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Long-Term Attachments and Long-Run Firm Rates of Return

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  • Orazem, Peter
  • Bouillon, Marvin
  • Doran, B. Michael

Abstract

Long-term attachments between workers and firms are common. Numerous studies have examined worker returns to tenure, but little is known of firm returns to firm-worker matches. Yet, these attachments represent a human capital asset quasi-held by the firm which is not captured by traditional accounting measures of firm assets. Firms with large quasi-holdings of human capital will have higher measured return on assets, other things equal. Analysis of data on 250 large manufacturing firms supports the view that firms profit from long-term attachments with their workers. Consequently, unmeasured human capital assets contribute to the explanation of persistence in measured long-run excess profits across firms.

Suggested Citation

  • Orazem, Peter & Bouillon, Marvin & Doran, B. Michael, 2004. "Long-Term Attachments and Long-Run Firm Rates of Return," Staff General Research Papers Archive 11577, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:11577
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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