Credit Constraints and Labor Supply
Credit Constraints and Labor Supply

Author: Kien Bui Trung Dao

Publisher:

Published: 2016

Total Pages: 45

ISBN-13:

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This paper examines labor supply adjustment - both at the intensive (hours worked) and extensive (labor force participation) margins - following financial market development. Theoretically, well-functioning credit markets allow individuals to transfer resources and substitute leisure across states. Hence, individuals would behave (w.r.t. labor supply) differently under complete and incomplete credit markets. We exploit the staggered passage of bank branching deregulation in the U.S. to study the impact of relaxing credit constraints on labor supply decisions. The intensity of labor supply, on average, is about 0.3 hours lower after the reform (and about 0.5 hours lower after five years following deregulation). We also find deregulation's impact heterogeneity across income distribution and demographics. The effect of lifting branching prohibitions is most pronounced for the lower-middle income (marginal) group. Further, these findings indicate that blacks were facing higher effective loan prices than whites, suggesting the existence of both statistical and taste-based discriminations. In contrast, we find little to no evidence that deregulation has a significant impact on the extensive margin of participation.

Liquidity Constraints and Labor Supply
Liquidity Constraints and Labor Supply

Author: Mariacristina Rossi

Publisher:

Published: 2014

Total Pages: 24

ISBN-13:

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In this paper we show how liquidity constraints shape Italian households' decisions with respect to labour supply. One way to neutralize the existence of binding liquidity constraints is simply by supplying additional labor, instead of reducing consumption patterns. We estimate whether resorting to additional labor supply as a smoothing consumption device is at work by using the Survey of Households Income and Wealth (SHIW) and exploiting its panel component. The longitudinal dimension allows to control for state dependence in the labor supply, individual unobserved heterogeneity and the endogeneity of our measure for credit constraints in labor supply equations. Our results show that liquidity constraints increase the intensity in the supply of women's labor and foster their participation in the labor force. The former effect is at work without time delay, while participation takes more time to adjust to credit constraints. We do not find any significant effect on men's labor supply.

Seasonal Credit Constraints and Agricultural Labor Supply
Seasonal Credit Constraints and Agricultural Labor Supply

Author: Günther Fink

Publisher:

Published: 2014

Total Pages: 43

ISBN-13:

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Small-scale farming remains the primary source of income for a majority of the population in developing countries. While most farmers primarily work on their own fields, off-farm labor is common among small-scale farmers. A growing literature suggests that off-farm labor is not the result of optimal labor allocation, but is instead driven by households' inability to cover short-term consumption needs with savings or credit. We conduct a field experiment in rural Zambia to investigate the relationship between credit availability and rural labor supply. We find that providing households with access to credit during the growing season substantially alters the allocation of household labor, with households in villages randomly selected for a loan program selling on average 25 percent less off-farm labor. We also find that increased credit availability is associated with higher consumption and increases in local farming wages. Our results suggest that a substantial fraction of rural labor supply is driven by short-term constraints, and that access to credit markets may improve the efficiency of labor allocation overall.

Credit Supply and Productivity Growth
Credit Supply and Productivity Growth

Author: Francesco Manaresi

Publisher: International Monetary Fund

Published: 2019-05-17

Total Pages: 75

ISBN-13: 1498315917

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We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.

Labor Supply Responses to Adverse Shocks Under Credit Constraints
Labor Supply Responses to Adverse Shocks Under Credit Constraints

Author: Hazel Jean Malapit

Publisher:

Published: 2018

Total Pages: 31

ISBN-13:

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The ability of households to insure consumption from adverse shocks is an important aspect of vulnerability to poverty. How is consumption insurance achieved in a low-income setting where formal credit and insurance markets have been observed to be imperfect or missing? Using 2003 data from the Philippine province of Bukidnon, we investigate how labor supply is used to buffer transitory income shocks, in light of credit constraints. We find that the most vulnerable households are those with little education and with few or no able-bodied male members. Appropriate policy responses include counter-cyclical workfare programs targeted to households with high female-to-male ratios, households with high dependency ratios, and households with little or no education, as well as the provision of universal education and health care. These programs are likely to be effective in strengthening the labor endowments of households and improving their ability to cope with adverse shocks in the future.

Trade Credit and Temporary Employment
Trade Credit and Temporary Employment

Author: Sebastian Nielen

Publisher: Springer

Published: 2016-04-08

Total Pages: 114

ISBN-13: 331929850X

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This book presents an empirical investigation into the relationship between companies' short-term response to capital and labor market frictions and performance. Two different kinds of performance measures are considered, namely innovation performance and firm performance. The author focuses on two major topics: first, on the relation between innovation performance and the use of trade credit. Second, on the relation between firm performance and the use of temporary employment. The use of in-depth firm-level data and state-of-the-art microeconometric methods provide the scientific rigor to this important investigation to answer the questions currently being confronted by many companies in different economies.

Firm-level and Local Labor Market Effects of a Large Credit Shock
Firm-level and Local Labor Market Effects of a Large Credit Shock

Author: Carlos Henrique Corseuil

Publisher:

Published: 2023

Total Pages: 0

ISBN-13:

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A common explanation for the poor performance of entrepreneurs in developing economies is their inability to obtain credit to expand their scale of operation. This paper assesses the aggregate impacts of the Cartão BNDES, a credit line targeted at small and medium enterprises (SMEs) in Brazil, to investigate the role of credit constraints on SMEs performance. We use a major expansion of credit supply within the line to estimate causal effects of credit supply on firm size distribution, entry and exit, and employment. By exploiting the fact that firms can only use the available credit with suppliers that are registered in the credit line's system, we construct a variable that capture a credit supply expansion that varies exogenously across regions. We use an instrumental variable estimator that exploits differential access to the line and the expansion of suppliers to recover these causal effects. Our main result points that a 1% increase in the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social - BNDES) card loans has a positive effect on average local formal employment between 6.7% and 10.3%. This increase in employment is driven by the increase in the average size of firms, specially by the average size of new entrant firms. These are relevant results as they suggest that the type of credit provided by BNDES card foster the dynamics of local labor markets, increasing the entrance of new firms, which are pointed as the group most affected by credit constrains.