Capital and Labor Reallocation within Firms

Holger Mueller and Xavier Giroud

No 10360, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Internal; capital; markets (search for similar items in EconPapers)
JEL-codes: G31 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (113)

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