Accounting and Finance Seminar - Vladimir Vladimirov (Amsterdam)
G.15, 15-19 Tyndalls Park Road
Financing Skilled Labor
This paper studies how competition for skilled workers a¤ects how firms structure and finance workers' compensation. Workers' compensation structure has externalities for co-workers and firms, as it affects the risk of subsequent "worker runs" (workers leaving because others are leaving). It results from negotiations in which workers may struggle to compare di¤erent types of compensation o¤ers. If competition for skilled labor empowers workers to dictate terms, workers demand equity-based compensation, effectively, self-financing their compensation. Otherwise, ...firms offer fixed wages that they back by external financing. Both cases entail ineffiencies. The model explains
evidence relating compensation structure to worker bargaining power.