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Local Banks Efficiency and Employment

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  • Patrizia Ordine
  • Giuseppe Rose

Abstract

. This work analyses the links between credit and labour markets highlighting the influence of credit market inefficiencies on employment. We argue that if banks are not efficient in monitoring the borrowers in the presence of asymmetric information, credit market imperfections have real effects. We estimate dynamic equations using system generalized method of moments (GMM) for bank loans and employment on panel data for Italian firms. The system GMM estimates indicate that the impact of credit market on employment is higher where the local financial market is less developed, asymmetric information is widespread, bank managers are less efficient in assessing the firms' solvency and do not use appropriate methods to evaluate the borrowers' payback capacity.

Suggested Citation

  • Patrizia Ordine & Giuseppe Rose, 2008. "Local Banks Efficiency and Employment," LABOUR, CEIS, vol. 22(3), pages 469-493, September.
    • Handle: RePEc:bla:labour:v:22:y:2008:i:3:p:469-493
    DOI: 10.1111/j.1467-9914.2008.00422.x
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    1. Apergis, Nicholas & Fafaliou, Irene & Stefanitsis, Marinos, 2016. "Asymmetric information and employment: evidence from the U.S. banking sector," The Journal of Economic Asymmetries, Elsevier, vol. 14(PB), pages 199-210.
    2. Ordine, Patrizia & Rose, Giuseppe, 2008. "The supply of education quality in a spatial model with asymmetric moving costs," Research in Economics, Elsevier, vol. 62(4), pages 197-214, December.
    3. Johannes M. Bauer & Gary Madden & Aaron Morey, 2014. "Effects of economic conditions and policy interventions on OECD broadband adoption," Applied Economics, Taylor & Francis Journals, vol. 46(12), pages 1361-1372, April.

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