 Financial development and labor market outcomes: Evidence from BrazilJulia Fonseca and Bernardus Van Doornik Journal of Financial Economics, 2022, vol. 143, issue 1, 550-568 Abstract: We estimate the effect of increased access to bank credit on the employment and wages of high- and low-skilled workers. To do so, we consider a bankruptcy reform that led to an expansion of bank credit to Brazilian firms. We use administrative data and exploit cross-sectional variation in the enforcement of the new legislation arising from differences in the congestion of civil courts. We find that the credit expansion led to an increase in the skill intensity of firms and in within-firm returns to skill and to a reallocation of skilled labor from financially unconstrained firms to constrained firms. To rationalize these findings, we design a model in which heterogeneous producers face constraints in their ability to borrow and have production functions featuring capital-skill complementarity. We use this framework to generate an industry-level measure of capital-skill complementarity, which we use to provide direct evidence that the effect of access to credit on skill utilization and the skill premium is driven by a relative complementarity between capital and skilled labor. Keywords: Financial constraints; Human capital; Labor misallocation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:1:p:550-568 DOI: 10.1016/j.jfineco.2021.06.009 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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