The effect of uncertainty on equilibrium wage rates causes uncertainty to have a negative impact on marginal q. In turn, uncertainty reduces corporate investment and employment. Using a novel firm-level measure of cash flow uncertainty, we find empirically that uncertainty has a strong negative...

We highlight the role of cash flow uncertainty on corporate employment and investment. We find that a 1% increase in cash flow uncertainty leads to a 0.62% decrease in tangible investment, a 1.39% decrease in intangible investment, and a 3.67% decrease in corporate employment. Our results are...