Financing Skilled Labor

WFA 2019 Meetings Paper

50 Pages Posted: 7 Aug 2018 Last revised: 31 Jan 2020

See all articles by Vladimir Vladimirov

Vladimir Vladimirov

University of Amsterdam Business School; Centre for Economic Policy Research (CEPR)

Date Written: January 30, 2020

Abstract

This paper studies how negotiations to hire skilled workers affect workers' compensation structure and firm financing. It shows that firms with strong bargaining power offer fixed wages, secured by a credit line. By contrast, firms trying to accommodate workers' demands offer equity-based compensation. The model highlights two main factors affecting workers' compensation structure and firm financing. The first is workers' ability to play firms --- often making different types of offers --- off against each other. The second is that workers' compensation structure affects the risk that workers want to leave when others are leaving. The evidence supports the model's main predictions.

Keywords: financing wages, wage structure of non-executive employees, worker runs, worker bargaining power, noncompetition agreements

JEL Classification: G32, M52, J54, J33

Suggested Citation

Vladimirov, Vladimir, Financing Skilled Labor (January 30, 2020). WFA 2019 Meetings Paper. Available at SSRN: https://ssrn.com/abstract=3227946 or http://dx.doi.org/10.2139/ssrn.3227946

Vladimir Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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