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Local Banks Efficiency and Employment
Author(s) -
Ordine Patrizia,
Rose Giuseppe
Publication year - 2008
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.2008.00422.x
Subject(s) - solvency , bond market , work (physics) , panel data , generalized method of moments , business , economics , information asymmetry , monetary economics , financial system , finance , econometrics , mechanical engineering , market liquidity , engineering
. This work analyses the links between credit and labour markets highlighting the influence of credit market inefficiencies on employment. We argue that if banks are not efficient in monitoring the borrowers in the presence of asymmetric information, credit market imperfections have real effects. We estimate dynamic equations using system generalized method of moments (GMM) for bank loans and employment on panel data for Italian firms. The system GMM estimates indicate that the impact of credit market on employment is higher where the local financial market is less developed, asymmetric information is widespread, bank managers are less efficient in assessing the firms' solvency and do not use appropriate methods to evaluate the borrowers' payback capacity.