The Labor Market Effects of Loan Guarantee Programs
90 Pages Posted: 27 Jun 2019 Last revised: 5 Nov 2024
Date Written: July 20, 2021
Abstract
We investigate the labor market effects of a loan guarantee program targeting French SMEs during the financial crisis. Exploiting differences in regional treatment intensity in a border discontinuity design, we uncover a central trade-off for such interventions. While the program has a positive impact on workers' employment and earnings trajectories which translates into positive aggregate employment effects, it dampens the worker reallocation towards more productive firms that happens following recessions, and particularly so for high-skill workers. This labor allocation effect is economically significant and translates into a reduction in aggregate productivity.
Keywords: Loan Guarantees, Financial Frictions, Labor Market, Employment Trajectory
JEL Classification: G28, G33, H81, J23, J31, J65
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