Board of Governors of the Federal Reserve System (U.S.)
Finance and Economics Discussion Series
Financing Constraints and Unemployment: Evidence from the Great Recession
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.
Cite this item
Burcu Duygan-Bump & Alexey Leykov & Judit Montoriol-Garriga, Financing Constraints and Unemployment: Evidence from the Great Recession, Board of Governors of the Federal Reserve System (U.S.), Finance and Economics Discussion Series 2014-92, 22 Oct 2014.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G20 - Financial Economics - - Financial Institutions and Services - - - General
Keywords: Great Recession; firm size; financial dependence; unemployment
This item with handle RePEc:fip:fedgfe:2014-92
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