Research
Publications
J. Jerónimo, Assis Azevedo, P.C. Neves, M. Thompson (2023), Interactions between financial constraints and economic growth. The North American Journal of Economics and Finance, vol. 67, 101943.
Work in progress
- Rent sharing under dynamic monopsony and sectoral wage floors (2025)
- Abstract: This paper investigates how exogenous productivity shocks shape the division
of rents between firms and workers in imperfect labor markets, with a particular focus on the interaction between monopsony power and binding wage
floors. Extending the structural framework of Chan et al. (2024), we develop
a dynamic model in which firms face upward-sloping labor supply and heterogeneous, industry-level wage floors-reflecting collective bargaining or minimum
wage policies-that can bind asymmetrically across sectors. The model predicts
that rent-sharing elasticities are cyclically sensitive: sector-wide productivity
shocks are more strongly passed through to wages than firm-specific shocks,
especially in industries where wage floors are binding. In these settings, positive productivity shocks increase profits without commensurate wage or employment gains, while negative shocks are absorbed through employment reductions
rather than wage cuts, generating asymmetric wage adjustment. We empirically
test these predictions using matched employer-employee data from Portugal,
finding that rent-sharing is indeed more pronounced for sector-level shocks and
that binding wage floors dampen wage flexibility while amplifying employment
volatility. These results challenge the conventional view that productivity gains
are broadly shared with workers and help explain phenomena such as “jobless
growth” and stalled development in regulated labor markets.
- Abstract: This paper investigates how exogenous productivity shocks shape the division
of rents between firms and workers in imperfect labor markets, with a particular focus on the interaction between monopsony power and binding wage
floors. Extending the structural framework of Chan et al. (2024), we develop
a dynamic model in which firms face upward-sloping labor supply and heterogeneous, industry-level wage floors-reflecting collective bargaining or minimum
wage policies-that can bind asymmetrically across sectors. The model predicts
that rent-sharing elasticities are cyclically sensitive: sector-wide productivity
shocks are more strongly passed through to wages than firm-specific shocks,
especially in industries where wage floors are binding. In these settings, positive productivity shocks increase profits without commensurate wage or employment gains, while negative shocks are absorbed through employment reductions
rather than wage cuts, generating asymmetric wage adjustment. We empirically
test these predictions using matched employer-employee data from Portugal,
finding that rent-sharing is indeed more pronounced for sector-level shocks and
that binding wage floors dampen wage flexibility while amplifying employment
volatility. These results challenge the conventional view that productivity gains
are broadly shared with workers and help explain phenomena such as “jobless
growth” and stalled development in regulated labor markets.
- Inter-industry wage premiums and wage floors (2024)
- Abstract: This paper investigates whether industry wage premiums - systematic pay differences across sectors for observationally similar workers - persist in Portugal’s highly regulated labor market, and whether near-universal sectoral wage floors compress these premiums. Using matched employer-employee data from Portugal and applying the two-way fixed effects (AKM) model alongside an “industry-movers” design, we decompose wage variation into worker, firm, and industry components, controlling for worker and firm characteristics and addressing identification challenges such as assortative matching and limited mobility. The main findings are twofold: (1) positive industry wage premiums exist in Portugal’s private sector, but their dispersion is much lower (weighted SD = 0.011) than in the U.S., consistent with Portugal’s centralized wage-setting and declining wage inequality; (2) sectoral wage floors, despite covering over 90% of workers, do not significantly compress industry wage premiums between 2010 and 2019. Quantile regression analysis reveals that wage floors compress premiums in low-wage industries but have negligible or even positive effects in high-wage, high-productivity sectors, where firms maintain wage cushions above the floor. These results challenge monopsony models predicting uniform compression under wage floors and suggest that centralized wage-setting alone is insufficient to eliminate wage dispersion driven by firm-specific rent-sharing, highlighting the need for complementary policies to address labor market inequality.
- Abstract: This paper investigates whether industry wage premiums - systematic pay differences across sectors for observationally similar workers - persist in Portugal’s highly regulated labor market, and whether near-universal sectoral wage floors compress these premiums. Using matched employer-employee data from Portugal and applying the two-way fixed effects (AKM) model alongside an “industry-movers” design, we decompose wage variation into worker, firm, and industry components, controlling for worker and firm characteristics and addressing identification challenges such as assortative matching and limited mobility. The main findings are twofold: (1) positive industry wage premiums exist in Portugal’s private sector, but their dispersion is much lower (weighted SD = 0.011) than in the U.S., consistent with Portugal’s centralized wage-setting and declining wage inequality; (2) sectoral wage floors, despite covering over 90% of workers, do not significantly compress industry wage premiums between 2010 and 2019. Quantile regression analysis reveals that wage floors compress premiums in low-wage industries but have negligible or even positive effects in high-wage, high-productivity sectors, where firms maintain wage cushions above the floor. These results challenge monopsony models predicting uniform compression under wage floors and suggest that centralized wage-setting alone is insufficient to eliminate wage dispersion driven by firm-specific rent-sharing, highlighting the need for complementary policies to address labor market inequality.
- Cyclicality of the pass-through elasticity from productivity to wages (2023)
- Abstract: This paper investigates how cyclical fluctuations influence the sharing of productivity gains between firms and workers, focusing on the differential pass-through elasticities of firm-specific versus sector-wide productivity shocks to wages. We develop a theoretical framework integrating labor supply curvature and production function concavity to show that pass-through elasticities vary with labor market tightness and unemployment, predicting stronger rent-sharing at the sector level during downturns. Empirically, we use rich Portuguese matched employer-employee data from 2002-2019, employing a two-way fixed effects wage equation augmented with firm, sector, and worker heterogeneity, and instrument productivity and local unemployment with lagged values and a Bartik instrument to address endogeneity. The results reveal that sector-level productivity shocks have a pass-through to wages up to four times larger than firm-level shocks, with cyclical unemployment modulating this effect; notably, firms appear to better insure workers against firm-level productivity fluctuations than sector-level ones during downturns. Additionally, pass-through elasticities vary across the wage distribution, being more pronounced for low-wage workers, indicating structural inequality in exposure to productivity shocks. These findings challenge uniform rent-sharing assumptions and underscore the role of labor market institutions and business cycles in wage dynamics and inequality.
- Abstract: This paper investigates how cyclical fluctuations influence the sharing of productivity gains between firms and workers, focusing on the differential pass-through elasticities of firm-specific versus sector-wide productivity shocks to wages. We develop a theoretical framework integrating labor supply curvature and production function concavity to show that pass-through elasticities vary with labor market tightness and unemployment, predicting stronger rent-sharing at the sector level during downturns. Empirically, we use rich Portuguese matched employer-employee data from 2002-2019, employing a two-way fixed effects wage equation augmented with firm, sector, and worker heterogeneity, and instrument productivity and local unemployment with lagged values and a Bartik instrument to address endogeneity. The results reveal that sector-level productivity shocks have a pass-through to wages up to four times larger than firm-level shocks, with cyclical unemployment modulating this effect; notably, firms appear to better insure workers against firm-level productivity fluctuations than sector-level ones during downturns. Additionally, pass-through elasticities vary across the wage distribution, being more pronounced for low-wage workers, indicating structural inequality in exposure to productivity shocks. These findings challenge uniform rent-sharing assumptions and underscore the role of labor market institutions and business cycles in wage dynamics and inequality.
- Cyclicality of Wage elasticity of labour supply (2022)
- Abstract: This paper investigates how the wage elasticity of labor supply to firms - a measure of employer wage-setting power - varies over the business cycle in Portugal using matched employer-employee data from 2002 to 2019. Motivated by the growing recognition of imperfect competition in labor markets, we apply a dynamic monopsony framework and replicate the methodology of Hirsch, Jahn, and Schnabel (2017), estimating elasticities through models of worker separations and recruitments while controlling for worker, firm, and market characteristics. The main findings reveal that the wage elasticity of labor supply is procyclical: it decreases as unemployment rises, implying that firms gain more wage-setting power during downturns. Elasticity estimates range from 0.2 to 1.5, with job-to-job separations accounting for most of the cyclical variation. These results confirm significant monopsony power in the Portuguese labor market, are consistent with international evidence, and highlight the importance of labor market frictions and institutional features in shaping wage dynamics.
- Abstract: This paper investigates how the wage elasticity of labor supply to firms - a measure of employer wage-setting power - varies over the business cycle in Portugal using matched employer-employee data from 2002 to 2019. Motivated by the growing recognition of imperfect competition in labor markets, we apply a dynamic monopsony framework and replicate the methodology of Hirsch, Jahn, and Schnabel (2017), estimating elasticities through models of worker separations and recruitments while controlling for worker, firm, and market characteristics. The main findings reveal that the wage elasticity of labor supply is procyclical: it decreases as unemployment rises, implying that firms gain more wage-setting power during downturns. Elasticity estimates range from 0.2 to 1.5, with job-to-job separations accounting for most of the cyclical variation. These results confirm significant monopsony power in the Portuguese labor market, are consistent with international evidence, and highlight the importance of labor market frictions and institutional features in shaping wage dynamics.