Fabio Berton, Sauro Mocetti, Andrea Presbitero, and Matteo Richiardi
INTERNATIONAL MONETARY FUND
We analyze the employment effects of financial shocks using a rich data set of job contracts,
matched with the universe of firms and their lending banks in one Italian region. To isolate
the effect of the financial shock we construct a firm-specific time-varying measure of credit
supply. The contraction in credit supply explains one fourth of the reduction in employment.
This result is concentrated in more levered and less productive firms. Also, the relatively less
educated and less skilled workers with temporary contracts are the most affected. Our results
are consistent with the cleansing role of financial shocks.