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Autoren: 
Merz, Monika
Yashiv, Eran
Datum: 
2003
Schriftenreihe/Nr.: 
IZA Discussion Papers No. 965
Zusammenfassung: 
What role does labor play in firms? market value? We explore this question using a production-based asset pricing model with frictions in the adjustment of both capital and labor. We posit that hiring of labor is akin to investment in capital and that the two interact, with the interaction being a crucial determinant of market value behavior. We use aggregate U.S. corporate sector data to estimate firms? optimal hiring and investment decisions and the consequences for firms? value. We then decompose this value, thereby quantifying the link between firms? market value and gross hiring flows, employment, gross investment and physical capital. We find that a conventional specification – quadratic adjustment costs for capital and no hiring costs – performs poorly. Rather hiring and investment flows, unlike employment and capital stocks, are volatile and both are essential to account for market volatility. A key result is that firms? value embodies the value of hiring and investment over and above the capital stock.
Schlagwörter: 
production-based asset pricing
labor market frictions
gross flows
Q-model
GMM
JEL: 
E24
E23
E22
G12
Dokumentart: 
Working Paper

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