Working Papers
Turnover Costs: Evidence From Unexpected Worker Separations. Pdf
Job Market Paper. Antoine Bertheau, Pierre Cahuc, Simon Jäger, and Rune Vejlin
Abstract: To what extent do unexpected worker exits affect firm profits? To answer this question, we exploit exogenous variation coming from unexpected worker deaths, linked with rich administrative data on firm profitability in Denmark. We find that turnover costs are large – equal to roughly one year of labor costs for an average employee – much larger than previous evidence based on employer surveys. The imperfect substitutability of incumbent workers with outsiders drives the larger estimates. We find negative effects on revenue even after employment has recovered and higher labor costs to retain the remaining workers. Our findings of substantially higher replacement costs help to resolve puzzles in search and matching models, which struggled to reconcile seemingly low turnover cost estimates with several other empirical regularities.
Selected presentations: NBER Summer Institute (Macro Perspectives), SOLE, the Dale Mortensen Centre Conference, SaM, EALE
Why Firms Lay Off Workers instead of Cutting Wages: Evidence from Matched Survey-Administrative Data -November 2022. Submitted.
Antoine Bertheau, Marianna Kudlyak, Birthe Larsen and Morten Bennedsen
Abstract: We study how firms adjust labor in response to adverse shocks—via layoffs or pay cuts—and the reasons behind each adjustment margin. To do so, we design and implement a novel large-scale survey of firms in Denmark and link it to administrative data. We find, first, that layoffs are much more prevalent than pay cuts, but pay cuts are not rare. Second, employers do not consider pay cuts to be a viable substitute for layoffs during crises. The size of a hypothetical pay cut needed to save a layoff is large. Furthermore, some layoffs during a crisis are not caused by the crisis. Rather, a crisis is an opportune time for firms to lay off some workers. Third, employers who did not cut base pay think that it would damage morale, or lead employees to quit, or they perceive base pay as a commitment to employees. Fourth, losing specific workers’ skills is the most important consideration in layoff decisions.
Selected presentations: SOLE, COPE, the Dale Mortensen Centre Conference, the Nordic Summer Institute in Labor Economics, the CRC Workshop on Labor Markets
Job Ladders by Firm Wage and Productivity - September 2022. Submitted.
Antoine Bertheau and Rune Vejlin
Abstract: We identify which jobs are more desirable than others as revealed by workers’ transitions on the firm wage and productivity ladders using employer-employee data matched with firms’ financial data for 20 years in Denmark. We conclude that revenue-based TFP is a better ranking measure of the job ladder than the average wage paid, since highly productive firms create more jobs than high wage firms, and they do so by poaching more workers from other firms. When the unemployment rate increases, the difference in growth rates between high and low productivity firms becomes larger. The opposite is true for the difference between high and low wage firms. Measuring productivity using sales per worker, as done in previous studies, instead of TFP reduces the magnitude or even reverses the sign of our estimates such that the difference in growth rates between high and low productivity measured by sales per worker becomes smaller in recessions.
Selected presentations: SOLE, the Dale Mortensen Centre Conference, EALE, SaM, briq Workshop on Firms Jobs and Inequality, IZA Labor Statistics Workshop
From Matchy-Administrative
Employer Wage-Setting Power: Evidence From Matched
Turnover Costs: Evidence From Unexpected Worker Separations. Pdf
Job Market Paper. Antoine Bertheau, Pierre Cahuc, Simon Jäger, and Rune Vejlin
Abstract: To what extent do unexpected worker exits affect firm profits? To answer this question, we exploit exogenous variation coming from unexpected worker deaths, linked with rich administrative data on firm profitability in Denmark. We find that turnover costs are large – equal to roughly one year of labor costs for an average employee – much larger than previous evidence based on employer surveys. The imperfect substitutability of incumbent workers with outsiders drives the larger estimates. We find negative effects on revenue even after employment has recovered and higher labor costs to retain the remaining workers. Our findings of substantially higher replacement costs help to resolve puzzles in search and matching models, which struggled to reconcile seemingly low turnover cost estimates with several other empirical regularities.
Selected presentations: NBER Summer Institute (Macro Perspectives), SOLE, the Dale Mortensen Centre Conference, SaM, EALE
Why Firms Lay Off Workers instead of Cutting Wages: Evidence from Matched Survey-Administrative Data -November 2022. Submitted.
Antoine Bertheau, Marianna Kudlyak, Birthe Larsen and Morten Bennedsen
Abstract: We study how firms adjust labor in response to adverse shocks—via layoffs or pay cuts—and the reasons behind each adjustment margin. To do so, we design and implement a novel large-scale survey of firms in Denmark and link it to administrative data. We find, first, that layoffs are much more prevalent than pay cuts, but pay cuts are not rare. Second, employers do not consider pay cuts to be a viable substitute for layoffs during crises. The size of a hypothetical pay cut needed to save a layoff is large. Furthermore, some layoffs during a crisis are not caused by the crisis. Rather, a crisis is an opportune time for firms to lay off some workers. Third, employers who did not cut base pay think that it would damage morale, or lead employees to quit, or they perceive base pay as a commitment to employees. Fourth, losing specific workers’ skills is the most important consideration in layoff decisions.
Selected presentations: SOLE, COPE, the Dale Mortensen Centre Conference, the Nordic Summer Institute in Labor Economics, the CRC Workshop on Labor Markets
Job Ladders by Firm Wage and Productivity - September 2022. Submitted.
Antoine Bertheau and Rune Vejlin
Abstract: We identify which jobs are more desirable than others as revealed by workers’ transitions on the firm wage and productivity ladders using employer-employee data matched with firms’ financial data for 20 years in Denmark. We conclude that revenue-based TFP is a better ranking measure of the job ladder than the average wage paid, since highly productive firms create more jobs than high wage firms, and they do so by poaching more workers from other firms. When the unemployment rate increases, the difference in growth rates between high and low productivity firms becomes larger. The opposite is true for the difference between high and low wage firms. Measuring productivity using sales per worker, as done in previous studies, instead of TFP reduces the magnitude or even reverses the sign of our estimates such that the difference in growth rates between high and low productivity measured by sales per worker becomes smaller in recessions.
Selected presentations: SOLE, the Dale Mortensen Centre Conference, EALE, SaM, briq Workshop on Firms Jobs and Inequality, IZA Labor Statistics Workshop
From Matchy-Administrative
Employer Wage-Setting Power: Evidence From Matched
Publications
The Unequal Consequences of Job Loss across Countries - American Economic Review: Insights. Accepted.
Antoine Bertheau, Edoardo Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio
Media Coverage: VoxEu.org and World Economic Forum in English, LaVoce.info in Italian, The Conversation España in Spanish, Portuguese Economy Research Report in English.
The Unequal Consequences of Job Loss across Countries - American Economic Review: Insights. Accepted.
Antoine Bertheau, Edoardo Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio
Media Coverage: VoxEu.org and World Economic Forum in English, LaVoce.info in Italian, The Conversation España in Spanish, Portuguese Economy Research Report in English.
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Abstract:
We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums explains a substantial portion of wage losses in all countries. Employer-to-Employer Transitions and Time Aggregation Bias - Labour Economics. April 2022.
Antoine Bertheau and Rune Vejlin Abstract:
The rate at which workers switch employers without experiencing a spell of unemployment is one of the most important labor market indicators. However, Employer-to-Employer (EE) transitions are hard to measure in widely used matched employer-employee datasets such as those available in the US. We investigate how the lack of the exact start and end dates for job spells affect the level and cyclicality of EE transitions using Danish data containing daily information on employment relationships. Defining EE transitions based on quarterly data overestimates the EE transition rate by approximately 30% compared to daily data. The bias is procyclical and is reduced by more than 10% in recessions. We propose an algorithm that uses earnings and not just start and end dates of jobs to redefine EE transitions. Our definition performs better than definitions used in the literature. Employer Search Behavior: Reasons for Internal Hiring - Labour Economics. December 2021.
Antoine Bertheau Abstract:
This article studies reasons for internal hiring, i.e., re-assigning or promoting an employee instead of recruiting an external candidate. We exploit a representative survey of establishments covering all European Union countries to measure employers’ search for internal candidates. Internal search is a widespread practice: 66% of establishments typically search internally. The accumulation of specific skills and the provision of incentives for employees are the main advantages of hiring internally in the theoretical literature. Ordered probit estimates show that on-the- job training and internal search are positively associated. On the contrary, incentive schemes such as variable pay are not associated with employer search. These results help to assess competing theories, and in particular, suggest that specific human capital is an important driver of internal hiring. Finally, we uncover two interesting facts that need further research: internal hiring is less likely in service firms and in non-competitive product markets. |
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Work in Progress (selected)
Employer Wage-Setting Power: Evidence from Matched Survey-Administrative Data
Antoine Bertheau and Christian Hoeck
Abstract: We ask all firms in Denmark whether they pay high or low wages, and if so, why. We match our representative survey of firms with linked administrative labor market data and firm's financial data. We first document that firms that think they are high-paying firms are more likely to be high-wage firms using an objective measure of wage policies (AKM firm fixed effects). We then continue to open the black box of the firm's wage-setting in two ways. First, by exploiting a novel administrative dataset, we show that high AKM fixed effects firms are more likely to hire directly from other firms (poaching), have higher overtime work hours (relative to normal hours), and higher pay components for bad job characteristics. We then elicit a variety of beliefs on the reasons to pay high wages. The most common reason to pay high wages is to alleviate search frictions and retain incumbent employees. In contrast, compensation for negative job characteristics is the least common reason to pay high wages.
Selected presentation: EALE
What Makes Hiring Difficult? Evidence from Employers’ Beliefs
Antoine Bertheau, Birthe Larsen and Zeyu Zhao
Abstract: We investigate factors that make hiring difficult by designing and implementing a large-scale, representative employer survey in Denmark. We elicit the preferences of employers regarding their decision to recruit. Three important facts stand out: i) The lack of qualified candidates is the main barrier to hiring; ii) It takes on average six months for new recruits to be as productive as an average employee in a similar position; iii) Some employers prefer to hire already employed workers over the unemployed due to their concerns about skill deterioration and workers’ ability. By linking our survey to administrative data, we document the firm-level predictors that explain our findings.
Selected presentation: EALE
Policy Work
I am an active member of the Link Employer-Employee Data (LinkEED) working group, coordinated by the OECD. The previous topics covered the role of the firm for the gender wage gap, and labour market monopsony and wage-setting power. More work coming soon!
Book chapter: "Worker skills or firm wage-setting practices? Decomposing wage inequality across 20 OECD countries." in "The Role of Firms in Wage Inequality" published by the OECD in 2021, with the LinkEED team.
Book chapter : “Monopoly’s neglected twin? The effect of labour market concentration on wages and inequality” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team
Book chapter : “Is it where you work, what you do, or what you get? Unpacking the gender wage gap and its evolution over the life-course” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team
Employer Wage-Setting Power: Evidence from Matched Survey-Administrative Data
Antoine Bertheau and Christian Hoeck
Abstract: We ask all firms in Denmark whether they pay high or low wages, and if so, why. We match our representative survey of firms with linked administrative labor market data and firm's financial data. We first document that firms that think they are high-paying firms are more likely to be high-wage firms using an objective measure of wage policies (AKM firm fixed effects). We then continue to open the black box of the firm's wage-setting in two ways. First, by exploiting a novel administrative dataset, we show that high AKM fixed effects firms are more likely to hire directly from other firms (poaching), have higher overtime work hours (relative to normal hours), and higher pay components for bad job characteristics. We then elicit a variety of beliefs on the reasons to pay high wages. The most common reason to pay high wages is to alleviate search frictions and retain incumbent employees. In contrast, compensation for negative job characteristics is the least common reason to pay high wages.
Selected presentation: EALE
What Makes Hiring Difficult? Evidence from Employers’ Beliefs
Antoine Bertheau, Birthe Larsen and Zeyu Zhao
Abstract: We investigate factors that make hiring difficult by designing and implementing a large-scale, representative employer survey in Denmark. We elicit the preferences of employers regarding their decision to recruit. Three important facts stand out: i) The lack of qualified candidates is the main barrier to hiring; ii) It takes on average six months for new recruits to be as productive as an average employee in a similar position; iii) Some employers prefer to hire already employed workers over the unemployed due to their concerns about skill deterioration and workers’ ability. By linking our survey to administrative data, we document the firm-level predictors that explain our findings.
Selected presentation: EALE
Policy Work
I am an active member of the Link Employer-Employee Data (LinkEED) working group, coordinated by the OECD. The previous topics covered the role of the firm for the gender wage gap, and labour market monopsony and wage-setting power. More work coming soon!
Book chapter: "Worker skills or firm wage-setting practices? Decomposing wage inequality across 20 OECD countries." in "The Role of Firms in Wage Inequality" published by the OECD in 2021, with the LinkEED team.
Book chapter : “Monopoly’s neglected twin? The effect of labour market concentration on wages and inequality” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team
Book chapter : “Is it where you work, what you do, or what you get? Unpacking the gender wage gap and its evolution over the life-course” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team