Knowledge that Transforms

We study the link between firm productivity and the wages that firms pay. Guided by a search-matching model with large firms, worker and firm heterogeneity, and production complementarities, we infer firm productivity by estimating firm-level production functions. Using German data, we find that the most productive firms do not pay the highest wages. Worker transitions from high- to medium-productivity firms are on average associated with wage gains. Productivity sorting—that is, the sorting of high-ability workers into high-productivity firms—is less pronounced than the sorting into high-wage firms.

This paper studies the relationship between industrial robots and employment in Japan on the basis of a unique dataset that allows us to calculate the unit price of robots. Our model combines standard factor demand theory with a recent task-based approach to derive a simple estimation equation between robot prices and employment, and our identification strategy leverages heterogeneous applications of robots across industries and heterogeneous price changes across applications. We find that the decline in robot prices increased both the number of robots and employment by raising the productivity and production scale of robot-adopting industries.

There is substantial variation in working time even within employer-employee matches, yet estimates of the Frisch elasticity of labor supply can be near zero. This paper proposes a tractable theory of earnings and working time to interpret these observations. Production complementarities attenuate the response of working time to idiosyncratic, or worker-specific, shocks, but firm-wide shocks are mediated by preference parameters. The model can be identified using firm-worker matched data, revealing a Frisch elasticity of around 0.5. A quasi-experimental approach that exploits only idiosyncratic variation would find an elasticity less than half this.

Inequality in access to high-quality teachers is an important driver of student socioeconomic achievement gaps. We experimentally evaluate a novel nation-wide low-cost government program aimed at reducing teacher sorting. Specifically, we tested two behavioral strategies designed to motivate teachers to apply to job vacancies in disadvantaged schools. These strategies consisted of an "Altruistic Identity" treatment arm, which primed teachers' altruistic identity by making it more salient, and an "Extrinsic Incentives" arm, which simplified the information and increased the salience of an existing government monetary-incentive scheme rewarding teachers who work in underprivileged institutions. We show that both strategies are successful in triggering teacher candidates to apply to such vacancies, as well as make them more likely to be assigned to a final in-person evaluation in a disadvantaged school. The effect among high-performing teachers is larger, especially in the "Altruistic" arm. Our results imply that low-cost behavioral strategies can enhance the supply and quality of professionals willing to teach in high-need areas.

Using data on applied-for jobs for the universe of Danish UI recipients, we examine variation in job search behavior both across individuals and over time during unemployment spells. We find large differences in the level of applied-for wages across individuals but over time all individuals adjust wages downward in the same way. The decline in applied-for wages over time is descriptively small but economically important in standard models of job search. We find similar results when examining variation in the non-wage characteristics of applied-for jobs and in the search methods used to find them. We discuss implications for theory.

We study the extent to which employer heterogeneity affects gender gaps in earnings across the distribution, over time, and over the life cycle, accounting for cohort effects. Using a linked employer-employee dataset for Italy, we show that the gender gap in firm pay premia explains 34% of the mean gender pay gap, mainly due to between-firm components. Within-firm differences are more important at the top of the distribution and have become more relevant over time. Gender differences in mobility toward firms with higher pay premia and within-firm gender inequality partly explain the gender gap in firm pay premia.

We show that score inflation yields residential sorting around what households expect to be better schools, with long-term consequences for the economic geography of neighborhoods. We consider primary school exams in England, where grading standards have triggered an inflation of indicators in the national performance tables since the mid-1990s. Local neighborhoods were gentrified because of school improvements artificially signaled by score inflation. Competition between schools increased, yielding a real improvement in their quality. Effects of score inflation on house prices, deprivation, and local economic activities are identifiable through to the present day.

How much can employers in low- and middle-income countries suppress wages below marginal productivity? Using plant and customs data from Colombia, we exploit predetermined variation across plants in sales export destinations combined with variation in exchange rates to generate plant-specific shocks to marginal revenue productivity and labor demand. We estimate a firm-level labor supply elasticity of around 2.5, implying that workers produce about 40% more than their wage level. This result is driven by plants that account for a large share of local employment, consistent with an oligopsonistic labor market model.

From 1970 to 2000, worker participation in strikes decreased by 90%. We show that strikers also experienced worse outcomes after 1981. Evidence from the Panel Study of Income Dynamics suggests that strikers enjoyed 5%–10% wage gains before the 1980s but null wage changes thereafter. Additional analyses of other survey data and collective bargaining agreements reinforce the finding that strikes since the 1980s have not been associated with increases in wages, hours, or benefits. We attribute these findings to structural labor market shifts and to a narrower deterioration in labor relations signaled by the 1981 air traffic controllers strike.