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The impact of credit shocks on the European labour market

Author

Listed:
  • Katalin Bodnár

    (European Central Bank, Frankfurt, Germany)

  • Ludmila Fadejeva

    (Monetary Policy Department, Latvijas Banka, Riga, Latvia)

  • Marco Hoeberichts

    (Economics and Research Division, De Nederlandsche Bank, Amsterdam, Netherlands)

  • Mario Izquierdo Peinado

    (Banco de España, Madrid, Spain)

  • Christophe Jadeau

    (Engineering and Statistical Methodology Department, Banque de France, Paris, France)

  • Eliana Viviano

    (Economics and Research Department, Bank of Italy, Rome, Italy)

Abstract

The sovereign debt crisis led to financial difficulties for European firms and a decline in the use of labour input. We use qualitative firm-level data for 24 European countries, collected within the third wave of the Wage Dynamics Network (WDN3) of the ESCB, to propose a cross-country analysis of the relationship between a credit shock and labour markets. We first derive a set of indices measuring difficulties in accessing the credit market for the period 2010–2013. Second, we provide a description of the relationship between credit difficulties and changes in labour input, both along the extensive and the intensive margins as well as on wages. We find strong and significant correlation between credit difficulties and adjustments along both the extensive and the intensive margin. In the presence of credit market difficulties, firms also cut wages by reducing the variable part of wages. This evidence suggests that credit shocks can affect not only the real economy, but also nominal variables.

Suggested Citation

  • Katalin Bodnár & Ludmila Fadejeva & Marco Hoeberichts & Mario Izquierdo Peinado & Christophe Jadeau & Eliana Viviano, 2021. "The impact of credit shocks on the European labour market," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 21(1), pages 1-25.
    • Handle: RePEc:bic:journl:v:21:y:2021:i:1:p:1-25
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    File URL: https://www.tandfonline.com/doi/pdf/10.1080/1406099X.2020.1871213?needAccess=true
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    Citations

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    Cited by:

    1. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).

    More about this item

    Keywords

    Credit difficulties; labour input adjustment; intensive margin; wage adjustment; survey data;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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