Abstract: This paper examines how the design of debt restructuring or personal insolvency programs shapes labor market outcomes using Sweden as a case study. In the Swedish debt restructuring program, debt is forgiven following a 5-year partial repayment period. I estimate the causal effects of the program using an examiner instrumental variable (IV) design and show that traditional examiner IV estimates can be biased if there is path dependency in examiner decision-making. This bias is avoided by estimating examiner leniency from past cases. On average, participation in the debt restructuring program has negative effects on labor income and employment, but these findings mask a large heterogeneity. Initially employed participants experience relative gains in income and employment, while initially unemployed participants face substantial negative effects. Both of these effects persist even after the program has ended. Combining observational data and results from a survey I conducted among debt restructuring participants, I show that the risk of substantial increases in repayment obligations disincentivizes unemployed participants from seeking employment. I then calibrate a labor supply model and show that modest changes in the repayment plan structure improve welfare for both debtors and creditors. These findings challenge the practice of substantially adjusting repayment plans in debt restructuring programs in response to income changes.

Abstract: We study the impact of mergers and acquisitions (M&As) on firm performance and worker labor market outcomes in Sweden. Comparing firms that undergo M&As with those that eventually do so, we find that both joint profits and employment drop substantially following a merger. However, this masks substantial heterogeneity: Profits of firms that share a common board member with the target firm continue to grow as expected, and only firms without a common board member experience reduced profit. This is especially true for vertical M&As between firms in different industries. This heterogeneity reflects differences in the effect of mergers on salaries, where firms that share a common board member with the target firm cut salaries following mergers, while others do not. We provide evidence that firms that execute successful M&As strategically send board members to potential targets in the years leading up to the M&A. This suggests that information acquisition can play a crucial role in successfully executing an M&A.