Firm Leverage, Consumer Demand, and Employment Losses during the Great Recession
Xavier Giroud and
Holger M. Mueller
Working Papers from U.S. Census Bureau, Center for Economic Studies
We argue that firms’ balance sheets were instrumental in the propagation of consumer demand shocks during the Great Recession. Using establishment-level data, we show that establishments of more highly levered firms exhibit a significantly larger decline in employment in response to a drop in consumer demand. These results are not driven by firms being less productive, having expanded too much prior to the Great Recession, or being generally more sensitive to fluctuations in either aggregate employment or house prices. At the county level, we find that counties with more highly levered firms experience significantly larger job losses in response to county-wide consumer demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. Our research suggests a possible role for employment policies that target firms directly besides conventional stimulus.
New Economics Papers: this item is included in nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://www2.census.gov/ces/wp/2017/CES-WP-17-01.pdf First version, 2017 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:cen:wpaper:17-01
Access Statistics for this paper
More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC.
Series data maintained by Erica Coates ().