In a recent review of this literature, Card, Cardoso, Heining, and Kline (2018) conclude that more research is needed applying (quasi)-experimental research designs that convincingly tease out the mechanisms through which firm shocks are transmitted to workers. A few recent papers have contributed to fill this gap. Exploiting an unexpected devaluation of the Mexican currency, Fr ́ıas, Kaplan, Verhoogen, and Alfaro-Serrano (2024) carefully estimate how differential export shocks across firms impact wage premia and worker composition.<sup>3</sup> The results reveal that exports have a significant positive effect on wage premia, and that the effect on wage premia accounts for essentially all of the medium-term effect of exporting on plant-average wages.<sup>4</sup> Kline, Petkova, Williams, and Zidar (2019) estimate the effects of innovation on rent-sharing using employer-employee data and rich patent information for the United States. Under the identifying assumption that the U.S. Patent Office’s initial decision on a patent application is as good as random (conditional on observable attributes of the application and the firm), the authors find that each patent-induced additional dollar of operating surplus yields a 29-cent rise in a firm’s wage bill. Also focusing on patents, but using Finish data and a matching estimator, Aghion, Akcigit, Hyytinen, and Toivanen (2018) find that patents are positively associated with earnings of the co-workers of inventors.

Our paper makes several contributions to this literature. First, the employer-employee data we use make it possible to examine effects of unexpected demand shocks on the various components of worker compensation (bases wages, overtime and other components of pay). Recent work by Grigsby, Hurst, and Yildirmaz (2021) convincingly argues that this distinction is important for examining and understanding the extent of wage rigidity over the business cycle.<sup>5</sup> Second, we exploit the role of top managers’ skills—which we show are correlated with management practices observed in data—in shaping these effects. Although a growing body of evidence reveals that manager attributes are important for management practices and firm performance (Bertrand and Mullainathan, 2003; Bertrand and Schoar, 2003; Bastos and Monteiro, 2011; Bender, Bloom, Card, Van-Reenen, and Wolter, 2018), there is little evidence on whether and how managers matter for how exogenous firm shocks are transmitted to workers. Finally, the

> 3The broader literature on firm and labor market responses to exchange rate movements includes Revenga (1992), Bertrand (2004), Verhoogen (2008), Brambilla, Lederman, and Porto (2012), Amiti, Itskhoki, and Konings (2014) and Bastos, Silva, and Verhoogen (2018), among others. Most closely related to this paper, Araujo and Paz (2014) and Macis and Schivardi (2016) use unexpected devaluations of the Italian and Brazilian currencies, respectively, to examine effects on rent sharing and workforce composition.

> 4A related strand of work examines the relationship between exports and wages, but does not exploit quasiexperimental variation in exports, including Schank, Schnabel, and Wagner (2007), Munch and Skaksen (2008), Baumgarten (2013), Irarrazabal, Moxnes, and Ulltveit-Moe (2013), Helpman, Itskhoki, Muendler, and Redding (2017).

> 5Using administrative payroll data from the largest U.S. payroll processing company, they provide descriptive evidence that firms use base wages to cyclically adjust the marginal cost of their workers, although about one third of workers receive no base wage change year over year.

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