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2010): “Credit within the firm
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| Venue: | NBER Working Papers 15924, National Bureau of Economic Research, Inc |
| Citations: | 2 - 0 self |
BibTeX
@INPROCEEDINGS{Guiso_2010):“credit,
author = {Luigi Guiso and Luigi Pistaferri and Fabiano Schivardi and Luigi Guiso and Luigi Pistaferri and Fabiano Schivardi},
title = {2010): “Credit within the firm},
booktitle = {NBER Working Papers 15924, National Bureau of Economic Research, Inc},
year = {}
}
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Abstract
We exploit time variation in the degree of development of local credit markets and matched employer-employee data to assess the role of the firm as an internal credit market. In less developed local credit markets firms can offer a flatter wage-tenure profile than firms in more developed credit markets to lend implicitly to their workers or offer a steeper profile to implicitly borrow from their workers. We find that firms located in less financially developed markets offer wages that are lower at the beginning of tenure and grow faster than those offered by firms in more financially developed markets, helping firms finance their operations by raising funds from workers. Because we control for local market effects and only exploit time variation in the degree of local financial development induced by an exogenous liberalization, the effect we find is unlikely to reflect unobserved local factors that systematically affect wage tenure profiles. The size of implicit loans is larger for firms with more problematic access to bank credit and workers less likely to face credit constraints. The amount of credit generated by implicit lending within the firm is economically important and can be as large as 30 % of bank lending. Consistent with credit market imperfections opening up trade opportunities within the firm, we find that
Keyphrases
developed market local credit market implicit loan exploit time variation problematic access developed local credit market firm unobserved local factor local market effect time variation steeper profile flatter wage-tenure profile implicit lending internal credit market local financial development bank lending credit market imperfection wage tenure profile bank credit credit constraint trade opportunity exogenous liberalization developed credit market
