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Title: Capital and Labor Reallocation within Firms

Author(s): Xavier Giroud and Holger M Mueller

Publication Date: January 2015

Keyword(s): Internal Capital Markets

Programme Area(s): Financial Economics

Abstract: 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 productivity increases. We do not find any evidence of capital or labor spillovers among plants of financially unconstrained firms.

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Bibliographic Reference

Giroud, X and Mueller, H. 2015. 'Capital and Labor Reallocation within Firms'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10360