Job Market Paper

"Which Workers Earn More at Productive Firms? Position Specific Skills and Individual Hold-up Power" 

with Birthe Larsen and Bledi Taska.

We argue that productive firms share rents with workers only in occupations where workers have individual hold-up power. Workers have individual hold-up power if (i) labor in production is organized into distinct, differentiated positions (ii) the output of positions is individually complementary or "critical" in the production process, and (iii) skills are position-specific, i.e., skills are acquired on the job and are not transferable across positions or firms. If output losses from an unfilled position are larger at productive firms, incomplete contracts and on-the-job search incentivize productive firms to pay differentially higher wages. We estimate individual worker hold-up power by occupation using the effect of worker deaths on firm profits in Danish administrative data and using a measure of within-firm, across-position task differentiation from US job posting data. High "hold-up" occupations exhibit higher long-run passthrough of permanent firm productivity innovations to wages, supporting the main model prediction. Accounting for heterogeneity in hold-up power across occupations has numerous implications for wage inequality: (1) greater employment of men in high hold-up occupations can account for one fifth gender wage gap; (2) rising "superstar firms" increases wage inequality; (3) hold-up power decreases the responsiveness of wages to labor market slack.

bloesch_jmp_larsen_taska_position_specificity_holdup_aug22.pdf2.17 MB