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Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks

Author

Listed:
  • Erik P. Gilje
  • Jérôme P. Taillard
  • Linghang Zeng

Abstract

We study human capital reallocation following firm-specific idiosyncratic shocks. Theory offers diverging predictions as to whether human capital gets reallocated to its most productive use following these shocks. To empirically test these predictions, we focus on relegation battles in the English Premier League. This setting offers well identified idiosyncratic shocks as well as both individual-level and firm-level productivity metrics. We find that human capital exits firms after a negative idiosyncratic shock. Specifically, we find that more productive players move to more productive clubs and maintain their long-term productivity. They get replaced with lower productivity players. Overall, our results show that in a setting with highly transferable skills, idiosyncratic shocks lead to a reallocation of human capital that moves an industry towards a better overall match between individual-level and firm-level productivity.

Suggested Citation

  • Erik P. Gilje & Jérôme P. Taillard & Linghang Zeng, 2022. "Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks," NBER Working Papers 29782, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29782
    Note: CF LS
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    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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