Are Executives in Short Supply? Evidence from Death Events

Julien Sauvagnat, Bocconi University and CEPR and Fabiano Schivardi, Luiss University, EIEF and CEPR

Using exhaustive administrative data on Italian social security records, we construct measures of local labor market thickness for executives that vary by industry and location. We show that firm performance is strongly and persistently affected by executive death, but only in thin local labor markets. The new executives hired after death events in thin local labor markets have lower education levels and are more likely to be replaced. These predictions are consistent with a simple model of executive search in which market thickness determines the arrival rate of applications for executive positions.