Edoardo Maria Acabbi


Academic positions

Assistant Professor, Universidad Carlos III de Madrid (Sep. 2020 - )


Ph.D. in Business Economics, Harvard University (Sep. 2014 - May 2020)
M.Sc. in Economics and Social Sciences, Bocconi University (Sep. 2010 - April 2013)
B.A. in International Economics and Management, Bocconi University (Sep. 2007 - Oct. 2010)

Working Papers

Acabbi, Edoardo M., Panetti, Ettore and Sforza, Alessandro (2021).
The Financial Channels of Labor Rigidities: Evidence from Portugal.
Best paper on “Savings and Financing of the Portuguese Economy”, Office of Strategy and Studies (GEE) of the Portuguese Ministry of Economy and the Portuguese Association of Insurers (APS)
Blog post about the paper (courtesy of Thorsten Beck)

Abstract. How do credit shocks affect labor market reallocation and firms’ exit, and how does their propagation depend on labor rigidities at the firm level? To answer these questions, we match administrative data on worker, firms, banks and credit relationships in Portugal, and conduct an event study of the interbank market freeze at the end of 2008. Consistent with other empirical literature, we provide novel evidence that the credit shock had significant effects on employment and assets dynamics and firms’ survival. These findings are entirely driven by the interaction of the credit shock with labor market frictions, determined by rigidities in labor costs and exposure to working-capital financing, which we label “labor-as-leverage” and “labor-as-investment” financial channels. The credit shock explains about 29 percent of the employment loss among large Portuguese firms between 2008 and 2013, and contributes to productivity losses due to increased labor misallocation.

Acabbi, Edoardo M., Alati, Andrea and Mazzone, Luca (2021).
Leveraging on Human Capital: Labor Rigidities and Sorting over the Business Cycle.
(Draft under revision, old draft available upon request. Part of the VisitInps project.)

Abstract. This paper introduces a structural model of the labor market that features worker and firm heterogeneity, where workers accumulate human capital and can search on the job. Wages are determined through an optimal dynamic contract. In our setting downward wage rigidity arises endogenously through limited commitment on the firm side. We show that aggregate fluctuations alter the sorting between workers and fi rms and distort incentives to accumulate human capital. Insurance incentives and contractual rigidities, together with limits to the intensity of investment in human capital, generate long term costs of business cycle fluctuations. Scarring effects arise in absence of demand externalities or informational frictions, simply as a result of physical constraints to investment and limited commitment problems. Once inefficiently separated, workers that look for employment in bad times direct their search towards less productive ms, which determines additional lasting effects for their working career. Using administrative data on the universe of Italian labor contracts provided by the social security administration (INPS), we provide empirical evidence of these mechanisms.

Acabbi, Edoardo M. and Alati, Andrea (2021).
Defusing Leverage: Liquidity Management and Labor Contracts.
(Part of the VistInps project.)

Abstract. Rigidities in firms' payroll structures are likely to increase the transmission of shocks to firms' cash flows and profitability. By using Italian administrative data on workers careers and firms’ balance sheets, we study how the use of permanent and fixed-term labor contracts affects this pass-through. We document how firms use the contract composition of their workforce to manage the risk determined by their labor-induced operating leverage. First, we confirm that a higher labor share is associated with more volatile cash flows following unexpected real shocks, a telling indication of operating leverage at work through labor costs. Second, we show that firms with a greater share of temporary contracts are characterized by a smoother time-series behavior of their cash-flows. In particular, the smoothing effect is stronger for firms with higher labor share related to the permanent workforce. We complement this analysis with the study of the 2001 labor market reform that lifted constraints on the employment of temporary contracts. Exploiting the staggered implementation of the reform across different collective bargaining agreements, we show that following the reform firms increased on average their share of temporary contracts and decreased average labor compensation. In particular, earlier transition to a more flexible workforce composition led to a 1 percentage point increase in profit margins (against a -1.6pp average variation around the event) and a 5 percent decrease in cross-sectional standard deviation of profits, but only among firms with an ex-ante more rigid labor cost structure.

Bertheau, Antoine, Acabbi, Edoardo M., Gulyas, Andreas , Lombardi, Stefano , Barcelo, Cristina and Saggio, Raffaele (2021).
The Unequal Cost of Job Loss across Countries.

Abstract. We document the consequences of losing a job across countries using a harmonized research design. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in-between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums accounts for 40% to 95% of within-country wage declines. The use of active labor market policies predicts a significant portion of the cross-country heterogeneity in earnings losses.

Sforza, Alessandro and Acabbi, Edoardo M. (2021).
Shocks and the organisation of the firm: who pays the bill?
Under revision.