Effects of Credit Supply on Unemployment and Inequality

Arbeitspapier

The Great Recession, which was preceded by the financial crisis, resulted in higher unemployment and inequality. We propose a simple model where firms producing varieties face labor-market frictions and credit constraints. In the model, tighter credit leads to lower output, lower number of vacancies, and higher directed-search unemployment. Where workers are more productive at higher levels of firm output, lower credit supply increases firm capital intensity, raises inequality by increasing the rental of capital relative to the wage, and has an ambiguous effect on welfare. At initial high levels of labor share in total costs tighter credit lowers welfare. This pattern reverses during an expansionary phase caused by higher credit availability.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 10006

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Wage Level and Structure; Wage Differentials ; Unemployment: Models, Duration, Incidence, and Job Search ; Production, Pricing, and Market Structure; Size Distribution of Firms
• Thema: monopolistic competition ; functional inequality ; search unemployment ; credit constraints

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bandyopadhyay, Subhayu ; Dinopoulos, Elias ; Unel, Bulent
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/145140
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ