Credit Supply and Human Capital: Evidence from Bank Pension Liabilities
60 Pages Posted: 6 Jun 2017 Last revised: 17 Mar 2019
Date Written: February 12, 2019
We identify the effects of exogenous credit constraints on firm ability to attract and retain skilled workers. To do so, we exploit a shock to the value of the pension obligations of Portuguese banks resulting from a change in accounting norms. Using bank-firm credit exposures that we match with a census of all Portuguese employees, we show that firms in a relationship with affected banks borrow less and reduce employment mostly of high-skilled workers. High-skilled workers are more likely to exit and less likely to join affected firms. Overall, credit market frictions might have long-lasting effects on firm productivity and growth through the firm accumulation of human capital.
Keywords: Credit Frictions, Bank Regulation, Employment, Human Capital
JEL Classification: G21, J32, J63
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