Advanced Search
MyIDEAS: Login to save this paper or follow this series

Credit within the firm

Contents:

Author Info

  • Luigi Pistaferri
  • Luigi Guiso
  • Fabiano Schivardi

Abstract

We exploit time 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. In less developed local credit markets firms can offer a flatter wage-tenure profile than firms in more developed credit markets to lend implicitly to their workers or offer a steeper profile to implicitly borrow from their workers. We find that firms located in less financially developed markets offer wages that are lower at the beginning of tenure and grow faster than those offered by firms in more financially developed markets, helping firms finance their operations by raising funds from workers. Because we control for local market effects and only exploit time variation in the degree of local financial development induced by an exogenous liberalization, the effect we find is unlikely to reflect unobserved local factors that systematically affect wage tenure profiles. The size of implicit loans is larger for firms with more problematic access to bank credit and workers less likely to face credit constraints. The amount of credit generated by implicit lending within the firm is economically important and can be as large as 30% of 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 firms pay on their loans from banks.

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://www.nber.org/papers/w15924.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15924.

as in new window
Length:
Date of creation: Apr 2010
Date of revision:
Publication status: published as Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2013. "Credit within the Firm," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 211-247.
Handle: RePEc:nbr:nberwo:15924

Note: LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

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. Bernhardt, Dan & Timmis, Gerald C, 1990. "Multiperiod Wage Contracts and Productivity Profiles," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(4), pages 529-63, October.
  2. 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.
  3. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2002. "Does Local Financial Development Matter?," NBER Working Papers 8923, National Bureau of Economic Research, Inc.
  4. 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.
  5. 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.
  6. 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.
  7. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, American Finance Association, vol. 60(1), pages 231-266, 02.
  8. 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.
  9. 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.
  10. 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.
  11. Fabio Panetta & Fabiano Schivardi & Matthew Shum, 2004. "Do mergers improve information? Evidence from the loan market," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 521, Bank of Italy, Economic Research and International Relations Area.
  12. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  13. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  14. Vicenzo Quadrini & Claudio Michelacci, 2005. "Borrowing From Employees: Wage Dynamics With Financial Constraints," Working Papers, CEMFI wp2005_0501, CEMFI.
  15. 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.
  16. Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 795-827.
  17. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2006. "The Cost of Banking Regulation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5864, C.E.P.R. Discussion Papers.
  18. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  19. 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.
  20. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  21. John M. Abowd & Francis Kramarz & Sébastien 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.
  22. 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.
  23. Jeremy C. Stein, 2001. "Agency, Information and Corporate Investment," NBER Working Papers 8342, National Bureau of Economic Research, Inc.
  24. Luigi Guiso & Fabiano Schivardi, 2007. "Spillovers in Industrial Districts," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(516), pages 68-93, 01.
  25. 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.
  26. Wasmer, Etienne & Weil, Philippe, 2000. "The Macroeconomics of Labor and Credit Market Imperfections," IZA Discussion Papers 179, Institute for the Study of Labor (IZA).
  27. Efraim Benmelech & Nittai K. Bergman & Ricardo Enriquez, 2011. "Negotiating with Labor Under Financial Distress," NBER Working Papers 17192, National Bureau of Economic Research, Inc.
  28. Azariadis, Costas, 1988. " Human Capital and Self-Enforcing Contracts," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 90(4), pages 507-28.
  29. 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.
  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. 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.
  32. 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.
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. Marco Pagano & Giovanni Pica, 2012. "Finance and employment," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 27(69), pages 5-55, 01.
  2. 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.
  3. Selim Gulesci, 2012. "Labor-tying and poverty in a rural economy:evidence from bangladesh," Working Papers 460, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. 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.

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:nbr:nberwo:15924. 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: ().

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.