Financing Labor

Efraim Benmelech; Nittai K. Bergman; Amit Seru

doi:10.3386/w17144

Financing Labor

Efraim Benmelech, Nittai K. Bergman, Amit Seru

Finance

Research output: Working paper

Abstract

Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms' financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three 'quasi-experiments' used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes.

Original language	English (US)
Publisher	National Bureau of Economic Research (NBER)
DOIs	https://doi.org/10.3386/w17144
State	Published - 2011

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No.	17144

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abstract = "Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms' financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three 'quasi-experiments' used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes.",

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N2 - Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms' financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three 'quasi-experiments' used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes.

AB - Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms' financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three 'quasi-experiments' used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes.

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DO - 10.3386/w17144

M3 - Working paper

BT - Financing Labor

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Financing Labor

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