Wages and their impact on individuals, households and firms

Author: Anna Thoresson, And

Summary of Dissertation series 2022:4

Essay III has been published by IFAU as working paper 2020:2 and Swedish report 2020:3.


Essay I: This paper studies how wages respond to employer concentration. It exploits a reform that deregulated the Swedish pharmacy market, which until 2009 was a monopoly. The reform involved a substantial increase in the number of employers on the pharmacy labor market.
However, the change in employer concentration was not geographically uniform: certain areas experienced large changes while others were largely unaffected. Exploiting this geographical
variation, elasticities of wages with respect to labor market concentration are estimated to be between -0.02 and -0.05. The empirical approach relies only on the variation in concentration
controlled by the policymaker to remedy the concern that actual labor market concentration is endogenous. The positive wage effects from reduced labor market concentration are found to be most prevalent for stayers, rather than new hires, as well as those with more industry experience and longer tenure. Overall, the paper adds to a growing literature that finds that market concentration matters for workers' wages, in a context where labor is highly industryspecific.

Essay II: (with Olof Åslund, Cristina Bratu and Stefano Lombardi):
This paper studies the role of firm productivity in explaining earnings differences between immigrants and natives in Sweden. We first show that firms with higher value added per worker pay higher earnings
and document that immigrant workers are under-represented in high-productive firms relative to natives. Next, we estimate substantial positive earnings returns to working in more productive firms, with significantly larger returns for immigrants from non-Western countries. We also find that immigrants are less likely to move up the firm productivity distribution. Sorting into less productive firms thus decreases earnings in poor-performing immigrant groups that would gain the most from firm productivity. The results are consistent with firms having differential wagesetting power over immigrants and natives.

Essay III: (with Erik Grönqvist and Lena Hensvik):

We study the effects of introducing a performance-based promotion program for teachers in Sweden. The program intended to make the teaching profession more attractive by raising wages for skilled teachers and taking advantage of teachers' professional competence. Our results show that: (i) high-wage teachers are more likely to be promoted; (ii) the stipulated wage increase has full pass-through onto
wages for promoted teachers; (iii) schools with promotions have lower teacher separations and an improved pool of teachers; (iv) the promotion program improved student performance. These results suggest that performance-based promotions could be an important tool for raising school quality.

Essay IV: (with Erik Grönqvist and Lena Hensvik):

This paper studies the impact of a substantial change in household relative wage on the reallocation of childcare time across parents. Our empirical strategy takes advantage of a promotion program for teachers, which led to a sudden and persistent 20 percent wage increase for the promoted spouse and a 32 percent decrease in the couple's gender wage gap (reflecting the higher promotion rate of the female spouses). Our findings suggest that female promotions lead to a more even division of childcare and that the change in bargaining power of the promoted spouse is a contributing mechanism behind the effect. Overall, these findings suggest that improved career opportunities for women can improve gender equality in the household.

Keywords: Wages, wage inequality, firms, competition, immigrant-native earnings gaps, career opportunities, teacher labor markets, household behavior, gender gaps