Labor Heterogeneity and Asset Prices: the Importance of Skilled Labor
Heterogeneity in the composition of the labor force affects asset prices in the cross section. We combine a model of labor heterogeneity with a neoclassical q-theory model with labor adjustment costs and show that the negative expected return-hiring rate relation documented in previous studies should be steeper in industries with higher labor adjustment costs. Empirically, using a novel industry level measure of labor skills as a proxy for the size of labor adjustment costs, we show that the negative expected return-hiring rate relation is two times larger among industries with higher labor skills than in industries with lower labor skills.
Year of publication: |
2014
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Authors: | Lin, Xiaoji ; Belo, Frederico |
Institutions: | Society for Economic Dynamics - SED |
Saved in:
freely available
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