Finance and Employment: Evidence from U.S. Banking Reforms

32 Pages Posted: 8 Nov 2011 Last revised: 11 Aug 2014

See all articles by Hamid Boustanifar

Hamid Boustanifar

EDHEC Business School; BI Norwegian Business School


Economic theory offers competing hypotheses about how the cost and availability of finance influence labor market outcomes. Making use of the U.S. banking reforms between the 1970s and the 1990s as a quasi-natural experiment, this paper studies the impact of credit market development on employment. This paper documents the significant effects of these reforms on employment growth. Potential channels between finance and employment are also investigated. Changes in the growth of the number of self-employed individuals, the entry and exit of firms, and investment growth do not explain most of the employment growth following the reforms. The reforms had a substantially higher impact in industries with higher labor intensity, which is consistent with the idea that labor has fixed costs that need to be financed.

Keywords: Credit Market, Employment

JEL Classification: D33, G21, J21

Suggested Citation

Boustanifar, Hamid, Finance and Employment: Evidence from U.S. Banking Reforms. Journal of Banking and Finance, vol. 46, p. 343-354, 2014, Available at SSRN: or

Hamid Boustanifar (Contact Author)

EDHEC Business School ( email )

393 Promenade des Anglais – BP 3116
Nice, 06202

BI Norwegian Business School ( email )


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