The Labor Market Effects of Loan Guarantee Programs

Jean-Noël Barrot, Thorsten Martin, Julien Sauvagnat and Boris Vallee

The Review of Financial Studies, 2024, vol. 37, issue 8, 2315-2354

Abstract: We investigate the labor market effects of a loan guarantee program targeting French SMEs during the financial crisis. Exploiting differences in regional treatment intensity in a border discontinuity design, we uncover a central trade-off for such interventions. While the program has a positive impact on workers’ employment and earnings trajectories that translates into positive aggregate employment effects, it dampens the worker reallocation toward more productive firms that happens following recessions, and particularly so for high-skill workers. This labor allocation effect is economically significant and translates into a reduction in aggregate productivity.

JEL-codes: G28 G33 H81 J23 J31 J65 (search for similar items in EconPapers)
Date: 2024
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