Manpower Constraints and Corporate Policies

Using a unique German panel that allows measuring manpower constraints at the firm level, we document that manpower constraints vary substantially over time and across industries. Manpower-constrained firms have 5% higher capacity utilization and 21% longer order backlog.They also plan on higher investments in physical and human capital. For identification, we exploit the fall of the Berlin Wall and the subsequent differential fluxes of specialized Eastern workers across Western German states as a shock to manpower constraints. We also design a Manpower Constraint (MPC) Index using the loadings on firm-level financials that are available in commonly used dataset worldwide