Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks

Erik P. Gilje, Jérôme P. Taillard and Linghang Zeng

No 29782, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G31 G32 G33 J24 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-eff, nep-hrm and nep-spo
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