The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity

61 Pages Posted: 24 May 2016

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Daniel R. Carvalho

Indiana University - Kelley School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: May 19, 2016

Abstract

Using a difference-in-difference methodology, we find that the state-level deregulation of local U.S. banking markets leads to significant increases in the reallocation of labor within local industries towards small firms with higher marginal products of labor. Using plant-level data, we propose and examine an approach that quantifies the industry productivity gains from labor reallocation and find that these gains are economically important. Our analysis suggests that labor reallocation is a significant channel through which local banking markets affect the aggregate productivity and performance of local industries.

Suggested Citation

Bai, John (Jianqiu) and Carvalho, Daniel R. and Phillips, Gordon M., The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity (May 19, 2016). Tuck School of Business Working Paper No. 2781980. Available at SSRN: https://ssrn.com/abstract=2781980 or http://dx.doi.org/10.2139/ssrn.2781980

John (Jianqiu) Bai (Contact Author)

Northeastern University - D'Amore-McKim School of Business ( email )

Boston, MA 02115
United States

Daniel R. Carvalho

Indiana University - Kelley School of Business ( email )

Bloomington, IN 47405
United States

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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