The Review of Economics and Statistics Vol. 101 No. 1 2019
Employment Effects of Financial Constraints during the Great Recession
Abstract
Employment declined substantially during the 2007–2009 recession, especially in small and young firms. Using confidential firm-level data of the universe of firms and a difference-in-differences methodology, this paper estimates that financial constraints reduced employment growth by 4 to 8 percentage points in small firms relative to large firms and by 7 to 9 percentage points in young relative to old firms. I find that the effect of financial constraints on small firms is driven to a large extent by young firms. I then document that financial constraints affected employment growth in small and young firms strongly through the entry and exit of firms.
- DOI
- 10.1162/rest_a_00733
- Volume
- 101
- Issue
- 1
- Pages
- 16-29
- Language
- en
- Sources
- openalex crossref