Corporate Cash and Employment
- (pp. 30-66)
AbstractIn the aftermath of the US financial crisis, both a sharp drop in employment and a surge in corporate cash have been observed. In this paper, based on US data, we argue that the negative relationship between the corporate cash ratio and employment is systematic, both over time and across firms. We develop a dynamic general equilibrium model where heterogenous firms need cash and external liquid funds in their production process. We analyze the dynamic impact of aggregate shocks and the cross-firm impact of idiosyncratic shocks. We show that external liquidity shocks generate a negative comovement between the cash ratio and employment, as documented in the data.
CitationBacchetta, Philippe, Kenza Benhima, and Céline Poilly. 2019. "Corporate Cash and Employment." American Economic Journal: Macroeconomics, 11 (3): 30-66. DOI: 10.1257/mac.20150191
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- J23 Labor Demand