The Banks that Said No: the Impact of Credit Supply on Productivity and Wages

Abstract

This paper estimates the effects of changes in bank credit supply on the real economy. We use UK firm-level data around the global financial crisis and information on pre-existing bank lending relationships to isolate exogenous credit supply shocks. We find some evidence that contractions in credit supply substantially reduce labour productivity, wages, and capital per worker within firms, and increase the chance firms will fail. Our results have implications for the welfare costs of financial crises, and for the costs of policy measures affecting credit supply at other times.

Bank crediting to the sector of non-financial corporations in Ukraine

“…The Great Britain is negative example of excessive financial dependence of companies and thus, their vulnerability. In the post-crisis period in the Great Britain, reducting the supply of loans has become one of the major reasons for a significant productivity decline, consequently declining the wages and capital per employee indicators inside the companies (Franklin et al, 2019). Figure 1 shows the dynamics of main indicators of bank crediting in the Ukrainian economy.…”

The Effect of Giving Credit to Social Enterprises: Evidence From Italy

“…A vast body of literature-mostly related to standard business companies-shows that access to credit is beneficial to firms and crucial to their development. On the contrary, contractions in credit supply substantially harm firms, thus increasing their likelihood of failing (Franklin et al 2020).…”

Pembiayaan Investasi Bank Syariah dan Pertumbuhan Produksi Usaha Kecil dan Menengah: Bukti Data Panel Indonesia Kawasan Barat

“…Hal ini berarti bahwa ketika pembiayaan meningkat, kinerja usaha juga meningkat. Sebaliknya, kontraksi penawaran pembiayaan secara substansial mengurangi produktivitas tenaga kerja, upah dan modal per pekerja dalam perusahaan, dan bahkan meningkatkan kemungkinan perusahaan gagal (Franklin et al, 2019).…”