This paper studies the speed at which workers’ pretax earnings respond to tax changes along the intensive margin. We do so in the context of Germany, where a large notch in the tax schedule induces sharp bunching in the earnings distribution. We analyze earnings responses to two policy reforms that shift this notch outward and find clear evidence that frictions delay the earnings responses of more than 38% of workers. We propose that heterogeneity in firm labor demand plays a key role in generating the observed differences in the speed of workers’ earnings responses and provide supporting evidence.

As millions of soldiers deployed to Iraq or Afghanistan between 2001 and 2021, Veteran Affairs Disability Compensation payments quadrupled and the veteran suicide rate rose rapidly. We estimate the causal contribution of combat deployments to declining veteran well-being. Deployments increase injuries, combat deaths, and disability compensation, but we find limited effects on suicide, deaths of despair, financial health, incarceration, or education. Our estimates suggest that deployment cannot explain either the recent rise in disability payments, which is more likely driven by policy changes, or the surge in noncombat deaths, which is better explained by shifts in observable characteristics of soldiers.