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The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity
Author(s) -
BAI JOHN JIANQIU,
CARVALHO DANIEL,
PHILLIPS GORDON M.
Publication year - 2018
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12726
Subject(s) - deregulation , productivity , monetary economics , bank credit , economics , labour economics , total factor productivity , capital (architecture) , business , market economy , macroeconomics , history , archaeology
We provide evidence that the deregulation of U.S. state banking markets leads to a significant increase in the relative employment and capital growth of local firms with higher productivity, and that this effect is concentrated among young firms. Using financial data for a broad range of firms, our analysis suggests that this effect is driven by a shift in the composition of local bank credit supply toward more productive firms. We estimate that this effect translates into economically important gains in aggregate industry productivity and that changes in the allocation of labor play a central role in driving these gains.