Working Paper: CEPR ID: DP9776
Authors: Samuel Bentolila; Marcel Jansen; Gabriel Jiménez; Sonia Ruano
Abstract: We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare employment changes from 2006 to 2010 at firms heavily indebted to weak banks before the crisis and the rest. Our estimates imply that these firms suffered an additional employment drop between 3 and 13.5 percentage points due to weak-bank attachment, representing between 8% and 36% of aggregate job losses.
Keywords: credit constraints; great recession; job losses
JEL Codes: D92; G33; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| change in banking regulation in 1988 (G28) | weak-bank attachment (F65) |
| weak-bank attachment (F65) | employment drop (J63) |
| weak-bank attachment (F65) | job losses (J63) |
| weak-bank attachment (F65) | larger share of job destruction (F66) |