Essays in Labor and Political Economics

The public defense will be held at the School of Business, hall U006, starting at 13.00. Link to the Zoom event: https://aalto.zoom.us/j/68354267850The first essay studies the importance of firm-specific factors in the 20 percent increase in the variance of hourly wages in Finland since the mid-1990s. The analysis shows that more than 60 percent of the increase in variance of hourly wages between 1995 and 2013 takes place between firms, as opposed to within firms. While this suggests firm-level explanations to increases in wage inequality, such as increasingly different pay policies or firm-level productivities, a wage decomposition with simultaneous person and firm fixed effects reveals that the variance of firm-specific component of pay has not increased but stayed constant over the period. Instead, increasing differences in firms' average wages arise because firms differ in the composition of their workforce. Almost all (95 percent) of the increase in overall wage inequality can be attributed to increasingly different wages between occupations. The second essay describes how party differences in political speech in Finland evolve since the beginning of the 20th century. The analysis is based on a novel dataset constructed from transcripts of parliamentary debates in 1907–2018. I construct a measure of partisanship contrasting parties' phrase choice probabilities. This measure captures the ease of correctly deducing the party of the politician based on a single phrase. LASSO-penalized estimates of phrase choice probabilities account for the finite sample bias due to sparse count matrix. I find that left-right partisanship in speech fluctuates during the majority of the 20th century, with the most pronounced and sustained peak during the 1970s. The peak is driven by large differences in speech between the extreme left and the other parties in the parliament. While the left-right differences in speech have been steadily increasing since the 1990s, the growth is modest, and today's levels are similar to those of the 1930s. The paper provides new evidence on party differences in political speech in a multi-party context, Finland, for more than 100 years. The third essay offers the first empirical evidence on the employment consequences and trade-offs of tying a firm's Disability Insurance (DI) tax payments to the DI claims of the firm's own workers. The evidence comes from a reform in Finland that increased employer DI co-insurance rates while decreasing (non-experience rated) payroll taxes. The reform applied to some firms but not others, and to varying degrees. The evidence indicates that among firms bearing higher costs of DI claims by their own employees, (i) DI receipts of their employees declined, (ii) the composition of new hires shifted away from higher-disability-risk groups, and (iii) among current employees the expected gains from increased sustained employment exceed the declines in expected DI receipts