Working Paper: NBER ID: w24081
Authors: John Jianqiu Bai; Daniel Carvalho; Gordon M. Phillips
Abstract: 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 towards 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.
Keywords: bank credit; labor reallocation; aggregate productivity; deregulation
JEL Codes: G21; G3; G31; G32; J01; J21; J24; L22; L23; L25; O11; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deregulation of banking markets (G18) | Increase in relative growth of high-productivity firms (O49) |
| Change in the composition of bank credit supply post-deregulation (E51) | Increase in relative growth of high-productivity young firms (L26) |
| Increased access to bank credit (G21) | Enhanced aggregate industry productivity (O49) |
| Deregulation of banking markets (G18) | Enhanced aggregate industry productivity (O49) |