Employee Job Search during Mergers and Acquisitions

We construct a new dataset to analyze employee job search behavior around merger and acquisition (M&A) announcements. We document significant heterogeneity in the levels of job search effort and outside wages sought by job seekers. The empirical facts are poorly explained by frictionless models of job search activity. Instead, the data are consistent with models that emphasize labor market frictions such as search costs, insider information about impending takeovers, and asymmetric information about worker productivity. The findings illustrate that frictionless models of labor supply and demand are insufficient for fully characterizing the labor reallocation process that takes place during corporate control transactions.