Edoardo Maria Acabbi

I will be visiting the Economics Department at Northwestern University this Fall. Please get in touch if you want to meet!


Academic positions

Assistant Professor, Universidad Carlos III de Madrid (Sep. 2020 - )
Visiting Professor, Northwestern University (Fall 2022)


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)


Bertheau, Antoine, Acabbi, Edoardo M., Barcelo, Cristina , Gulyas, Andreas , Lombardi, Stefano , and Saggio, Raffaele (2022).
The Unequal Consequences of Job Loss across Countries.
Forthcoming, American Economic Review: Insights
NBER working paper version
Media Coverage: VoxEu.org, World Economic Forum and The Conversation Global in English, LaVoce.info in Italian, The Conversation España in Spanish, Portuguese Economy Research Report in English.

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.

Working Papers

Acabbi, Edoardo M., Panetti, Ettore and Sforza, Alessandro (2022).
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)
Media coverage: Portuguese Economy Research Report in English.

Abstract. We study how labor rigidities affect firms' responses to credit shocks. Using novel data on the universe of workers, firms, banks and credit in Portugal, we establish three main facts. First, a short-term credit supply shock leads to a decrease in firms' employment and size and to a greater probability of exit, but the effects are concentrated on firms deriving greater value added from labor within their industries. Second, this exposure to liquidity risk stems from exposure to high-skill workers' compensation: the shock disproportionately affects productive firms with a high-skilled specialized labor force that requires greater investment in on-the-job training. Third, given labor costs exposure, productivity does not attenuate the effects of credit shocks. Our findings suggest that labor rigidities are an important driver of the lack of productivity-enhancing reallocation throughout financial crises.

Acabbi, Edoardo M., Alati, Andrea and Mazzone, Luca (2022).
A Labor Market Sorting Model of Scarring and Hysteresis.
Part of the VisitInps project.

Abstract. What are the long-run consequences of business cycle fluctuations for the skill distribution in the labor force? How is the sorting between firms and workers altered by aggregate fluctuations at different stages of the working life? And finally, what are the aggregate effects of changes in sorting for earnings dynamics, potential productivity and labor misallocation in the long run? We address these questions by proposing a tractable search equilibrium model of the labor market with aggregate risk, firm and worker heterogeneity, life-cycle dynamics and endogenous human capital accumulation. We show that sorting of workers to firms is a key factor in increasing the persistence of fluctuations, directly relating labor reallocation to economic hysteresis. We estimate the model on Italian administrative matched employer-employee data. Our estimates highlight the long term supply-side hysteresis effects of business cycle.

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.

Sforza, Alessandro and Acabbi, Edoardo M. (2022).
Shocks and the organisation of the firm: who pays the bill?

Abstract. What happens to firms’ organizational structure when they are hit by a negative shock? By matching employer-employee data with firm loans and bank balance sheets, we study firms’ reactions to a credit shock–the global financial crisis—and compare it to a trade shock—the entry of China in the WTO. When hit by a credit supply shock, firms reduce employment of higher-skilled workers more than lower-skilled production workers, while no adjustment is found on the wages. In contrast, a trade shock affects the hierarchy of the firm from the bottom to the top: firms rescale the organization and reduce employment at all levels. Results support the existence of heterogenous complementarities between working capital and skills along the hierarchy of the firm. Abstracting from general equilibrium effects, we find that firms’ organization is a key channel in the transmission of credit shocks to the real economy.