Advanced Search
MyIDEAS: Login to save this article or follow this journal

Credit within the Firm

Contents:

Author Info

  • Luigi Guiso
  • Luigi Pistaferri
  • Fabiano Schivardi

Abstract

We use variation in the degree of development of local credit markets and matched employer--employee data to assess the role of the firm as an internal credit market. We find that firms operating in less financially developed markets offer lower entry wages but faster wage growth than firms in more financially developed markets. This helps firms finance their operations by implicitly raising funds from workers. We control for local market fixed effects and only exploit time variation in the degree of local financial development induced by an exogenous liberalization, so that the effect we find is unlikely to reflect unobserved local factors that systematically affect wage--tenure profiles. We estimate that the amount of credit generated by implicit lending within the firm is economically important and can be as large as 30 percent of the bank lending. Consistent with credit market imperfections opening up trade opportunities within the firm, we find that the internal rate of return of implicit loans lies between the rate at which workers savings are remunerated in the market and the rate that firms pay on their loans from banks. Copyright , Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/restud/rds024
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 80 (2013)
Issue (Month): 1 ()
Pages: 211-247

as in new window
Handle: RePEc:oup:restud:v:80:y:2013:i:1:p:211-247

Contact details of provider:

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mitchell A. Petersen & Raghuram G. Rajan, 2000. "Does Distance Still Matter? The Information Revolution in Small Business Lending," NBER Working Papers 7685, National Bureau of Economic Research, Inc.
  2. Vicenzo Quadrini & Claudio Michelacci, 2005. "Borrowing From Employees: Wage Dynamics With Financial Constraints," Working Papers, CEMFI wp2005_0501, CEMFI.
  3. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  4. Panetta, Fabio & Schivardi, Fabiano & Shum, Matthew, 2005. "Do Mergers Improve Information? Evidence from the Loan Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4961, C.E.P.R. Discussion Papers.
  5. Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper, Tilburg University, Center for Economic Research 2003-123, Tilburg University, Center for Economic Research.
  6. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 567, Princeton University, Department of Economics, Industrial Relations Section..
  7. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2001. "Insurance within the Firm," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 414, Bank of Italy, Economic Research and International Relations Area.
  8. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(4), pages 653-77, October.
  9. Efraim Benmelech & Nittai K. Bergman & Ricardo Enriquez, 2011. "Negotiating with Labor Under Financial Distress," NBER Working Papers 17192, National Bureau of Economic Research, Inc.
  10. Luigi Guiso & Fabiano Schivardi, 2007. "Spillovers in Industrial Districts," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(516), pages 68-93, 01.
  11. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "The Cost of Banking Regulation," NBER Working Papers 12501, National Bureau of Economic Research, Inc.
  12. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  13. John M. Abowd & Francis Kramarz & S├ębastien Roux, 2006. "Wages, Mobility and Firm Performance: Advantages and Insights from Using Matched Worker-Firm Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(512), pages F245-F285, 06.
  14. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  15. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(3), pages 929-969, August.
  16. Jeremy C. Stein, 2001. "Agency, Information and Corporate Investment," NBER Working Papers 8342, National Bureau of Economic Research, Inc.
  17. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, American Finance Association, vol. 50(1), pages 301-18, March.
  18. Bovenberg, A Lans & Teulings, Coen N, 2002. "Insurance and Information: Firms as a Commitment Device," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3441, C.E.P.R. Discussion Papers.
  19. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  20. Jerry Timmins & Dan Bernhardt, 1985. "Multiperiod Wage Contracts and Productivity Profiles," Working Papers, Queen's University, Department of Economics 644, Queen's University, Department of Economics.
  21. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  22. Azariadis, Costas, 1988. " Human Capital and Self-Enforcing Contracts," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 90(4), pages 507-28.
  23. Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Oxford University Press, Oxford University Press, vol. 76(2), pages 795-827.
  24. Brandt, Loren & Hosios, Arthur J, 1996. "Credit, Incentives, and Reputation: A Hedonic Analysis of Contractual Wage Profiles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1172-1226, December.
  25. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  26. Enrica Detragiache & Paolo Garella & Luigi Guiso, 2000. "Multiple versus Single Banking Relationships: Theory and Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 55(3), pages 1133-1161, 06.
  27. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(456), pages F283-306, June.
  28. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 259-93, March.
  29. Wasmer, Etienne & Weil, Philippe, 2002. "The Macroeconomics of Labour and Credit Market Imperfections," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3334, C.E.P.R. Discussion Papers.
  30. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 606-20, September.
  31. Marcello Bofondi & Giorgio Gobbi, 2006. "Informational Barriers to Entry into Credit Markets," Review of Finance, European Finance Association, European Finance Association, vol. 10(1), pages 39-67.
  32. Luca Casolaro & Leonardo Gambacorta & Luigi Guiso, 2005. "Regulation, formal and informal enforcement and the development of the household loan market. Lessons from Italy," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 560, Bank of Italy, Economic Research and International Relations Area.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Laurent Bach & Nicolas Serrano-Velarde, 2009. "The Power of Dynastic Commitment," Working Papers, Oxford University Centre for Business Taxation 0924, Oxford University Centre for Business Taxation.
  2. Marco Pagano & Giovanni Pica, 2011. "Finance and Employment," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 283, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2011. "Exporting under financial constraints: margins, switching dynamics and prices," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2011/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  4. Selim Gulesci, 2012. "Labor-tying and poverty in a rural economy:evidence from bangladesh," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 460, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:80:y:2013:i:1:p:211-247. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.