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Local Banks Efficiency and Employment

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  • Patrizia Ordine
  • Giuseppe Rose

Abstract

This work analyses the links between credit and labour markets highlighting the influence of credit market inefficiencies on employment. We argue that if banks are not efficient in monitoring the borrowers in the presence of asymmetric information, credit market imperfections have real effects. We estimate dynamic equations using system generalized method of moments (GMM) for bank loans and employment on panel data for Italian firms. The system GMM estimates indicate that the impact of credit market on employment is higher where the local financial market is less developed, asymmetric information is widespread, bank managers are less efficient in assessing the firms' solvency and do not use appropriate methods to evaluate the borrowers' payback capacity. Copyright 2008 The Authors. Journal compilation 2008 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.

Suggested Citation

  • Patrizia Ordine & Giuseppe Rose, 2008. "Local Banks Efficiency and Employment," LABOUR, CEIS, vol. 22(3), pages 469-493, September.
  • Handle: RePEc:bla:labour:v:22:y:2008:i:3:p:469-493
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    References listed on IDEAS

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    Cited by:

    1. Ordine, Patrizia & Rose, Giuseppe, 2008. "The supply of education quality in a spatial model with asymmetric moving costs," Research in Economics, Elsevier, vol. 62(4), pages 197-214, December.

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