Tuna Dökmeci

Endogenous Bargaining Weights in Search and Match Labour Markets

In frictional labour markets wages are determined through a bargaining process in which firms and workers share the surplus they jointly generate. A crucial element in this process is the bargaining weight, usually treated as exogenous. I develop an alternating-moves bargaining model where firms and workers continuously meet new potential partners during negotiations; outside options evolve in real time, leading to endogenous breakdown probabilities. Bargaining weights become functions of market tightness: as tightness rises, workers secure a larger share of the surplus.

Effects of State Aid on Firm Performance: Evidence from 22 EU Countries

with Andrea Brasili, Annamaria Tueske, Jochen Schanz

This paper examines the impact of state aid on firm performance across 22 EU countries. Using data on large state aid awards merged with firm-level balance sheet information from the Orbis database, we employ a generalised difference-in-differences approach with staggered adoption to identify causal effects on investment rates, employment growth, and revenue-based productivity. Our analysis reveals that state aid substantially boosts firm investment, particularly for recipients under regional development programmes. However, the increased investment does not translate into higher employment growth, and is associated with an initial decline in productivity due to rising capital without corresponding revenue gains. Notably, regional heterogeneity is observed: firms in Central and Eastern Europe exhibit more favourable productivity responses. These findings suggest that while state aid can effectively stimulate capital formation, its design should be refined to ensure that investments are productivity-enhancing and support job creation.

Presented at: Joint Research Centre TEDAM Seminar

The Ripple Effect: Children's Job Insecurity and Parents' Labour and Consumption Choices

with Elena Lazzaro

This paper studies the effect of young adults’ job insecurity on the consumption and labour supply decisions of their parents. Using data from the Italian Survey on Household Income and Wealth (SHIW), we causally estimate this effect by exploiting a labour market reform (“Fornero reform”) that substantially reduced firing costs for workers in firms with more than 15 employees. According to our findings, working parents of treated adult children reduced their consumption by €2,453 per year on average. This effect is driven by the drop in durable consumption, which yearly decreases by €1,600. Even if we do not find any substantial and significant effect on the intensive and extensive margins of labour, we observe that the impact on consumption is stronger for retired parents who are constrained in their ability to adjust their labour supply and who also reduce their non-durable expenditures.

Labour Demand and Firing Costs under Imperfect Competition: A Non-Monotonic Relationship

In this paper, I analyse the effects of firing costs on job creation and employment in an oligopolistic setting. I show that quantity competition and strategic interaction can generate a positive relationship between firing costs and hiring. The mechanism relies on commitment: when firms face costly lay-offs, they can credibly commit to higher output, discouraging rivals from expanding. However, this effect is not monotonic. At low levels, firing costs limit commitment and deter hiring; at higher levels, they enable firms to lead the market and expand employment. The model also reveals strategic spillovers, as firms respond not only to their own constraints but also to their competitors’. These results challenge the standard view that firing costs necessarily suppress job creation and highlight the importance of market structure in shaping labour market outcomes.

Sectoral Policies in the EU

with Guido Bongioanni