Dissertation/Thesis Abstract

Essays in Labor and Personnel Economics
by Friedrich, Benjamin Uwe Rolf, Ph.D., Yale University, 2016, 190; 10160861
Abstract (Summary)

This dissertation consists of three chapters that use administrative matched employer-employee data to analyze firms' hiring and promotion strategies and to explore how firm-level personnel strategies affect individual firm performance and worker careers, but also aggregate outcomes of productivity, wage inequality and welfare. The first chapter studies how firms compete for managerial talent by using internal promotions versus external hiring to recruit managers. The second chapter analyzes how exporters adjust their organizational structure in response to international trade shocks and how these adjustments affect wage inequality within the firm. The third chapter focuses on the health care sector and uses a parental leave reform to analyze whether a sudden shortage in nurses affects patient health outcomes in hospitals and nursing homes.

In the first chapter, I use administrative matched employer-employee data from Denmark to provide the first comprehensive evidence how firms differ in using internal promotions and external hiring at the management level. The data cover the universe of firms and workers and allow me to track career paths both within and across firms based on worker occupations. I document that more productive firms hire more talented young workers, are more likely to promote managers internally, and match with better managers in terms of education and ability. Based on these facts, I develop an assignment model of the market for managers where heterogeneous firms compete for workers who differ in managerial talent. In the model internal labor markets arise from asymmetric learning and firm-specific human capital. Production complementarities between firm productivity and manager talent result in better firms investing in promising workers and in developing talent through firm-specific training and internal promotion. I estimate the model using the Danish data. Model simulations indicate that removing information frictions increases aggregate productivity by 22.5 percent. This gain is accompanied by higher wage inequality because better signals of talent increase competition for the best managers. This mechanism provides a new market-driven explanation for the increase in upper-tail wage inequality.

In the second chapter, I combine the administrative employer-employee data with firm-level trade data from Denmark to provide evidence for a novel mechanism through which trade affects wage inequality: changes in firm hierarchies. This mechanism is motivated by the empirical fact that within-firm wage variation across the hierarchical levels of top manager, middle manager, supervisor and worker accounts for an important component of wage inequality. It is comparable in magnitude to wage differences across firms. To identify the causal effect of trade shocks on firm hierarchies and wage inequality, I use two distinct research designs for firm-level trade shocks—one based on foreign demand and transportation costs, and the other using the Muslim boycott of Danish exports after the Cartoon crisis. Both identification strategies suggest robust effects of trade shocks on within-firm inequality through changes in hierarchies. Consistent with models of knowledge-based or incentive-based hierarchies, firm-level trade shocks influence organizational choices through production scale. Adding a hierarchy layer significantly increases inequality within firms, ranging from 2% for the 50-10 wage gap to 4.7% for the 90-50 wage gap.

The third chapter, which is joint with Martin B. Hackmann, Pennsylvania State University, studies unintended effects of a parental leave program on employers and consumers, specifically on the allocation of resources and the quality of care in the Danish health sector. Using matched employer-employee data, we estimate that a generous child leave program introduced in Denmark in 1994 led to a persistent decrease in the number of skilled nurses in Danish hospitals and nursing homes by more than 10% on average. Combining labor market and death register data, we analyze the effect of nurse shortages on patient mortality. Our empirical strategy exploits exogenous variation in net employment effects based on eligibility of the workforce across health sectors and counties. We find that the policy led to an average increase in mortality in nursing homes by 14% for the population aged 85 and older. Nurse shortages in nursing homes increase total mortality for this subpopulation at the county level one-to-one. This suggests that staffing needs for skilled nurses are a particular concern in nursing homes and of growing importance as the population ages and the demand for long term care services increases.

Indexing (document details)
Advisor: Altonji, Joseph G., Meghir, Costas
Commitee:
School: Yale University
School Location: United States -- Connecticut
Source: DAI-A 78/01(E), Dissertation Abstracts International
Source Type: DISSERTATION
Subjects: Economics
Keywords: Cartoon Crisis, Firm Hierarchy, Internal Labor Markets, Managerial Hiring, Matched Employer-Employee Data, Nurse Shortage
Publication Number: 10160861
ISBN: 9781369157567
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