Higher job-finding rates cut wage premium at risky young firms
A Danmarks Nationalbank working paper shows that safer unemployment conditions lower the wage premium workers require to join risky young firms, encouraging experimentation and raising aggregate productivity by roughly 1 percent.
Workers, not just entrepreneurs, drive the risk calculus
Renato Faccini, Seho Kim and Javier Miranda develop a model in which lower job-loss costs reduce the wage premium workers demand to join risky young firms.
Using Danish matched employer-employee data covering roughly 14 million worker-year observations from 2008 to 2022, they find that a one-standard-deviation increase in local job-finding rates lowers wages at young firms relative to mature firms by 0.9 to 1.1 percentage points, significant at the 1 percent level across specifications.
In the calibrated model, a 12-percentage-point rise in the quarterly job-finding rate increases the share of entrants choosing risky experimentation by 6 percentage points and lifts aggregate productivity by about 1 percent.
Doubling the wait, raising the price
To test the mechanism directly, the authors fielded a randomized survey experiment within Danmarks Nationalbank's Survey of Consumers' Expectations, covering 2,556 respondents from January to April 2026.
Respondents compared a stable firm with a 4 percent annual closure rate to an experimental young firm with a 20 percent closure rate, after their expected unemployment duration was randomly halved or doubled.
Doubling expected duration raised the required wage premium by 2.3 percentage points, close to the 2.8 percentage points implied by the calibrated model.
A credible mechanism, a modest payoff
Pairing register data with a causal survey experiment is a genuinely rare and credible combination in labor economics.
Yet the productivity gain is modest, about 1 percent, and rests on calibration choices such as the targeted 60 percent experimentation share.
The paper stops short of naming which policy lever would actually deliver safer job-finding conditions in practice.