NIKLAS ENGBOM
New York University
Working Papers
We develop a methodology to consistently estimate employer-to-employer (EE) mobility toward higher paying jobs based on publicly available microdata from the Current Population Survey, and use it to document three trends over the past half century. First, such EE mobility fell by half between 1979 and 2023. Second, its decline reduced annual wage growth by over one percentage point. Third, the decline was particularly pronounced for women, those without a college degree, and young workers. The decline does not appear to primarily stem from workers being better matched with their current jobs or the labor market being worse at matching workers and firms. Instead, based on long-run variation across U.S. states, we present evidence consistent with the view that greater labor market concentration reduced workers’ opportunities to transition toward higher paying employers.
Exploiting variation across Swedish local labor markets between 1986 and 2018, I estimate that individuals are less likely to start new firms and switch employers in an older labor market. To account for these patterns, I propose an equilibrium theory of growth with frictional labor markets. On the one hand, workforce aging raises the level of output by increasing the share of people who have found a good match with existing production technologies. On the other hand, the higher opportunity cost of switching to new technologies discourages their introduction. The offsetting level and growth effects result in high growth through the 1990s, even though the rate at which new technologies are introduced declines monotonically since the 1970s. I estimate that it will be suppressed for the next 30 years. The lower growth rate in the older economy lowers welfare for labor market entrants, but raises the value of the high-productive jobs typically held by older individuals.
Labor Market Dynamics When Ideas are Harder to Find
with
Adrien Bilal
Simon Mongey
Gianluca Violante
Forthcoming, The Economics of Creative Destruction, ed. Akcigit, Van Reenen
This paper evaluates the impact of slowing economic growth on labor market dynamism and misallocation. It provides a model of endogenous growth via imitation in a frictional labor market. The framework accounts for rich data on worker job-to-job transitions as well as stochastic and lifecycle properties of firm growth and job reallocation. High productivity entrants gradually replace obsolescing incumbents by poaching their workers, a process that is intermediated via a frictional labor market. When the likelihood of entrants imitating technologies in the tail of the distribution falls (ideas are harder to find), so does growth. Consistent with US data over the past 30 years, firm entry, incumbents’ employment response to productivity shocks, and job-to-job transitions decline, while the share of old firms increases. With lower imitation, however, there is less misallocation, because the slower aggregate rate of obsolescence induces productive firms to invest more in costly hiring and grow faster to their optimal size.
We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz, and Margolis (1999) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2015. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay.
Using panel data from 23 OECD countries, I document that wages grow more over the life-cycle in countries where job-to-job mobility is more common. A life-cycle theory of job shopping and accumulation of skills on the job highlights that a more fluid labor market allows workers to faster relocate to jobs where they can better use their skills, incentivizing accumulation of skills. Lower labor market fluidity reduces life-cycle wage growth by 20 percent and aggregate labor productivity by nine percent across the OECD relative to the US. I derive a set of testable predictions for training and confront them with comparable cross-country training data, finding support for the theory.
Recent micro evidence of how workers search for jobs is shown to have critical implications for the macroeconomic propagation of labor market shocks. Unemployed workers send over 10 times as many job applications in a month as their employed peers, but are less than half as likely per application to make a move. I interpret these patterns as the unemployed applying for more jobs that they are less likely to be a good fit for. During periods of high unemployment, it consequently becomes harder for firms to assert who is a good fit for the job. By raising the cost of recruiting, a short-lived adverse shock has a persistent negative impact on the job finding rate. I provide evidence that firms spend more time on recruiting when unemployment is high, quantitatively consistent with the theory.
Firm and Worker Dynamics in a Frictional Labor Market
with
Adrien Bilal
Simon Mongey
Gianluca Violante
Econometrica, Vol. 90, No. 4 (July 2022), 1425–1462
This paper integrates the classic theory of firm boundaries, through span of control or taste for variety, into a model of the labor market with random matching and on-the-job search. Firms choose when to enter and exit, whether to create vacancies or destroy jobs in response to shocks, and Bertrand-compete to hire and retain workers. Tractability is obtained by proving that, under a parsimonious set of assumptions, all worker and firm decisions are characterized by their joint surplus, which in turn only depends on firm productivity and size. The job ladder in marginal surplus that emerges in equilibrium determines net poaching patterns by firm characteristics that are in line with the data. As frictions vanish, the model converges to a standard competitive model of firm dynamics. The combination of firm dynamics and search frictions allows to: (i) quantify the misallocation cost of frictions; (ii) replicate elusive life-cycle growth profiles of superstar firms; and (iii) make sense of the failure of the job ladder around the Great Recession as a result of the collapse of firm entry.
Earnings Inequality and the Minimum Wage: Evidence from Brazil
with
Christian Moser
American Economic Review, Vol. 112, No. 12 (December 2022), 3803–3347
Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of the Brazilian labor market. We find that a 128 percent increase in the real minimum wage in Brazil between 1996 and 2018 had far-reaching spillover effects on wages higher up in the distribution. The increased minimum wage accounts for 45 percent of a large fall in earnings inequality over this period. At the same time, the effects of the minimum wage on employment and output are muted by reallocation of workers toward more productive firms.
Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil
with
Gustavo Gonzaga
Christian Moser
Roberta Olivieri
Quantitative Economics, Vol. 13, No. 4 (November 2022), 1405–1446
Using rich administrative and household survey data spanning 34 years from 1985 to 2018, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil’s formal sector. Higher-order moments of the distribution of earnings changes show cyclical movements in Brazil that are similar to those in developed countries like the US. Relative to the formal sector, the informal sector is associated with a significant earnings penalty and higher earnings volatility for identical workers. Earnings changes of workers who switch from formal to informal (from informal to formal) employment are relatively negative (positive) and large in magnitude, dispersed, negatively (positively) skewed, and less leptokurtic. Our results suggest that informal employment is an imperfect insurance mechanism.
I develop an idea flows theory of firm and worker dynamics in order to assess the consequences of aging. Older people are less likely to attempt entrepreneurship and switch employers because they have found better jobs. Consequently, aging reduces firm and worker dynamics through three channels. First, entry and mobility fall due to a composition effect. Second, the fact that potential hires are in better jobs dissuades entry. Third, fewer start-ups imply fewer new job opportunities for workers. Aging accounts for 37 and 81 percent of the declines in entry and mobility, respectively, since 1986. Cross-state evidence supports these predictions.
Publications
Firms and the Decline in Earnings Inequality in Brazil
with
Jorge Alvarez
Felipe Benguria
Christian Moser
American Economic Journal: Macroeconomics (2018), 10(1): 149–189
We document a large decline in earnings inequality in Brazil between 1996 and 2012. Using administrative linked employer-employee data, we fit high-dimensional worker and firm fixed effects models to identify the sources of this decline. Firm effects account for 45 percent of the total decline and worker effects for 24 percent. While pay-relevant firm and worker characteristics became more dispersed over the period, the inequality decline is driven by falling returns in pay to these variables. We conclude that changes in pay policies, rather than changes in firm and worker fundamentals, played a significant role in Brazil’s inequality decline.
with
Christian Moser
American Economic Review: Papers and Proceedings (2017), 107(5): 374–378
What are the sources of the returns to education? We study the allocation of higher education graduates from public institutions in Ohio across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher education degrees are associated with greater representation at the best-paying firms. We conclude that employer heterogeneity is an important factor in mediating the returns to education.
Old Projects
The German Labor Market Reforms and Post-Unemployment Earnings
with
Enrica Detragiache
Faezeh Raei
IMF Working Paper WP/15/162
In 2003–05, Germany undertook extensive labor market reforms which were followed by a large and persistent decline in unemployment. Key elements of the reforms were a drastic cut in benefits for the long-term unemployed and tighter job search and acceptance obligations. Using a large confidential data set from the German social security administration, we find that the reforms were associated with a fall in the earnings of workers returning to work from short-term unemployment relative to workers in long-term employment of about 10 percent. We interpret this as evidence that the reforms strengthened incentives to return to work but, in doing so, they adversely affected post re-entry earnings.