1. Abstract: Labor mobility is the flexibility of workers to walk away from an industry in response to better opportunities. I develop a model in which labor flows make bad times worse for shareholders who are left with capital that is less productive. The model shows that firms face greater operating leverage by providing flexibility to mobile workers. I construct an empirical measure of labor mobility consistent with the model and document an economically significant cross-sectional relation between mobility, operating leverage, and stock returns. I find that firms in mobile industries earn returns over 5% higher than those in less mobile industries.
   

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Product Market Competition and Industry Returns (2012), (with M. Cecilia Bustamante)

1. Abstract: It is a well-known fact that product market competition erodes the value of the firm by reducing its profit margins. This paper shows that, perhaps counter intuitively, competition generally also reduces a firm's exposure to risk. We construct a model of an industry where firms face the threat of entry or expansion by competitors. Our model shows that the value destruction due to this threat is pro-cyclical, and leads to lower firm betas and expected returns in more competitive industries. The model also predicts that previously documented links between betas and industry-specific characteristics, such as the capital intensity, are greatly affected by the competitive environment. We employ four different empirical measures of product market competition and find supporting evidence for the model's predictions, even after controlling for the sample selection bias of publicly listed firms.
   

Aggregate Asset-Pricing Implications of Human Capital Mobility in General Equilibrium (2011), (with Esther Eiling and Miguel Palacios)

1. Abstract: We present a model in which aggregate mobility of labor affects risk and expected equity returns. Our setup is based on a multi-industry dynamic economy with production. We consider two different types of human capital. Generalist human capital can move between industries, while specialized human capital and physical capital cannot. The greater relative mobility of human capital relative to physical capital affects how aggregate risk in the economy is split between these two components of total wealth. We show that aggregate consumption and wealth increase when human capital is more mobile. However, at the same time, aggregate risk and the equity risk premium also increase under human capital mobility.