Financial frictions and employment during the Great Depression

• 成果类型: Article
• 署名作者: Benmelech, Efraim; Frydman, Carola; Papanikolaou, Dimitris
• 署名单位: Northwestern University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.02.005
• 发表日期: 2019
• 页码: 541-563
• 关键词: credit; financial constraints; LABOR; unemployment; Great Depression

摘要

We provide new evidence that a disruption in credit supply played a quantitatively significant role in the unprecedented contraction of employment during the Great Depression using a novel, hand-collected dataset of large industrial firms. Our identification strategy exploits preexisting variation in the need to raise external funds at a time when public bond markets essentially froze. Local bank failures inhibited firms' ability to substitute public debt for private debt, which exacerbated financial constraints. We estimate a large and negative causal effect of financing frictions on firm employment. We find that the lack of access to credit likely accounted for a substantial fraction of the aggregate decline in employment of large firms between 1928 and 1933. (C) 2019 Elsevier B.V. All rights reserved.