How Does Labor Mobility Affect Corporate Leverage and Investment?

56 Pages Posted: 15 Jun 2017 Last revised: 3 Oct 2023

Date Written: October 1, 2023


I develop a dynamic model to investigate how labor mobility impacts firms' decisions. In the model, firms make investment and financing decisions, hire labor with different skill and mobility levels, and set wages through bargaining. The model predicts that, in response to an increase in labor mobility, high-skill firms operate with lower financial leverage, become less responsive to investment opportunities, and invest at lower rates, while low-skill firms remain unaffected. I confirm these predictions in the data using shocks to workers’ mobility across firms. The results are useful in understanding the effects of labor mobility changes driven by government policies or technological shocks, such as the rise of remote work.

Keywords: Capital Structure, Investment, Labor Skill, Labor Mobility, Inalienable Human Capital, Bargaining

JEL Classification: G32, G33, J24, J62

Suggested Citation

Sanati, Ali, How Does Labor Mobility Affect Corporate Leverage and Investment? (October 1, 2023). Available at SSRN: or

Ali Sanati (Contact Author)

American University ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics