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Financing Constraints and Unemployment: Evidence from the Great Recession

Financing Constraints and Unemployment: Evidence from the Great Recession

Paperback

Economics

ISBN10: 1507563019
ISBN13: 9781507563014
Publisher: Createspace
Published: Jan 14 2015
Pages: 54
Weight: 0.33
Height: 0.11 Width: 8.50 Depth: 11.00
Language: English
Exploiting the differential financing needs across industrial sectors, this paper shows that financing constraints of small businesses in the United States are one of the drivers explaining the unemployment dynamics during the Great Recession. We show that workers in small firms are more likely to become unemployed during the 2007-09 financial crisis if they work in industries with high external financing needs. We find very similar results for the 1990-91 recession, but not for the 2001 recession, where only the former was associated with a reduction in loan supply. These findings further support the credit constraints hypothesis.

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