Working papers

Great Recession Babies: How Are Startups Shaped by Macro Conditions at Birth?

with A. Ljungqvist

We combine novel micro data with quasi-random timing of patent decisions over the business cycle to estimate the effects of the Great Recession on innovative startups. After purging ubiquitous selection biases and sorting effects, we find that recession startups experience better long-term outcomes in terms of employment and sales growth (both driven by lower mortality) and future inventiveness. While funding conditions cannot explain differences in outcomes, a labor market channel can: recession startups are better able to retain their founding inventors and build productive R&D teams around them. Contrary to popular belief, recessions do not spawn superstar firms.

Going Public and the Internal Organization of the Firm

with B. Lochner, S. Obernberger, and M. Sevilir

We examine how firms adapt their organization when they go public. To conform with the requirements of public capital markets, we expect IPO firms to become more organized, making the firm more accountable and its human capital more easily replaceable. We find that IPO firms transform into a more hierarchical organization with smaller departments. Hiring is strongest in jobs requiring knowledge in finance, accounting, and management. New hires are better educated, but less experienced than incumbents, which reflects the staffing needs of a more hierarchical organization. Employee turnover is sizeable and directly related to changes in hierarchical layers. Wage inequality increases in public firms as they become more hierarchical. Overall, going public is associated with a comprehensive transformation of the firm’s organization which becomes geared towards operating efficiently and in accordance with capital market standards.

Illiquid Equity, Labor Mobility, and Talent Allocation

Job Market Paper

Using stock market shocks to randomize the completion of a firm’s liquidity event, I provide evidence that illiquid equity constrains labor mobility and talent allocation. I find that illiquidity reduces the mobility of employees with vested equity, while employees with unvested equity remain unaffected. The lock-in effect of illiquidity for vested employees is distinct from the well-known retention effect of unvested equity. I show that, by reducing labor mobility, illiquidity interferes with the assortative re-matching of talent in the economy. Recent trends of innovative startups staying private for longer can impose an externality on the broader economy by trapping employees in sub-optimal employer matches.

Task Heterogeneity, Employee Characteristics, and Within-Firm Wage Inequality

with C. Lin, B. Lochner, and T. Schmid

How much of the within-firm wage inequality comes from wage differences among employees with similar characteristics who perform similar tasks? Using matched employer-employee data from Germany, we show that task heterogeneity accounts for half of the overall within-firm wage differences. For employees who perform similar tasks, differences in their characteristics (e.g., ability or education) explain three-quarters of their wage differences. Residual wage inequality (RWI) among employees with similar characteristics who perform similar tasks accounts for 12 percent of the overall wage differences. RWI increases with task complexity, establishment and firm size, profit sharing, and profitability, which points to pay-for-performance schemes as potential drivers of HWI. These results indicate that firms use RWI to incentivize employees and call for the separate disclosure of wage inequality related to task heterogeneity, employee characteristics, and RWI.

Customer Concentration and the Upstream Propagation of Idiosyncratic Shocks: Evidence from Labor Strikes


This paper studies the role of customer concentration in the upstream propagation of idiosyncratic firm-level shocks. I utilize major labor strikes as idiosyncratic disruptions of large firms with multiple suppliers. I find that strike-hit customers impose a substantial output loss on their suppliers. The negative effect increases with suppliers’ direct dependence on disrupted customers. Moreover, suppliers’ output loss is amplified by additional indirect links that exist if suppliers sell products to other companies whose business also depends on the large disrupted customer. Overall, these results show that customer concentration increases the vulnerability of production networks to idiosyncratic firm-level shocks.

Municipal Bankruptcy and the Economic Costs of Financial Contagion

with L. Knauer

This paper examines whether one municipality’s bankruptcy exposes other local governments to economic costs of financial contagion. To disentangle the bankruptcy’s effect from the general economic trend, we identify idiosyncratic bankruptcies using a narrative approach. We show that non-bankrupt municipalities issue less debt following the bankruptcy. To identify the economic consequences of the limited credit market access, we exploit ex-ante heterogeneity in local governments’ maturity of long-term debt. We find that high fractions of maturing debt lead to lower government spending, as well as to lower tradable employment. Overall, our results suggest that bankruptcy as resolution mechanism deteriorates the development of other municipalities that rely on debt financing.