Labor and Finance: The Effect of Bank Relationships

41 Pages Posted: 15 Nov 2018 Last revised: 3 Nov 2021

See all articles by Patrick Behr

Patrick Behr

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE)

Lars Norden

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE); Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Raquel F. Oliveira

Central Bank of Brazil; Fundação Escola de Comércio Álvares Penteado (FECAP)

Date Written: November 1, 2021

Abstract

We investigate whether firms’ number of bank relationships affects labor market outcomes. Using 5 million observations on matched credit and labor panel data from Brazil, we estimate IV regressions, employing exogenous variation in bank relationships due to nationwide bank M&A activity. Firms with more bank relationships employ more workers and pay higher wage bills. Credit availability, cost of credit and bank heterogeneity are economic channels behind these results. The firm-level results translate into positive macroeconomic effects in municipalities and states. The evidence is novel and indicates positive effects of multiple bank relationships on labor market outcomes in an emerging economy.

Keywords: Credit, banks, real effects, employment, wages, credit registry

JEL Classification: G21, J21, O10

Suggested Citation

Behr, Patrick and Norden, Lars and Oliveira, Raquel F., Labor and Finance: The Effect of Bank Relationships (November 1, 2021). Available at SSRN: https://ssrn.com/abstract=3276655 or http://dx.doi.org/10.2139/ssrn.3276655

Patrick Behr

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE) ( email )

Brazil

Lars Norden (Contact Author)

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE) ( email )

Rua Jornalista Orlando Dantas 30
Rio de Janeiro, 22231-010
Brazil
+552130832431 (Phone)

HOME PAGE: http://www.larsnorden.de

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

Raquel F. Oliveira

Central Bank of Brazil ( email )

Av. Paulista, 1804 - 4o andar
Sao Paulo, SP 01310-922
Brazil

Fundação Escola de Comércio Álvares Penteado (FECAP)

Av. Liberdade, 532
Liberdade
São Paulo
Brazil

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