Financial Interactions Between Labor Markets and the Macroeconomy

Project: Research project

Project Details

Description

Financial Interactions Between Labor Markets and the Macroeconomy Financial Interactions Between Labor Markets and the Macroeconomy This project titled Financial Interactions Between Labor Markets and the Macroeconomy assesses whether credit markets may reinforce the impacts of economic shocks like the 2020 shut-down of the economy, the extent to which collateral constraints will force firms and households to cut back on borrowing and spending, and whether fiscal policy can mitigate the propagation of shocks through financial markets into the real economy. Three key features of the Norwegian setting facilitate our studies and allow us to contribute to and bridge several strands of literature in macro, finance and labor economics. First, access to the universe of business ownership, assets and pledged collateral allows us to study the role of credit market frictions for small businesses access to credit and their hiring decisions. This enables us to provide first evidence on the role of inside collateral (assets owned by the firm) versus inside collateral (owned by the entrepreneur), and to assess how collateral constraints affect credit and labor markets differentially by aggregate market conditions. Second, comprehensive data on household balance sheets linked to data on job search allows us to study how leverage affects labor supply and job search behavior. This furthers new evidence on how household leverage affects wages, unemployment spells and labor force participation. Third, the combination of granular micro-data and a unique policy discontinuity that determines the eligibility for unemployment benefit extensions opens up for the first evidence on whether public insurance substitute with or reinforce the effects of credit markets. Arizona State Universitys project team will provide its expertise to achieve the goals of the project with an aim to produce research papers.
StatusActive
Effective start/end date1/1/2112/31/23

Funding

  • OTHER: Foreign Government: $59,842.00

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