A Structural Model of Human Capital and Leverage - Duke ...

Table 3: Calibration of Benchmark Model.
Panel A: Production and Taxes
r0 Risk-free Rate 0.025
ν Returns to Scale 0.85
αn Labor’s Share of Output 0.6
f0 Fixed Costs of Production 0.1
ρz Persistence of Productivity Shock 0.684
σz Conditional Volatility of Productivity Shock 0.092
δk Depreciation Rate of Capital Stock 0.15
δn Rate of Voluntary Labor Turnover 0.15
τ + c Maximum Corporate Tax Rate 0.4
τ − c Minimum Corporate Tax Rate 0.2
τi Tax Rate on Interest Income 0.29
τd Tax Rate on Dividends 0.12
Panel B: Equity Issuance and Default Costs
λ0 Fixed Costs of Equity Issuance 0.02
λ1 Proportional Costs of Equity Issuance 0.1
λ2 Quadratic Costs of Equity Issuance 0.36
ξ1 Proportional Default Costs 0.05
ξn Proportion of Jobs Lost in Default 0.3
Panel C: Labor Market
η Hiring Costs 0.75
wu Unemployment Benefit 0.5
θ Workers’ Bargaining Power 0.6811
pe Probability of Successful Job Search 0.3
Table 4: Results of Benchmark Calibration
Data Model
Average Net Market Leverage 0.21 0.1812
Equity Issuance Frequency 0.18 0.2401
Average Equity Issuance/Assets 0.09 0.1707
Average Payout Ratio 0.22 0.2436
Average Wages/Assets 0.37 0.3626
Average Tobin’s Q 1.49 1.7709
Average Investment/Assets 0.15 0.1859
Default Frequency 0.02 0.0358
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