Essays in Technology, Finance, and Labor

Zator, Michal

doi:https://doi.org/10.21985/n2-4ayx-ge39

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Essays in Technology, Finance, and Labor

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This dissertation is a wide-range study of the relationships between the three central elements of the production function: technology, capital and its financing, and labor. Chapter 1 analyzes the relationship between labor and recent wave of automation and digitization technologies, showing that while they typically substitute for workers, in several service industries the complementarity effect dominates. This is shown in two ways: (1) labor scarcity, instrumented with population aging, increases investment in technology on average but impedes it in selected industries; (2) technology typically reduces employment but increases it in selected industries. Additional results show that financial constraints impede technology adoption and that the new technology is skill-biased. Overall, the study unwinds the heterogeneous link between new technologies and labor, highlighting the importance of analyzing a broad set of technologies and studying patterns of their adoption. Chapter 2 studies the link between household debt and labor supply. Using income tax data from Poland and exploiting variation in floating-rate mortgage payments driven by inter-bank rates fluctuations, I show that households work and earn more when their mortgage payments are higher. Higher income covers around 35\% of the increase in the payment. The effect is stronger for households with higher payment-to-income ratio and for more flexible income sources. The increase in labor supply is accompanied by a decrease in consumption and savings and is driven by several mechanisms, including spousal labor supply, change of job, and additional income from after-hours contracts. The analysis shows that interests rates can affect labor supply of mortgage holders, with implications for monetary policy and debt relief policies. Chapter 3 studies the effect of debt on Danish exporters' response to a negative demand shock: the 2005 boycott of Danish products in Muslim countries after publication of Muhammad caricatures. Combining balance-sheet data with firms’ sales by product-destination in a triple-difference design, we find that only low-leverage firms recoup lost demand by increasing investment, introducing new products and entering new markets. In contrast, high-leverage firms reduce sales and employment, turning to outsourcing to reduce operating risk. These results highlight important flexibility costs of debt, consistent with declarations of practitioners.

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