Economics at your fingertips  

Financial development and labor market outcomes: Evidence from Brazil

Julia 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)
JEL-codes: G21 J24 J31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

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
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-09-18
Handle: RePEc:eee:jfinec:v:143:y:2022:i:1:p:550-568