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Finance and employment: Evidence from U.S. banking reforms

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  • Boustanifar, Hamid

Abstract

Economic theory offers competing hypotheses about how the cost and availability of finance influence labor market outcomes. Making use of the U.S. banking reforms between the 1970s and the 1990s as a quasi-natural experiment, this paper studies the impact of credit market development on employment. This paper documents the significant effects of these reforms on employment growth. Potential channels between finance and employment are also investigated. Changes in the growth of the number of self-employed individuals, the entry and exit of firms, and investment growth do not explain most of the employment growth following the reforms. The reforms had a substantially higher impact in industries with higher labor intensity, which is consistent with the idea that labor has fixed costs that need to be financed.

Suggested Citation

  • Boustanifar, Hamid, 2014. "Finance and employment: Evidence from U.S. banking reforms," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 343-354.
    • Handle: RePEc:eee:jbfina:v:46:y:2014:i:c:p:343-354
    DOI: 10.1016/j.jbankfin.2014.06.006
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    More about this item

    Keywords

    Banking reform; Employment; Credit market; Deregulation; Labor;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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