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Do Credit Supply Shocks Affect Employment in Middle-Income Countries?

Author

Listed:
  • Emilio Gutierrez
  • David Jaume
  • Martín Tobal

Abstract

This paper studies the effect of bank credit supply shocks on formal employment in Mexico using a proprietary dataset containing information on all loans extended to firms by commercial banks during 2010–2015. We find large impacts on the formal employment of small and medium firms: a positive credit shock of 1 standard deviation increases yearly employment by 1.4 percentage points. The shares of uncollateralized credit and credit received by family firms, younger firms, and firms with no previous bank relationships also increase, suggesting that credit shocks may play a more prominent role for employment creation in credit-constrained settings.

Suggested Citation

  • Emilio Gutierrez & David Jaume & Martín Tobal, 2023. "Do Credit Supply Shocks Affect Employment in Middle-Income Countries?," American Economic Journal: Economic Policy, American Economic Association, vol. 15(4), pages 1-36, November.
    • Handle: RePEc:aea:aejpol:v:15:y:2023:i:4:p:1-36
    DOI: 10.1257/pol.20210354
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    Citations

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    Cited by:

    1. Wang, Haijun & Du, Xiance & Ge, Chen & Wu, Wanting, 2024. "Does digital credit alleviate household income vulnerability?," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    2. Aguilar-Gomez, Sandra & Gutierrez, Emilio & Heres, David & Jaume, David & Tobal, Martin, 2024. "Thermal stress and financial distress: Extreme temperatures and firms’ loan defaults in Mexico," Journal of Development Economics, Elsevier, vol. 168(C).
    3. Alex Rivadeneira & Carlo Alcaraz & Nicolás Amoroso & Rodolfo Oviedo & Brenda Samaniego & Horacio Sapriza, 2024. "The Real Effects of Credit Supply Shocks During the COVID-19 Pandemic," Working Papers 2024-16, Banco de México.
    4. Nawal Abdalla Adam & Abad Alzuman, 2024. "Effect of per Capita Income, GDP Growth, FDI, Sectoral Composition, and Domestic Credit on Employment Patterns in GCC Countries: GMM and OLS Approaches," Economies, MDPI, vol. 12(11), pages 1-18, November.
    5. Luan, Fushu & Chen, Yang & Lang, Lin & Lim, King Yoong, 2025. "Banking prudentials, leverage, and innovation partnership choice in China," Journal of Banking & Finance, Elsevier, vol. 171(C).
    6. Isha Agarwal & David Jaume & Everardo Tellez de la Vega & Martin Tobal, 2024. "Differential Crowding Out Effects of Government Loans and Bonds: Evidence from an Emerging Market Economy," Working Papers 314, Red Nacional de Investigadores en Economía (RedNIE).
    7. Goel, Tirupam & Telegdy, Álmos & Banai, Ádám & Takáts, Előd, 2024. "Subsidy-driven firm growth: Does loan history matter? Evidence from a European Union subsidy program," Journal of Corporate Finance, Elsevier, vol. 87(C).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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