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.

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. IPO firms transform into a more hierarchical organization and increase managerial oversight. Organizational functions dedicated to accounting, finance, information technology, and human resources become more prominent. IPO firms turn around a large chunk of their labor force and almost their entire management to adapt their human capital to the new organization. New employees are better educated, but they possess less job- and industry-specific experience than incumbents and employees leaving the firm. The new organization facilitates internal transfers and job promotions. Overall, going public succumbs the firm to a transformation which reduces the firm’s dependence on individual employees and efficiently organizes the production process of a public firm.

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.

Within-Firm Wage Inequality and Employee Incentives

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

Recent transparency policies call for the disclosure of wage differences among peer employees within firms to combat wage inequality. Using a large, matched employer-employee dataset for Germany, we analyze how this horizontal wage dispersion among employees with similar individual characteristics and tasks is related to incentive pay. To this end, we decompose the overall within-firm wage inequality into wage differences that can be explained by employee characteristics, task heterogeneity, and residual wage inequality (RWI). RWI captures monetary rewards for employees outperforming their peers and accounts for 12 percent of the overall wage differences within firms. RWI increases in proxies for incentive pay, such as task complexity, firm size, establishment size within firms, profit-sharing programs, and firm profitability. These findings suggest that when debating about horizontal pay inequality, it is crucial to take incentive pay into consideration as it plays a significant role for firms.

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.