Edoardo Maria Acabbi (VATT)
Stefano Lombardi, Antoine Bertheau, Raffaele Saggio, Oona Tuominen, Andreas Gulyas, Marco Guido Palladino, Tobias Renkin and Salvatore Lattanzio
How do firm-level shocks translate into workers earnings? We study this question using harmonized matched employeremployee data from six European countries. We identify labor demand shocks as sharp changes in firm salesboth negative and positiveand, within a unified cross-country framework, provide the first directly comparable evidence on how shocks in both directions transmit to workers earnings using an event-study difference-in-differences design. Earnings responses are persistent and highly heterogeneous across countries. Earnings fall by 2 to 8 percent after negative shocks and rise after positive shocks. Passthrough from firm sales to worker earnings is two to four times larger in Southern Europe than in Northern Europe. Restricting attention to job stayers substantially attenuates estimated earnings effects, highlighting the important role of worker separations, although earnings responses among stayers remain non-negligible. Finally, for large negative shocks, separations increase in all countries, but the associated earnings losses rise much less in Nordic countries such as Denmark and Sweden than in Southern Europe.