Does Main Street Benefit from What Happens on Wall Street?
70 Pages Posted: 15 Dec 2020 Last revised: 1 Apr 2022
Date Written: March 31, 2022
Yes. We show that aggregate stock returns predict aggregate US employment, despite the industrial composition of publicly traded firms differing markedly from that of all firms, and the representativeness of public firms declining over time. Using establishment-level data and cross-sectional variation in city and industry employment and returns, we also show that returns predict local and industry labor market outcomes. Our granular approach allows us to include time fixed effects such that the predictive power is not driven by omitted aggregate variables such as monetary policy expectations. Our results are consistent with an alignment of interests between shareholders and labor.
Keywords: Regional Employment, Industry Employment
JEL Classification: E24, E44, G14, G51, R12
Suggested Citation: Suggested Citation