Banks, Firms, and Jobs

IMF Working Papers, February 14, 2017

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Bibliographic details

• Authors: Fabio Berton, Sauro Mocetti, Andrea F Presbitero, Matteo Richiardi
• Published: February 14, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475579017.001

Summary and main finding

• The study analyzes the employment effects of financial shocks using a rich data set of job contracts matched with the universe of firms and their lending banks in one Italian region.
• To isolate the effect of the financial shock the authors construct a firm-specific time-varying measure of credit supply.
• The contraction in credit supply explains one fourth of the reduction in employment.
• Results are consistent with the cleansing role of financial shocks.

Methodology

• Data: matched job contracts, universe of firms, and their lending banks in one Italian region.
• Identification: firm-specific time-varying measure of credit supply to isolate the effect of financial shocks.

Heterogeneity of effects

• Firm-level heterogeneity:
  • The employment-reducing effect of the contraction in credit supply is concentrated in more levered firms.
  • The effect is concentrated in less productive firms.
• Worker-level heterogeneity:
  • Relatively less educated workers are most affected.
  • Relatively less skilled workers are most affected.
  • Workers with temporary contracts are the most affected.

Interpretation and implications

• The observed pattern—credit supply contraction disproportionately affecting more levered and less productive firms and more vulnerable workers—is consistent with a cleansing effect of financial shocks.
• Policy attention could be focused on supporting affected worker groups (less educated, less skilled, temporary contract holders) and on addressing financing constraints faced by more levered and less productive firms to mitigate employment losses.

Key statistics and identifiers

• The contraction in credit supply explains one fourth of the reduction in employment.
• Pages: 57
• Series: Working Paper No. 2017/038
• Issue: 038
• Volume: 2017
• DOI: https://doi.org/10.5089/9781475579017.001
• ISBN: 9781475579017
• ISSN: 1018-5941
• Publication date: February 14, 2017
• Authors: Fabio Berton, Sauro Mocetti, Andrea F Presbitero, Matteo Richiardi

Source: "Banks, Firms, and Jobs", IMF Working Papers, Fabio Berton; Sauro Mocetti; Andrea F Presbitero; Matteo Richiardi; February 14, 2017.

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