Financing Skilled Labor

WFA 2019 Meetings Paper

45 Pages Posted: 7 Aug 2018 Last revised: 8 Mar 2021

See all articles by Vladimir Vladimirov

Vladimir Vladimirov

University of Amsterdam Business School; Centre for Economic Policy Research (CEPR); Finance Theory Group (FTG)

Multiple version iconThere are 2 versions of this paper

Date Written: March 8, 2021


How does competition for high-skilled workers affect the design and financing of compensation? This paper shows that such competition has three main effects. It increases the cost of offering equity-based compensation by exacerbating the risk of contagious worker turnover. Simultaneously, competition shifts compensation structure toward equity-based pay, as that helps attract workers when firms' prospects are uncertain. Financing also changes, as equity-based pay requires no external financing. By contrast, firms whose bargaining power is not eroded by competition prefer deferred fixed compensation backed by credit lines. Capital and compensation structure choices may distort the efficient matching between workers and firms.

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 (March 8, 2021). WFA 2019 Meetings Paper, Available at SSRN: or

Vladimir Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Finance Theory Group (FTG) ( email )

United States

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