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

See all articles by Jean-Noel Barrot

Jean-Noel Barrot

HEC Paris

Thorsten Martin

Bocconi University; IGIER - Innocenzo Gasparini Institute for Economic Research

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Boris Vallee

Harvard Business School - Finance Unit

Date Written: June 24, 2019

Abstract

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

Suggested Citation

Barrot, Jean-Noel and Martin, Thorsten and Sauvagnat, Julien and Vallee, Boris, Employment Effects of Alleviating Financing Frictions: Worker-Level Evidence from a Loan Guarantee Program (June 24, 2019). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3409349 or http://dx.doi.org/10.2139/ssrn.3409349

Jean-Noel Barrot

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Thorsten Martin

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

HOME PAGE: http://https://sites.google.com/view/thorstenmartin

IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Boris Vallee (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

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