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Credit Supply, Firms, and Earnings Inequality

Christian Moser (), Farzad Saidi (), Benjamin Wirth () and Stefanie Wolter ()
Additional contact information
Farzad Saidi: University of Bonn and CEPR
Benjamin Wirth: Bavarian State Office for Statistics
Stefanie Wolter: Institute for Employment Research (IAB)

No 86, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study the distributional consequences of monetary policy-induced credit supply in the labor market. To this end, we construct a novel dataset that links worker employment histories to firm financials and banking relationships in Germany. Firms in relationships with banks that are more exposed to the introduction of negative interest rates in 2014 experience a relative contraction in credit supply, associated with lower average wages and employment. These effects are heterogeneous within and between firms. Within firms, initially lower-paid workers are more likely to leave employment, while initially higher-paid workers see a relative decline in wages. Between firms, wages fall by more at initially higher-paying employers. In this way, credit affects the distribution of pay and employment in line with predictions of an equilibrium model with both credit and search frictions.

Keywords: Wages; Employment; Worker and Firm Heterogeneity; Monetary Policy; Negative Interest Rates (search for similar items in EconPapers)
JEL-codes: E24 E51 G21 J23 J31 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2021-04
New Economics Papers: this item is included in nep-eur, nep-lma, nep-mac and nep-mon
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_086_2021.pdf First version, 2021 (application/pdf)

Related works:
Working Paper: Credit Supply, Firms, and Earnings Inequality (2021) Downloads
Working Paper: Credit Supply, Firms, and Earnings Inequality (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:086

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