Knowledge that Transforms

The main contribution of this paper is to identify the strong predictive power of the relative, rather than the absolute, volume of orders over volatility. To this end, we propose a new measure, relative liquidity, which accounts for how quoted depth is distributed in a limit order book and captures the level of consensus on a security׳s trading price. Higher liquidity provision farther away from the best quotes, relative to the rest of the book, is associated with a disagreement on the current price and followed by high volatility. The relationship is robust to the inclusion of several alternative measures.

We employ German social security records to investigate intragenerational lifetime earnings inequality and mobility of yearly earnings for 35 cohorts, starting with the birth year 1935. Our main result is a striking secular rise of intragenerational inequality in lifetime earnings: West German men born in the early 1960s are likely to experience about 85% more lifetime inequality than their fathers. In contrast, both short-term and long-term intragenerational mobility are stable. Longer unemployment spells of workers at the bottom of the distribution of younger cohorts contribute to explaining 20%–40% of the overall increase in lifetime earnings inequality.

Despite their documented importance in the labor market, little is known about how workers use social networks to find jobs and their resulting effect on earnings. I use geographically detailed US employer-employee data to infer the role of social networks in connecting workers to jobs in high-paying firms. To identify social interactions in job search, I exploit variation in social network quality within small neighborhoods. Workers are more likely to change jobs, and more likely to move to a higher-paying firm, when their neighbors are employed in high-paying firms. Furthermore, local referral networks help match high-ability workers to high-paying firms.

We combine unique administrative and survey data to study the match between firms and managers. The data include manager characteristics, firm characteristics, detailed measures of managerial practices, and outcomes for the firm and the manager. A parsimonious model of matching and incentives generates implications that we test with our data. We use the model to illustrate how risk aversion and talent determine how firms select and motivate managers. We show that empirical links between firm governance, incentives, and performance, which have so far been studied in isolation, can instead all be interpreted within our simple unified matching framework.

This paper proposes a new measure of gender differences in access to jobs based on a job assignment model. This measure is the probability ratio of getting a job for a female and a male at each rank of the wage ladder. We derive a nonparametric estimator of this access measure and estimate it for French full-time executives aged 40–45 in the private sector. Our results show that the gender difference in the probability of getting a job increases along the wage ladder from 9% to 50%. Females thus have a significantly lower access to high-paid jobs than to low-paid jobs.

We formulate and estimate a dynamic model of marriage, divorce, and remarriage using panel data on two cohorts of Danish men and women. The marital surplus is identified from the probability of divorce and the surplus shares of husbands and wives from their willingness to enter marriage. We find that the educations of husbands and wives are complements. Education raises the share of the marital surplus for men but not for women. As men and women get older, husbands receive a larger share of the marital surplus. The estimated costs of divorce are high both early and late in marriage.