We determine workforce composition and wages in firms in the presence of productivity spill-overs between co-workers. In equilibrium, workers’ wages depend on the production structure of firms, own group size, and aggregate workforce composition in the firm. We estimate the wage effects of...

Sick workers in many countries receive sick pay during their illness-related absences from the workplace. In several countries, the social security system insures firms against their workers’ sickness absences. However, this insurance may create moral hazard problems for firms, leading to the...

Does the supply of a welfare state create its own demand? Many economic scholars studying welfare arrangements refer to Say’s law and insinuate a self-destructive welfare state. However, little is known about the empirical validity of these assumptions and hypotheses. We study the dynamic...