Finance and employment: Evidence from U.S. banking reforms

Hamid Boustanifar

Journal of Banking & Finance, 2014, vol. 46, issue C, 343-354

Abstract: Economic theory offers competing hypotheses about how the cost and availability of finance influence labor market outcomes. Making use of the U.S. banking reforms between the 1970s and the 1990s as a quasi-natural experiment, this paper studies the impact of credit market development on employment. This paper documents the significant effects of these reforms on employment growth. Potential channels between finance and employment are also investigated. Changes in the growth of the number of self-employed individuals, the entry and exit of firms, and investment growth do not explain most of the employment growth following the reforms. The reforms had a substantially higher impact in industries with higher labor intensity, which is consistent with the idea that labor has fixed costs that need to be financed.

Keywords: Banking reform; Employment; Credit market; Deregulation; Labor (search for similar items in EconPapers)
JEL-codes: D33 G21 J21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (38)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:46:y:2014:i:c:p:343-354

DOI: 10.1016/j.jbankfin.2014.06.006

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