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Investment in Human Capital and Labor Mobility: Evidence from a Shock to Property Rights

46 Pages Posted: 3 Nov 2017 Last revised: 21 Nov 2017

Christopher P. Clifford

University of Kentucky

William Christopher Gerken

University of Kentucky - Finance

Date Written: November 2, 2017

Abstract

We show that the assignment of property rights to client relationships affects employee behavior in the industry for financial advice. Our identification comes from staggered firm-level entry into The Protocol for Broker Recruiting. The Protocol effectively transfers the ownership of the client relationship from the firm to the employee. We document that entering into the Protocol increases employee labor mobility among member firms. Further, upon Protocol inclusion, we find that employees are less likely to generate customer complaints, more likely to invest in their own general human capital, but less likely to invest in firm-specific human capital. We use detailed employee-employer matched data for the universe of financial advisors to show these effects hold within the same job spell and across advisors within the same county at the same time. Our results suggest that limiting labor mobility may limit employee incentives to invest in human capital.

Keywords: Financial Advisors, Non-Solicitation Agreements, Protocol for Broker Recruiting, Property Rights

JEL Classification: G24, J44, J60, K31, L22

Suggested Citation

Clifford, Christopher P. and Gerken, William Christopher, Investment in Human Capital and Labor Mobility: Evidence from a Shock to Property Rights (November 2, 2017). Available at SSRN: https://ssrn.com/abstract=3064204

Christopher Clifford

University of Kentucky ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)

William Gerken (Contact Author)

University of Kentucky - Finance ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States

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