Firing the wrong workers: financing constraints and labor misallocation
Andrea Caggese (),
Vicente Cuñat () and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Firms consider wages, current and expected productivity as well as firing and hiring costs when firing a worker. Financing constraints distort this intertemporal trade-off, leading firms to sub-optimally fire short-tenured workers with high future expected productivity. We provide empirical evidence of this distortion using matched employer-employee data from the Swedish population between 2000 and 2010. We propose a new empirical strategy that uses credit ratings to identify financing constraints and uses exchange rates and trade data to identify demand shocks. Our empirical results identify an important new misallocation effect of financial frictions that operates within firms across different types of workers.
Keywords: labor misallocation; firing decisions; financing constraints (search for similar items in EconPapers)
JEL-codes: F3 G3 J01 R14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Published in Journal of Financial Economics, 3, August, 2018, 133(3), pp. 589 - 607. ISSN: 0304-405X
Downloads: (external link)
http://eprints.lse.ac.uk/85645/ Open access version. (application/pdf)
Journal Article: Firing the wrong workers: Financing constraints and labor misallocation (2019)
Working Paper: Firing the Wrong Workers: Financing Constraints and Labor Misallocation (2018)
Working Paper: Firing the Wrong Workers: Financing Constraints and Labor Misallocation (2017)
Working Paper: Firing the wrong workers: Financing constraints and labor misallocation (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:85645
Access Statistics for this paper
More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().