Authors: Merz, Monika; Yashiv, Eran

Source: The American Economic Review, Volume 97, Number 4, September 2007 , pp. 1419-1431(13)

Publisher: American Economic Association

Abstract:

What role does labor play in firms' market value? We use a production-based asset pricing model with factor adjustment costs and forward-looking agents to explore this question. We posit that the hiring of labor is akin to investment in capital and that the two interact, with the interaction being a crucial determinant of the dynamic behavior of market value. Using aggregate US corporate sector data, we estimate firms' optimal hiring and investment decisions and the consequences for firms' value.

Document Type: Short communication

DOI: http://dx.doi.org/10.1257/000282807783286685

Publication date: 2007-09-01

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• The American Economic Review is a general-interest economics journal. The journal is published quarterly and contains articles on a broad range of topics. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession.
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