Discussion papers
Optimal minimum wages in spatial economies
with Gabriel Ahlfeldt and Tobias Seidel
Reject & Resubmit, Review of Economic Studies
We develop a quantitative general-equilibrium framework for the normative evaluation of minimum wages in spatial economies with monopsonistic labour markets. We quantify the model for German micro-regions and successfully over-identify its predictions against the effects of the 2015 German minimum wage observed in data. Simulating the model, we find that at low levels, spatially blind national minimum wages can increase welfare and spatial equity simultaneously. At higher levels, however, welfare gains are traded against employment losses and spatial inequality. Because regional minimum wages are not spatially blind, they can increase employment and welfare in a spatially neutral manner.
Measuring quality of life under spatial frictions
with Gabriel Ahlfeldt, Fabian Bald and Tobias Seidel
Submitted
Discussion papers: BSoE, CEP, CEPR, CESifo, IZA
ABRSQOL toolkit: GitHub directory
Using a quantitative spatial model as a data-generating process, we explore how spatial frictions affect the measurement of quality of life. We find that under a canonical parameterization, mobility frictions—generated by idiosyncratic tastes and local ties—dominate trade frictions—generated by trade costs and non-tradable services—as a source of measurement error in the Rosen-Roback framework. This non-classical measurement error leads to a downward bias in estimates of the urban quality-of-life premium. Our application to Germany reveals that accounting for spatial frictions results in larger quality-of-life differences, different quality-of-life rankings, and an urban quality-of-life premium that exceeds the urban wage premium.
Unemployment and worker careers: do different job opportunities matter?
with Mara Buhmann and Laura Pohlan
Revise & resubmit, Labour Economics
Discussion papers: IAB, IZA, CESifo
This paper exploits that the Covid-19 pandemic came as an unexpected shock that temporarily reduced the ratio of vacancies to seekers. We use this unique setting to understand the importance of job opportunities for the impact of unemployment on workers‘ careers. Compared to individuals who became unemployed under more benign conditions, we find greater and lasting adverse effects on earnings. We provide evidence that lower job opportunities lead unemployed individuals to take up jobs that are further down the occupation-specific wage distribution. Finally, we substantiate the importance of job prospects by using exogenous variation in the pandemic’s effect on occupations.
