Instrumental variables
Papers
Employee ownership and organizational design in startups: Evidence from wage constraints Liinus Hietaniemi and David H. Hsu
How do binding wage constraints reshape ownership allocation in startups, and what are the consequences for workforce outcomes? Using population-wide administrative data on Finnish startups (2006–2022), we study how mandated wage floors affect employee equity and worker mobility. We exploit staggered introductions and removals of collective bargaining agreement extensions that impose binding wage floors on previously uncovered firms, generating plausibly exogenous variation in wages and equity compensation. Extensions reduce individual employee equity stakes by 10–11%. Instrumental variables estimates show that a 10% increase in employee equity reduces one-year exit by 2.5–3% and increases internal advancement by 10–12%, with weaker effects in high-technology industries.