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

Table 5: Leverage and the Cross-Section of Labor Intensity. The table shows leverage as a function
of labor intensity both in the model and in the data. The labor intensity parameter, αn, is varied across
simulations, producing a model implied labor intensity and leverage. The labor intensity from the model is
mapped into a percentile of labor intensity in the data for which the corresponding leverage is calculated.
To avoid noisy calculations at the percentile level, leverage is calculated at the decile level of labor intensity,
then leverage at the percentile is interpolated between adjacent deciles.
αn 0.7 0.65 0.6 0.5 0.4 0.3 0.2
Model Wages/Assets 0.7021 0.4841 0.3626 0.2144 0.1324 0.0813 0.0488
Net Market Leverage 0.1271 0.1478 0.1812 0.2494 0.2894 0.3345 0.3352
Data Labor Intensity Percentile 92 75 59 39 29 20 6
Net Market Leverage 0.1194 0.1595 0.1723 0.2052 0.2352 0.3131 0.3899
Table 6: Leverage and Labor Intensity in the Model. The table shows the results from regressing
market leverage on labor intensity as well as a number of previously recognized predictors of capital structure
using data simulated from the model. For comparison with Table 1, the independent variables are all measured
in deciles.
(1) (2) (3) (4) (5) (6)
VARIABLES Mkt. Lev. Mkt. Lev. Mkt. Lev. Mkt. Lev. Mkt. Lev. Mkt. Lev.
Labor Intensity -0.030*** -0.030***
(0.000) (0.000)
Size -0.005*** -0.012***
(0.000) (0.000)
Market/Book -0.007*** -0.006***
(0.000) (0.000)
Profitability -0.015*** 0.002***
(0.000) (0.000)
Cash Flow Vol. -0.025*** -0.001***
(0.000) (0.000)
Constant 0.399*** 0.256*** 0.272*** 0.317*** 0.368*** 0.489***
(0.001) (0.001) (0.001) (0.001) (0.001) (0.002)
Observations 129153 129153 129153 129153 129153 129153
R 2 0.315 0.007 0.018 0.081 0.210 0.343
*** p