Credit Supply, Firms, and Earnings Inequality

57 Pages Posted: 14 May 2021 Last revised: 14 Jul 2021

See all articles by Christian Moser

Christian Moser

Columbia University; Federal Reserve Bank of Minneapolis; Centre for Economic Policy Research (CEPR)

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)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

We study the distributional consequences of monetary policy-induced credit supply in the labor market. To this end, we construct a novel dataset that links worker employment histories to firm financials and banking relationships in Germany. Firms in relationships with banks that are more exposed to the introduction of negative interest rates in 2014 experience a relative contraction in credit supply, associated with lower average wages and employment. These effects are heterogeneous within and between firms. Within firms, initially lower-paid workers are more likely to leave employment, while initially higher-paid workers see a relative decline in wages. Between firms, wages fall by more at initially higher-paying employers. In this way, credit affects the distribution of pay and employment in line with predictions of an equilibrium model with both credit and search frictions.

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

Suggested Citation

Moser, Christian and Saidi, Farzad and Wirth, Benjamin and Wolter, Stefanie, Credit Supply, Firms, and Earnings Inequality (May 2021). CEPR Discussion Paper No. DP16123, Available at SSRN: https://ssrn.com/abstract=3846235

Christian Moser (Contact Author)

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Federal Reserve Bank of Minneapolis ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Farzad Saidi

Boston University - Questrom School of Business ( email )

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United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Benjamin Wirth

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

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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

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