Research

This paper documents that production networks play an essential role in the job search and matching process. We document five facts about worker mobility in production networks using employer-employee data matched with the universe of firm-to-firm transactions for the Dominican Republic: 1) workers move between buyers and suppliers almost twice as much as predicted by standard labor market characteristics, 2) movers between buyers and suppliers experience larger earnings increases than other movers, 3) incumbent workers earnings increase when their firm hires from its buyers or suppliers, 4) firm-to-firm trade increases following supply chain hires, and 5) hiring from buyers or suppliers is associated with stronger firm growth. Survey evidence points to supply chain-specific human capital and better information about job applicants as the main reasons for hiring within the supply chain. These results reveal a new channel through which factors affecting the supply chain, such as international outsourcing or contracting frictions, impact labor markets. 

We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young firms is stronger in US counties more exposed to banks with greater IT adoption. We present evidence consistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces the time and cost of disbursing collateralized loans.

We study the labor market effects of information technology (IT) during the onset of the COVID-19 pandemic, using data on IT adoption covering almost three million establishments in the US. We find that in areas where firms had adopted more IT before the pandemic,  the unemployment rate rose less in response to social distancing. IT shields all individuals, regardless of gender and race, except those with the lowest educational attainment. Instrumental variable estimates--leveraging historical routine employment share as a booster  of IT adoption--confirm IT had a causal impact on fostering labor markets' resilience. Additional evidence suggests this shielding effect is  due to the easiness of working-from-home and to stronger creation of digital jobs in high IT areas. 

We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database, covering all the credit relationships of Italian corporations, to measure idiosyncratic supply-side shocks to credit availability and estimate a production model augmented with financial frictions. We find the effect of credit supply to be asymmetric: contractions harm TFP growth, halting productivity-enhancing activities;  credit expansions have limited effects. We find that a credit crunch was followed by a productivity slowdown while a sustained growth of credit supply did not lead to productivity increases at firms. This suggests a role of financial stability in preserving productivity growth.

What are the implications of information technology (IT) in banking for financial stability? Data on US banks’ IT equipment and the background of their executives reveals that higher pre-crisis IT adoption led to fewer non-performing loans and more lending during the global financial crisis. Empirical evidence indicates a direct role of IT adoption in strengthening bank resilience; this includes instrumental variable estimates exploiting the historical location of technical schools. Loan-level analysis shows that high-IT banks originated mortgages with better performance, indicating better borrower screening. No evidence points to offloading of low-quality loans, differences in business models, or enhanced monitoring.

The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on markups, we rely on the experience of the Global Financial Crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. Using a multivariate matching method, we find no evidence of an increase in markups. Interventions—especially longer and larger ones—have no significant impact on prices but they increase costs, mostly because of higher loan impairment charges, lowering markups.

We use high-frequency indicators to analyze the economic impact of COVID-19 in Europe and the United States during the early phase of the pandemic. We document that European countries and U.S. states that experienced larger outbreaks also suffered larger economic losses. We also find that the heterogeneous impact of COVID-19 is mostly captured by observed changes in people’s mobility, while, so far, there is no robust evidence supporting additional impact from the adoption of nonpharmaceutical interventions. The deterioration of economic conditions preceded the introduction of these policies and a gradual recovery also started before formal reopening, highlighting the importance of voluntary social distancing, communication, and trust-building measures.

Cloud computing has “democratized computing” by bringing it to the masses of firms. First, cloud computing has seen massive growth. Less than 0.5% of firms had adopted it in 2010, whereas 7% had by 2016, which is an annualized growth rate of almost 50%. Second, the adoption of cloud computing has occurred across the U.S., not just in one region — albeit with heaviest and earliest adoption in urban and educated areas. But third, and most strikingly, cloud computing – unlike other technologies like PCs and e-commerce – has been adopted first by smaller and younger firms.

The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.