Credit and Firm-Level Volatility of Employment
59 Pages Posted: 18 Aug 2015 Last revised: 13 Jul 2017
Date Written: June 27, 2017
We study a firm dynamics model where access to credit improves the bargaining position of firms with workers and increases the incentive to hire. To evaluate the importance of the bargaining channel for the hiring decisions of firms, we estimate the model structurally using data from Compustat and Capital IQ. We find that the contribution of the bargaining channel to the volatility of firm-level employment is about 13% . We also evaluate the relative contribution of credit and revenue shocks and find that credit shocks contribute to about 22%.
Suggested Citation: Suggested Citation