On credit frictions as labor–income taxation

Salem Abo-Zaid

Economics Letters, 2013, vol. 118, issue 2, 287-292

Abstract: This paper suggests that a model in which firms face credit constraints on hiring labor can explain both the behavior of the labor wedge and the “jobless recoveries” phenomenon of the last three recessions. Using the corporate credit spread as a measure of firms’ credit conditions, I show that the “jobless recoveries” of the U.S. economy from the last three recessions were associated with slow declines in the spread following those recessions. The credit conditions of firms, thus, were important in shaping the labor market recoveries of the last two decades.

Keywords: Jobless recoveries; Labor wedge; Credit spread; Credit frictions; Labor-income taxation (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:2:p:287-292

DOI: 10.1016/j.econlet.2012.11.005

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