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Banking on Snow: Bank Capital, Risk, and Employment

Author

Listed:
  • Simon Baumgartner

    (Humboldt University Berlin, Germany)

  • Alex Stomper
  • Thomas Schober
  • Rudolf Winter-Ebmer

Abstract

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms’ local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks’ borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.

Suggested Citation

  • Simon Baumgartner & Alex Stomper & Thomas Schober & Rudolf Winter-Ebmer, 2022. "Banking on Snow: Bank Capital, Risk, and Employment," Economics working papers 2022-10, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2022-10
    Note: English
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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