Human Capital Portability and Worker Career Choices: Evidence from M&A Bankers

We quantify the importance of firm-specific human capital in explaining workers' career choices. We develop a model that allows workers to accumulate both portable and non-portable human capital through their work experience and learn about their match quality with current employers over time. We also allow bankers to choose between firms that offer different levels of portability and production efficiency. The model is estimated to match banker career data in the M&A advisory industry, which is populated by bulge bracket and boutique firms. Our estimation suggests that bankers in boutique firms accumulate less portable human capital but enjoy higher efficiency. Such a trade-off explains why bankers are more likely to choose bulge bracket banks at the start of their careers but increasingly migrate to boutique banks when they become more seasoned. We also gauge the extent to which non-portable human capital affects labor allocation and shapes industry structure.