In this article we study consumption network effects. Does the consumption of our peers affect our own consumption? How large is such effect? What are the economic mechanisms behind it? We use administrative panel data on Danish households to construct a measure of consumption based on tax records on income and assets. We combine tax record data with matched employer–employee data to identify peer groups based on workplace, which gives us a much tighter and credible definition of networks than used in previous literature. We use the non-overlapping network structure of one’s peers group, as well as firm-level shocks, to build valid instruments for peer consumption. We estimate non-negligible and statistically significant network effects, capable of generating sizable multiplier effect at the macro-level. We also investigate what mechanisms generate such effects, distinguishing between intertemporal and intratemporal consumption effects as well as a more traditional risk sharing view.

We study how firms’ personnel practices react to labor market regulation. While a company is compelled to comply with a new law, what is the ripple effect of the change on existing personnel policies and practices? We provide evidence using passage of the Age Discrimination in Employment Act and nearly two decades of administrative data from a large US firm. In line with theory, we find a weakening of long-term implicit incentives and movement toward pay for performance. Furthermore, the data are consistent with the firm carefully managing its personnel practices according to economic principles to preserve incentives for employees.

We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. Supervisors vary widely in how they rate subordinates of similar quality. In our model, this ratings heterogeneity can arise because supervisors can differ in their ability to manage subordinates or in their leniency when rating subordinates. Furthermore, firms might or might not be informed about this heterogeneity. The evidence suggests that supervisor heterogeneity stems, in part, from real differences in managerial ability that firms are partially informed about.