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Can Paying Firms Quicker Affect Aggregate Employment?

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  • Jean Barrot

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  • Ramana Nanda

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Abstract

This paper studies the impact of reform on county-sector employment growth over three years. Despite firms being paid just 15 days sooner, we find payroll increased 10 cents for each accelerated dollar, with two-thirds of the effect coming from an increase in new hires and the balance from an increase in earnings. The result of this study highlights an important channel through which financing constraints can be alleviated for small firms, and emphasizes the general-equilibrium effects of large-scale interventions, which can lead to a substantially lower net impact on aggregate outcomes. [Working Paper 22420]

Suggested Citation

  • Jean Barrot & Ramana Nanda, 2016. "Can Paying Firms Quicker Affect Aggregate Employment?," Working Papers id:11119, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:11119
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    References listed on IDEAS

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    1. Daron Acemoglu, 2010. "Theory, General Equilibrium, and Political Economy in Development Economics," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 17-32, Summer.
    2. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    3. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-1460, September.
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    5. Garcia-Appendini, Emilia & Montoriol-Garriga, Judit, 2013. "Firms as liquidity providers: Evidence from the 2007–2008 financial crisis," Journal of Financial Economics, Elsevier, vol. 109(1), pages 272-291.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. repec:bla:jfinan:v:72:y:2017:i:1:p:291-324 is not listed on IDEAS
    8. Siemer, Michael, 2014. "Firm Entry and Employment Dynamics in the Great Recession," Finance and Economics Discussion Series 2014-56, Board of Governors of the Federal Reserve System (US).
    9. Cem Demiroglu & Christopher M. James, 2010. "The Information Content of Bank Loan Covenants," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3700-3737, October.
    10. Dobridge, Christine L., 2016. "Fiscal Stimulus and Firms: A Tale of Two Recessions," Finance and Economics Discussion Series 2016-13, Board of Governors of the Federal Reserve System (US).
    11. Vicente Cuñat, 2007. "Trade Credit: Suppliers as Debt Collectors and Insurance Providers," Review of Financial Studies, Society for Financial Studies, vol. 20(2), pages 491-527.
    12. Eric Zwick & James Mahon, 2017. "Tax Policy and Heterogeneous Investment Behavior," American Economic Review, American Economic Association, vol. 107(1), pages 217-248, January.
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    Cited by:

    1. Gerardino, Maria Paula & Litschig, Stephan & Pomeranz, Dina, 2017. "Can Audits Backfire? Evidence from Public Procurement in Chile," CEPR Discussion Papers 12529, C.E.P.R. Discussion Papers.
    2. P. Beaumont, 2017. "Time is Money: Cash-Flow Risk and Export Market Behavior," Documents de Travail de l'Insee - INSEE Working Papers g2017-10, Institut National de la Statistique et des Etudes Economiques.

    More about this item

    Keywords

    Employment; payroll; large-scale interventions;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G2 - Financial Economics - - Financial Institutions and Services
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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