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Journal of Finance Vol. 73 No. 6 2018

The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity

John Bai1,2,3,4,5,6,7; Daniel Carvalho1,2,3,4,5,6,7; Gordon M. Phillips1,2,3,4,5,6,8,7

1 Dartmouth College · 2 Northeastern University · 3 National Bureau of Economic Research · 4 University of Wisconsin–Madison · 5 Washington University in St. Louis · 6 Indiana University Bloomington · 7 Marshall University · 8 Plymouth Marjon University

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 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.

DOI
10.1111/jofi.12726
Volume
73
Issue
6
Pages
2787-2836
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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