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Title: A Spanner in the Works: Restricting Labor Mobility and the Inevitable Capital-Labor Substitution

Citation Type: Working Paper

Publication Year: 2022

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DOI: 10.2139/ssrn.4271501

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Abstract: We model an environment with overlapping generations of labor to show that policies restricting labor mobility increase a firm's monopsony power and labor turnover costs. Subsequently, firms increase capital expenditure, altering their optimal capital-labor ratio. We confirm this by exploiting the statewide adoption of the inevitable disclosure doctrine (IDD), a law intended to protect trade secrets by restricting labor mobility. Following an IDD adoption, local firms increase capital expenditure (capital-labor ratio) by 3.5 percent (5.5 percent). This result is magnified for firms with greater human capital intensity. Finally, IDD adoptions do not spur investment in either R&D or growth options as intended.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4271501

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Authors: Kannan, Bharadwaj; Pinheiro, Roberto B.; Turtle, Harry

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Pages: 1-83

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Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Population Mobility and Spatial Demography

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