Trading on Talent: Human Capital and Firm Performance
55 Pages Posted: 12 Aug 2017 Last revised: 28 Dec 2020
Date Written: December 26, 2020
How is skilled human capital reflected in firm performance? By directly observing the monthly career migration patterns of 37 million employees of US public companies, along with their education, demographics, and skills, we explore firm-level "skill premia." Our key empirical finding is that, contrary to the individual-level patterns documented by the labor economics literature, technical and social skillsets negatively forecast both financial and operational performance at the firm level. We explore several potential mechanisms for this finding. Social skillsets display counter-cyclical performance, suggesting that their negative premia reflect their risk profiles. Meanwhile, negative premia on technical skillsets show patterns consistent with over-exuberance regarding contemporaneous popular technologies: IT and Mobile Networks skillsets carry negative premia in the early 2000s, while Data Analysis, Software Engineering, and Web Development display negative premia during the 2010s.
Keywords: return predictability, asset prices, human capital, skilled labor
JEL Classification: G11, G00
Suggested Citation: Suggested Citation