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Title: Wage Differentials, Firm Investment, and Stock Returns

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: This paper documents how labor costs affect firm capital investment and stock returns. I estimate wage premia across U.S. industries and show that the negative investment-return relation implied by q -theory is steeper for high wage firms than low wage firms. Based on the empirical evidence that wage and labor adjustment costs are positively related, a extended investment-based model predicts the interaction effect, since capital-labor complementarity implies that labor market friction also govern investment decision. The inflexibility induced by wage offers new insights on asset prices and corporate investment.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2740124

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Authors: Kim, Yongjun

Publisher: University of Seoul

Data Collections: IPUMS USA, IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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