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Capital and Labor Reallocation within Firms

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  • Giroud, Xavier
  • Mueller, Holger M

Abstract

We document how a shock to investment opportunities at one plant (“treated plant”) spills over to other plants within the same firm, but only if the firm is financially constrained. To provide the treated plant with resources, headquarters withdraws capital and labor from other plants, especially from plants that are relatively less productive, not part of the firm’s core industries, and located far away from headquarters. As a result of the resource reallocation, aggregate firm-wide productivity increases. We do not find any evidence of capital or labor spillovers among plants of financially unconstrained firms.

Suggested Citation

  • Giroud, Xavier & Mueller, Holger M, 2015. "Capital and Labor Reallocation within Firms," CEPR Discussion Papers 10360, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10360
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Xavier Giroud & Holger M. Mueller, 2017. "Firms' Internal Networks and Local Economic Shocks," NBER Working Papers 23176, National Bureau of Economic Research, Inc.
    2. Nuri Ersahin, 2018. "Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence," Working Papers 18-20, Center for Economic Studies, U.S. Census Bureau.
    3. Andrea Bassanini & Giorgio Brunello & Eve Caroli, 2017. "Not in My Community: Social Pressure and the Geography of Dismissals," Journal of Labor Economics, University of Chicago Press, vol. 35(2), pages 429-483.
    4. John (Jianqiu) Bai & Daniel Carvalho & Gordon Phillips*, 2016. "The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity," Working Papers 16-26, Center for Economic Studies, U.S. Census Bureau.
    5. Giroud, Xavier & Mueller, Holger M, 2016. "Redistribution of Local Demand Shocks through Firms' Internal Networks," CEPR Discussion Papers 11384, C.E.P.R. Discussion Papers.
    6. Giacinta Cestone & Chiara Fumagalli & Francis Kramaz & Giovanni Pica, 2015. "Insurance Between Firms: The Role of Internal Labor Markets," CSEF Working Papers 386, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 15 Feb 2017.
    7. repec:eee:dyncon:v:89:y:2018:i:c:p:100-116 is not listed on IDEAS
    8. Nuri Ersahin & Rustom M. Irani, 2015. "Collateral Values and Corporate Employment," Working Papers 15-30, Center for Economic Studies, U.S. Census Bureau.
    9. Nuri Ersahin, 2017. "Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence," Working Papers 17-36, Center for Economic Studies, U.S. Census Bureau.
    10. Nuri Ersahin & Rustom M. Irani, 2015. "Collateral Values and Corporate Employment," Working Papers 15-30r, Center for Economic Studies, U.S. Census Bureau.
    11. Smolyansky, Michael, 2016. "Policy Externalities and Banking Integration," Finance and Economics Discussion Series 2016-8, Board of Governors of the Federal Reserve System (U.S.), revised 15 Feb 2018.
    12. repec:spr:reaccs:v:23:y:2018:i:1:d:10.1007_s11142-017-9421-3 is not listed on IDEAS
    13. Bakke, Tor-Erik & Gu, Tiantian, 2017. "Diversification and cash dynamics," Journal of Financial Economics, Elsevier, vol. 123(3), pages 580-601.
    14. repec:eee:ecmode:v:70:y:2018:i:c:p:245-258 is not listed on IDEAS
    15. repec:bla:deveco:v:55:y:2017:i:2:p:75-104 is not listed on IDEAS
    16. Jingbo Cui & GianCarlo Moschini, 2018. "Firm Internal Network, Environmental Regulation, and Plant Death," Center for Agricultural and Rural Development (CARD) Publications 18-wp585, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    17. repec:eee:jfinin:v:30:y:2017:i:c:p:86-106 is not listed on IDEAS
    18. Michael Koch, 2016. "Skills, Tasks and the Scarcity of Talent in a Global Economy," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 536-563, August.
    19. Keuschnigg, Christian & Kogler, Michael, 2018. "Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181571, Verein für Socialpolitik / German Economic Association.
    20. Keuschnigg, Christian & Kogler, Michael, 2017. "Schumpeterian Banks: Credit Reallocation and Capital Requirements," Economics Working Paper Series 1704, University of St. Gallen, School of Economics and Political Science.
    21. Nuri Ersahin & Rustom M. Irani & Hanh Le, 2015. "Creditor Control Rights and Resource Allocation within Firms," Working Papers 15-39, Center for Economic Studies, U.S. Census Bureau.
    22. Matthias Kehrig & Nicolas Vincent, 2017. "Do Firms Mitigate or Magnify Capital Misallocation? Evidence from Planet-Level Data," CESifo Working Paper Series 6401, CESifo Group Munich.
    23. repec:eee:corfin:v:50:y:2018:i:c:p:402-423 is not listed on IDEAS
    24. Matthias Kehrig & Nicolas Vincent, 2018. "Do Firms Mitigate or Magnify Capital Misallocation? Evidence from Plant-Level Data," 2018 Meeting Papers 233, Society for Economic Dynamics.

    More about this item

    Keywords

    Internal Capital Markets;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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