Banks, Firms, and Jobs

51 Pages Posted: 6 Apr 2017

See all articles by Fabio Berton

Fabio Berton

University of Turin

Sauro Mocetti

Bank of Italy

Andrea Presbitero

International Monetary Fund (IMF)

Matteo Richiardi

University of Oxford

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2017

Abstract

Unemployment is one of the most visible effects of financial crises. We contribute to the empirical literature on the employment effects of a decline in bank credit, investigating individual heterogeneity across firms, workers and jobs in response to a financial shock. We use a rich data set of over 1.5 million individual job contracts in an Italian region, which is matched with the universe of firms and their lending banks. To isolate the effect of the financial shock we construct a firm-specific time-varying measure of credit supply. Our findings indicate that a 10 percent supply-driven credit contraction reduces employment by 2.5 percent. The effect is mostly concentrated among relatively less-educated and less-skilled workers with temporary contracts, and is consistent with the presence of a “dual” labor market and a skill-upgrade strategy adopted by firms in response to the financial shock.

Keywords: bank lending channel, job contracts, employment, financing constraints, skill upgrade

JEL Classification: G01, G21, J23, J63

Suggested Citation

Berton, Fabio and Mocetti, Sauro and Presbitero, Andrea and Richiardi, Matteo, Banks, Firms, and Jobs (February 23, 2017). Bank of Italy Temi di Discussione (Working Paper) No. 1097. Available at SSRN: https://ssrn.com/abstract=2946926 or http://dx.doi.org/10.2139/ssrn.2946926

Fabio Berton

University of Turin ( email )

218 bis
Corso Unione Sovietica
Torino, 10134
Italy

Sauro Mocetti (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Presbitero

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Matteo Richiardi

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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