Dear all,

we would like to invite you to our ECON-Seminar Talk

on October 29th, 1:00-2:30 p.m. (Seminarroom DB04 Freihaus building, yellow area):

Financial Constraints, Firm Age, and the Labor Market

This paper shows that credit crunches cause labor market effects that are nonlinear over

time and heterogeneous by firm age. During the Great Financial Crisis, a credit supply shock

caused young firms to reduce employment significantly more than old firms, because the

housing bust in 2006 led to a decline in young firms’ housing collateral and restricted their

ability to borrow. To understand the underlying mechanism, I propose a financial frictions

model with an explicit firm age structure. A simultaneous credit crunch and a decline in

young firms’ net worth can reconcile the model with my empirical results. While old firms

switch to equity financing, young firms depend on debt financing and cut labor demand. As

young firms disproportionately account for aggregate job growth, my findings explain the

sluggish labor market recovery after the Great Financial Crisis. A counterfactual experiment

shows that absent the net worth shock, the U.S. unemployment rate would have been back

to its pre-crisis level two years sooner.

Due to the available room capacities, we ask you to register by sending a short mail to Julia.hutter@tuwien.ac.at.

Please note, that your digital COVID certificates (“Grüner Pass”) will be checked at the entrance of the building.

Best regards,

Julia Hutter for

Alexia Fürnkranz-Prskawetz

Julia Hutter

TU Wien

Institute of Statistics and Mathematical Methods in Economics

Economics E105-3

Phone: +43-1-58801x10531