NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Financing Labor

Efraim Benmelech, Nittai K. Bergman, Amit Seru

NBER Working Paper No. 17144
Issued in June 2011
NBER Program(s):CF, EFG, LS, ME

Financial market imperfections can have significant impact on employment decisions of firms. We illustrate the economic importance of this channel by demonstrating that the responsiveness of employment decisions to firms' financial health is quantitatively similar to the much-studied responsiveness of investment decisions to cash-flows. We use a collage of three 'quasi-experiments' used previously in the investment-cash flow and finance-growth literatures to trace the effects of finance on employment. Our results suggest that financial constraints and the availability of credit play an important role in firm-level employment decisions, as well as aggregate unemployment outcomes

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Document Object Identifier (DOI): 10.3386/w17144

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