UCL Department of Economics


Applied Micro Seminar presented by Sydnee Caldwell (UC Berkeley)

05 March 2020, 12:15 pm–1:45 pm

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Outside Options, Bargaining, and Wages: Evidence from Coworker Networks (with Nikolaj Harmon, University of Copenhagen)

Event Information

Open to

UCL staff | UCL students | UCL alumni


Department of Economics


Rm 321, Drayton House
30 Gordon Street
United Kingdom

Abstract: This paper analyzes the link between wages and outside employment opportunities. To overcome the fact that factors that affect a worker’s outside options may also impact her productivity at her current job, we develop a strategy that isolates changes in a worker’s information about her outside options. This strategy relies on the fact that individuals often learn about jobs through social networks, including former coworkers. We implement this strategy using employer-employee data from Denmark that contain monthly information on wages and detailed measures of worker skills. We find that increases in labor demand at former coworkers’ current firms lead to job-to-job mobility and wage growth. Consistent with theory, larger changes are necessary to induce a job-to-job transition than to induce a wage gain. Specification tests leveraging alternative sources of variation suggest these responses are indeed due to information rather than unobserved demand shocks. Impacts on earnings are concentrated among workers in the top half of the skill distribution. Finally, we use our reduced-form estimates to identify a structural model that allows us to estimate bargaining parameters and investigate the relevance of wage posting and bargaining across different skill groups.




About the Speaker

Sydnee Caldwell

at UC Berkeley