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The Long Run Earnings Effects of a Credit Market Disruption

Author

Listed:
  • Effrosyni Adamopoulou

  • Marta De Philippis
  • Enrico Sette
  • Eliana Viviano

Abstract

This paper studies the long-term consequences on firms and workers of the credit crunch triggered by the 2007-2008 global financial crisis. Relying on a unique matched bank-employer-employee administrative dataset, we construct a firm-specific credit supply shock and examine firms’ and workers’ outcomes for 11 years after the crisis. We find that highly-exposed firms shrink permanently and invest less; these effects are larger for high capital-intensive firms. The impact on workers’ earnings is also long-lasting, especially for high skilled workers, who are more complementary to capital. Displaced workers reallocate mostly to low capital-intensive firms, experiencing persistent wage losses.

Suggested Citation

  • Effrosyni Adamopoulou & Marta De Philippis & Enrico Sette & Eliana Viviano, 2020. "The Long Run Earnings Effects of a Credit Market Disruption," CRC TR 224 Discussion Paper Series crctr224_2020_169v3, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_169v3
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp169
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    Cited by:

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    2. Moser, Christian & Saidi, Farzad & Wirth, Benjamin & Wolter, Stefanie, 2020. "Credit Supply, Firms, and Earnings Inequality," MPRA Paper 100371, University Library of Munich, Germany.
    3. Fukuda, Akira, 2022. "Effects of financial frictions on employment: Evidence from Japan during the Global Financial Crisis," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    4. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    5. Paige Ouimet & Elena Simintzi, 2021. "Wages and Firm Performance: Evidence from the 2008 Financial Crisis [The effect of wage bargains on the stock market value of the firm]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(2), pages 273-305.

    More about this item

    Keywords

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    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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