Abstract

http://ssrn.com/abstract=1987315
 
 

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Finance and Employment


Marco Pagano


University of Naples Federico II - Department of Economics and Statistics; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Giovanni Pica


Università degli Studi di Salerno - Department of Economics

January 2012

Economic Policy, Vol. 27, Issue 69, pp. 5-55, 2012

Abstract:     
How does finance affect employment and inter‐industry job reallocation? We present a model that predicts that financial development (i) increases employment and/or labour productivity and wages, with a smaller impact at high levels of the equilibrium wage and financial development; (ii) may induce either more or less reallocation of jobs depending on whether shocks to profit opportunities or to cash flow predominate; (iii) amplifies the output and employment losses in crises, firms that rely most on banks for liquidity being hit the hardest. Testing these predictions on international industry‐level data for 1970–2003, we find that standard measures of financial development are indeed associated with greater employment growth, although only in non‐OECD countries, and are not correlated with labour productivity or real wage growth. Moreover, they correlate negatively with inter‐industry dispersion of employment growth. Finally, there is some evidence of a ‘dark side’ of financial development, in that during banking crises employment grows less in the industries that are more dependent on external finance and those located in the more financially developed countries.

Number of Pages in PDF File: 51

Accepted Paper Series


Date posted: January 18, 2012  

Suggested Citation

Pagano, Marco and Pica, Giovanni, Finance and Employment (January 2012). Economic Policy, Vol. 27, Issue 69, pp. 5-55, 2012. Available at SSRN: http://ssrn.com/abstract=1987315 or http://dx.doi.org/10.1111/j.1468-0327.2011.00276.x

Contact Information

Marco Pagano (Contact Author)
University of Naples Federico II - Department of Economics and Statistics ( email )
Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)
Einaudi Institute for Economics and Finance (EIEF)
Via Sallustiana, 62
Rome, 00187
Italy
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http:/www.ecgi.org
Giovanni Pica
Università degli Studi di Salerno - Department of Economics ( email )
via Ponte Don Melillo, 5
Fisciano, SA I-84084
Italy
+39 089 962831 (Phone)
HOME PAGE: http://www.unisa.it/docenti/pica/home
Feedback to SSRN


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References:  61
Citations:  3
Footnotes:  25

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