Brown Bag - The Employ - Level Evidence
Niklas Amberg, Stockholm School of Economics
2017-06-01 at 12:00
2017-06-01 at 13:00
Swedish House of Finance, Drottninggatan 98, Stockholm
This paper studies the employment effects of bank distress using a natural experiment and a dataset covering firm-, loan-, and employee-level data for close to the entire population of Swedish firms.
We show that a severe shock to the health of two of Sweden’s four major banks, emanating from their exposure to the Baltic countries during the global financial crisis, led them to contract lending on
the Swedish corporate loan market. This caused a significant and persistent decline in employment at non-financial firms with pre-crisis relationships to them (treated firms) relative to otherwise comparable
firms with relationships to unexposed banks (control firms). We also document, however, that individuals employed at treated firms were not more likely to be out of employment in the years following the crisis,
because employees laid off from the former went on to find employment elsewhere. Our results thus suggest that even though adverse shocks to banks cause declines in employment at firms borrowing from those
banks, these effects are not necessarily important from the perspective of aggregate employment because of employment reallocation across constrained and unconstrained firms.