Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks

45 Pages Posted: 2 Sep 2021 Last revised: 16 Feb 2022

See all articles by Erik Gilje

Erik Gilje

University of Pennsylvania - The Wharton School

Jérôme Taillard

Babson College

Linghang Zeng

Babson College - Finance Division

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2021

Abstract

We study human capital reallocation following firm-specific idiosyncratic shocks. Theory
offers diverging predictions as to whether human capital gets reallocated to its most
productive use following these shocks. To empirically test these predictions, we focus
on relegation battles in the English Premier League. This setting offers well identified
idiosyncratic shocks as well as both individual-level and firm-level productivity metrics.
We find that human capital exits firms after a negative idiosyncratic shock. Specifically,
we find that more productive players move to more productive clubs and maintain their
long-term productivity. They get replaced with lower productivity players. Overall, our
results show that in a setting with highly transferable skills, idiosyncratic shocks lead to
a reallocation of human capital that moves an industry towards a better overall match
between individual-level and firm-level productivity.

Keywords: Idiosyncratic shock, human capital, reallocation, productivity, English Premier League, relegation

JEL Classification: G31, G32, G33, J24

Suggested Citation

Gilje, Erik and Taillard, Jérôme and Zeng, Linghang, Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks (August 14, 2021). Available at SSRN: https://ssrn.com/abstract=3905244 or http://dx.doi.org/10.2139/ssrn.3905244

Erik Gilje

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Jérôme Taillard

Babson College ( email )

323 Tomasso Hall
Babson Park, MA 02457
United States
6145994184 (Phone)

HOME PAGE: http://https://www.babson.edu/academics/faculty/faculty-profiles/jerome-taillard.php

Linghang Zeng (Contact Author)

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States

HOME PAGE: http://sites.google.com/view/linghang-zeng

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