Antoine Bertheau, CREST (Center for Research in Economics and Statistics) Job Market Seminar

"Identifying Core Parameters of Labor Market Models: Evidence from Unexpected Worker Separations"

Abstract

We document how the effects of exogenous shocks to firms’ employment on firm and worker outcomes jointly identify three central parameters of core models of the labor market: (i) the elasticity of output with respect to labor, (ii) the elasticity of labor supply, and (iii) the marginal value of a filled job, which corresponds to the cost of labor market frictions and turnover to the firm. Empirically, we draw on matched employer-employee data from Denmark and estimate the causal effect of unexpected worker separations, due to deaths, on firm and coworker outcomes. Our reduced-form results indicate temporary adverse effects on firms’ employment and output and positive ones on coworkers’ hours and earnings. We then show how these reduced-form effects identify the core parameters of a search-and-matching model. We estimate these parameters using IV, provide an original estimate for the costs of labor turnover, and quantify the role of adjustment of hours and wage within firms by performing several counterfactual experiments.

Contact person: Morten Bennedsen