The Disciplining Effect of Labor Mobility on Managerial Myopia

We examine whether firms in industries with greater labor mobility exhibit less myopic behavior. Using an occupation-based measure of labor mobility for a large sample of US firms, we show that greater labor mobility is associated with fewer myopic operating decisions. This association is stronger in industries with specialized labor and less unionization and in highly competitive industries. In years with large equity issuances, labor mobility moderates the amount of myopia. We find consistent results using a difference-in-differences design with plausibly exogenous variation in labor mobility from changes in real estate transfer taxes. We also find consistent results when using the housing price index as an alternative measure of mobility. Taken together, our results suggest that greater labor mobility disciplines firms away from making myopic operating decisions to meet short-term objectives.