivers, which account for 63% of the failures to convert dismissals into SMAs: (i) hostility between the employer and the employee, (ii) employers using dismissals as a discipline device, and (iii) asymmetric beliefs about labor court outcomes following a dismissal.

IAB and the Network of European Labour Market Research Institutes (ELMI) organise a policy-oriented conference on `Securing Skilled Workforces in Europe´ in Brussels.

IAB and the Network of European Labour Market Research Institutes (ELMI) organise a policy-oriented conference on 'Securing Skilled Workforces in Europe' in Brussels on October 1st and 2nd, 2024. The event is open to EU policy makers and representatives of the European Commission as well as the Directorates-General.

The authors use employer-employee data to follow US workers' long-run employment flows and earnings after trade liberalization with China.

We use employer-employee data to follow US workers' long-run employment flows and earnings after trade liberalization with China. We find that manufacturing workers in more exposed counties flow disproportionately into low-skill services such as retail and temp agencies, and are more likely to exhibit nominal wage declines after seven years. Formal difference-in-differences analysis reveals that exposure to this shock operates predominantly through workers' local labor market versus industry, that greater upstream exposure via suppliers can offset the adverse impact of own and downstream exposure, and that workers initially employed outside manufacturing generally exhibit relative earnings growth as a result of the liberalization.