REMINDER: Dear all, the first Economic Theory and Policy Seminar talk will take place on Friday, October 29th, 1:00-2:30 p.m. (Seminarroom DB04 Freihaus building, yellow area): Financial Constraints, Firm Age, and the Labor Market Brigitte Hochmuth (Universität Wien) https://sites.google.com/view/brigittehochmuth/home 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 restricted room capacities, we ask you to register by sending a short mail to julia.hutter@tuwien.ac.at<mailto: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 E-Mail: julia.hutter@tuwien.ac.at<mailto:julia.hutter@tuwien.ac.at>