Alex Willén, Norwegian School of Economics The Labor Market Competition and Its Effect on Firms and Local Communities Abstract: We isolate the consequences of increased labor market competition on the entire ecosystem of local communities using unique features of the Scandinavian labor market. A shock to labor mobility from Sweden to Norway caused a substantial increase in labor competition for Swedish firms on the border with Norway. Using individual-level register data linked across the two countries, we show that Swedish firms respond by raising worker wages relative to productivity and reducing their workforces. A compositional change in the workforce results in a drop in the average quality of workers, generating a decline in firm value added and a higher risk of firm exit. The negative effects on firms spill over to the local communities, which experience population flight, declining business activity, increased inequality, and changing political sentiments. These effects persist for at least a decade after the initial shock. We conclude that changes to workers’ outside options can have a dramatic and persistent effect on local communities and send ripples across all segments of society, even in countries with automatic stabilizers specifically designed to blunt the impact of local shocks.

Join the ILR Worker Institute on March 5 for a talk on Unions, Labor and Freedom of Expression. Our featured speaker is Randi Weingarten, President, AFT and 2024 ILR Alice B. Grant Labor Leader in Residence. This event is geared towards an in-person audience. If this is not possible, please join us on Zoom.

Jorgen Harris, Occidental Diverse Hiring in Homogeneous Hiring Pools Abstract: We study the effect of hearing cases alongside nonwhite judicial colleagues on the probability that a federal judge hires a nonwhite law clerk. Federal judges are assigned to judicial panels at random and have few limitations on their choices of law clerks. Using a unique dataset of federal case records merged with judicial hiring information, we find that white judges are less likely to hire Black, Hispanic, or Asian clerks in years when they are randomly assigned to cases with Black, Hispanic, and Asian judges (respectively) at a higher rate. This finding presents a surprising contrast to prior work in Battaglini, Harris, Patacchini (2023) which found strong positive effects on interaction with female colleagues on hiring of women. We hypothesize that this negative effect results from reductions in judges’ proactive attempts to recruit non-white clerks, due to changes in their perceptions of the diversity of the profession.