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Banking on Snow: Bank Capital, Risk, and Employment

Author

Listed:
  • Baumgartner, Simon

    (Humboldt University Berlin)

  • Stomper, Alex

    (Humboldt University Berlin)

  • Schober, Thomas

    (Auckland University of Technology)

  • Winter-Ebmer, Rudolf

    (University of Linz)

Abstract

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms' local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks' borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.

Suggested Citation

  • Baumgartner, Simon & Stomper, Alex & Schober, Thomas & Winter-Ebmer, Rudolf, 2022. "Banking on Snow: Bank Capital, Risk, and Employment," IZA Discussion Papers 15519, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15519
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    More about this item

    Keywords

    quasi-fixed employment; labor productivity risk; bank liquidity;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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