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The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity

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  • John (Jianqiu) Bai
  • Daniel Carvalho
  • Gordon M. Phillips

Abstract

We provide evidence that the deregulation of U.S. state banking markets leads to a significant increase in the relative employment and capital growth of local firms with higher productivity and that this effect is concentrated among young firms. Using financial data for a broad range of firms, our analysis suggests that this effect is driven by a shift in the composition of local bank credit supply towards more productive firms. We estimate that this effect translates into economically important gains in aggregate industry productivity and that changes in the allocation of labor play a central role in driving these gains.

Suggested Citation

  • John (Jianqiu) Bai & Daniel Carvalho & Gordon M. Phillips, 2017. "The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity," NBER Working Papers 24081, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24081
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    Cited by:

    1. Atif Mian & Amir Sufi & Emil Verner, 2017. "How do Credit Supply Shocks Affect the Real Economy? Evidence from the United States in the 1980s," NBER Working Papers 23802, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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