Capital and Labor Reallocation within Firms

  title={Capital and Labor Reallocation within Firms},
  author={Xavier Giroud and Holger M. Mueller},
  journal={Microeconomics: Intertemporal Firm Choice \& Growth},
We document how a shock to investment opportunities at one plant (“treated plant”) spills over to other plants within the same firm, but only if the firm is financially constrained. To provide the treated plant with resources, headquarters withdraws capital and labor from other plants, especially from plants that are relatively less productive, not part of the firm’s core industries, and located far away from headquarters. As a result of the resource reallocation, aggregate firm-wide… 

Do Firms Mitigate or Magnify Capital Misallocation? Evidence from Plant-Level Data

Almost two thirds of the cross-plant dispersion in marginal revenue products of capital occurs across plants within the same firm rather than between firms. Even though firms allocate investment very

Reallocation of Capital and Labor within Firms

SummaryUnderstanding how internal capital and labor markets function sheds light on one of the most fundamental questions in economics: what determines the boundaries of the firm? This essay reviews

The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity

Using a difference-in-difference methodology, we find that the state-level deregulation of local U.S. banking markets leads to significant increases in the reallocation of labor within local

Insurance between Firms: The Role of Internal Labor Markets

We investigate how Internal Labor Markets (ILMs) allow organizations to accommodate shocks calling for costly labor adjustments. Using data on workers' mobility within French business groups, we find

How do tax increases affect investment allocation within multinationals?

This paper studies how tax increases transmit across countries through multinationals’ internal networks of subsidiaries. Using a large subsidiary-level dataset of European firms and several

Multiregional Firms and Region Switching in the US Manufacturing Sector

This paper uses data on US manufacturing firms to study a new extensive margin, the reallocation of resources that takes place within surviving firms as they open and close establishments in

Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence

I use U.S. Census microdata to analyze the effect of stronger creditor rights on productivity. Following the adoption of antirecharacterization laws that give lenders greater access to the

Minimum Wage Hikes, Innovation, and Corporate Investment

This paper studies how minimum wage policies affect capital investment using the industrial census of manufacturing firms in China, where minimum wage policies vary across counties. Exploiting

Labor Market Consequences of Antitax Avoidance Policies

In this paper, I analyze the local labor market consequences of multinational firms reallocating employees across their affiliates in response to antitax avoidance policies. I leverage the



The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets

It is found that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities, and internal labor markets provide a bright side to corporate diversification.

Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence

We develop a profit-maximizing neoclassical model of optimal firm size and growth across different industries based on differences in industry fundamentals and firm productivity. In the model, a

Internal Capital Markets and the Competition for Corporate Resources

This paper examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market. Unlike a bank lender, headquarters has control rights that

Are Internal capital Markets Efficient

Using segment information from Compustat, we find that the investment by a segment of a diversified firm depends on the cash flow of the firm's other segments, but significantly less than it depends

Resource Allocation within Firms and Financial Market Dislocation: Evidence from Diversified Conglomerates

When external capital markets are stressed they may not reallocate resources between firms. We show that resource allocation within firms' internal capital markets provides an important force

Cash Flow and Investment: Evidence from Internal Capital Markets

Using data from the 1986 oil price decrease, I examine the capital expenditures of non-oil subsidiaries of oil companies. I test the joint hypothesis that 1) a decrease in cash/collateral decreases

Conglomerate Firms and Internal Capital Markets

The large literature on conglomerate firms began with the documentation of the conglomerate discount. Given conglomerate firm production represents more than 50 percent of production in the United

Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?

No. This paper investigates the relationship between financing constraints and investment-cash flow sensitivities by analyzing the firms identified by Fazzari, Hubbard, and Petersen as having

Do Financing Constraints Explain Why Investment is Correlated with Cash Flow?

This paper investigates the sources of the correlation between corporate cash flow and investment by undertaking an in-depth analysis of the 49 low-dividend firms identified by Fazzari, Hubbard, and