Credit Supply, Firms, and Earnings Inequality

56 Pages Posted: 4 Jun 2020 Last revised: 30 Jun 2020

See all articles by Christian Moser

Christian Moser

Columbia University; Federal Reserve Bank of Minneapolis

Farzad Saidi

Boston University - Questrom School of Business; Centre for Economic Policy Research (CEPR)

Benjamin Wirth

Bavarian State Office for Statistics (Bayerisches Landesamt für Statistik)

Stefanie Wolter

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: June 29, 2020

Abstract

We study the distributional effects of a monetary policy-induced firm-level credit supply shock on individual wages and employment. To this end, we construct a novel dataset that links worker employment histories to firms' bank credit relationships in Germany. We document that firms in relationships with banks that were more exposed to the introduction of negative monetary policy rates in 2014 experience a relative reduction in credit supply. A negative credit supply shock in turn is associated with lower firm-level average wages and employment. These effects are concentrated among distinct worker groups within firms. Initially lower-paid workers are more likely to be fired, while initially higher-paid workers see relative wage declines. At the same time, wages fall by more at initially higher-paying firms. Consequently, wage inequality within and between firms decreases. Our results suggest that firm credit has important distributional consequences in the labor market.

Keywords: Credit Supply, Passthrough, Employment, Wages, Earnings Inequality, Worker and Firm Heterogeneity, Linked Employer-Employee Data, Bank Relationships, Monetary Policy, Negative Interest Rates

JEL Classification: J31, E24, J23, G21, E51

Suggested Citation

Moser, Christian and Saidi, Farzad and Wirth, Benjamin and Wolter, Stefanie, Credit Supply, Firms, and Earnings Inequality (June 29, 2020). Available at SSRN: https://ssrn.com/abstract=3597181 or http://dx.doi.org/10.2139/ssrn.3597181

Christian Moser (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States
6093564653 (Phone)

HOME PAGE: http://www.economoser.com

Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

HOME PAGE: http://www.economoser.com/

Farzad Saidi

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Benjamin Wirth

Bavarian State Office for Statistics (Bayerisches Landesamt für Statistik) ( email )

Nürnberger Straße 95
Fürth, Bayern 90762
Germany

HOME PAGE: http://https://www.statistik.bayern.de/

Stefanie Wolter

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
101
Abstract Views
643
rank
296,326
PlumX Metrics