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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 showing that employment decisions are constrained by firms’ financial health and liquidity. Our main analysis uses a collage of three “quasi-experiments” to trace the effects of finance on employment. The 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.

© The Author(s) 2021. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. For permissions, please email: [email protected]
This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
JEL
E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity E51 - Money Supply; Credit; Money Multipliers G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill G33 - Bankruptcy; Liquidation J64 - Unemployment: Models, Duration, Incidence, and Job Search
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