Employment Effects of Alleviating Financing Frictions: Worker-Level Evidence from a Loan Guarantee Program
66 Pages Posted: 27 Jun 2019 Last revised: 28 Oct 2019
Date Written: June 24, 2019
We study the employment effects of loan guarantee programs aiming at mitigating financing frictions for small businesses. Exploiting worker-level panel data combined with plausibly exogenous heterogeneity in policy generosity across French regions, we find that such programs have a significant and persistent positive impact on workers' employment and earnings trajectories. The program disproportionately benefits high earnings, male and younger workers, due to differences in retention decisions by the initial employer. We estimate the gross cost to preserve a job(-year) to be around EURO 3,200, and a negative net cost when we include the savings on unemployment benefits.
Keywords: Loan Guarantees, Financial Frictions, Labor Market, Employment Trajectory
JEL Classification: G28, G33, H81, J23, J31, J65
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