Essays on Personal Debt Relief and Firms in the Labor Market

Chapter 1: Designing Debt Restructuring: The Adverse Effects on Labor Market Outcomes This paper examines how the design of debt restructuring or personal insolvency programs shapes labor market outcomes using Sweden as a case study. In the Swedish debt restructuring program, debt is forgiven following a 5-year partial repayment period. I estimate the causal effects of the program using an examiner instrumental variable (IV) design and show that traditional examiner IV estimates can be biased if there is path dependency in examiner decision-making. This bias is avoided by estimating examiner leniency from past cases. On average, participation in the debt restructuring program has negative effects on labor income and employment, but these findings mask a large heterogeneity. Initially employed participants experience relative gains in income and employment, while initially unemployed participants face substantial negative effects. Both of these effects persist even after the program has ended. Combining observational data and results from a survey I conducted among debt restructuring participants, I show that the risk of substantial increases in repayment obligations disincentivizes unemployed participants from seeking employment. I then calibrate a labor supply model and show that modest changes in the repayment plan structure improve welfare for both debtors and creditors. These findings challenge the practice of substantially adjusting repayment plans in debt restructuring programs in response to income changes. Chapter 2: The Labor Market Consequences of Acquisitions How do corporate acquisitions affect workers' earnings and employment? Using Swedish administrative data on worker outcomes, firm balance sheets, and acquisitions, we document substantial and persistent earnings losses following acquisitions-driven 80% by job displacement and 20% by earnings declines among stayers. Displaced workers subsequently move to smaller, less profitable firms with lower wage premia. We find no evidence that increased monopsony power depresses earnings of stayers. Instead, worker outcomes differ substantially by acquisition type. Specifically, acquisitions without board interlocks between acquirers and target firms lead to concentrated layoffs at target firms and lower profits. In contrast, acquisitions involving target firms with acquirer-appointed board members result in pay cuts, fewer layoffs, and higher overall profits. Our findings suggest that acquisitions disrupt employment and reduce pay, with any resulting profit gains coming partly at workers' expense. Chapter 3: Employer Labor Market Power and Working Hours: Evidence from Swedish Layoffs Many part-time workers report a preference for increasing their working hours at the current wage rate. This paper analyzes the role that firm labor market power plays in shaping this involuntary part-time employment in Sweden. We use an identification strategy based on part-time workers who experience an increase in local labor market concentration caused by a large layoff event at another firm within the same labor market. We compare these workers to unaffected colleagues in different occupations within the same plant. Our findings reveal that increased labor market concentration substantially reduces wages and working hours for part-time workers. Full-time workers experience similar declines in wages, but no effect on working hours. At the same time, employers increase hiring on the extensive margin among treated workers. To explain these findings, we present evidence that, unlike full-time workers, part-time workers' productivity falls in weekly working hours. Thus, employers face incentives to increase production by expanding employment on the extensive margin, rather than by raising hours of part-time workers. These findings suggest that firm labor market power contributes to involuntary part-time employment.