Credit Supply Shocks and the Effect on Labour Force Composition.

The goal of this project is to analyse the effect of banks’credit supply on employment and

workforce composition; i.e., on firms’decisions to employ blue vs. white collar workers, to train

their staff, or to offer long- vs. short-term contracts. We propose to estimate this effect for the

Belgian economy, and to characterise heterogeneity across a variety of bank, firm, and job

characteristics. Conditions in Belgium further enable us to analyse the sensitivity of our results to

changes in firing costs, and their interaction with local labour supply shocks.

We have access to the Belgian credit registry, i.e. to extensive loan-level information, as well as to

detailed financial data for banks and firms, and to firms’social balance sheets (detailed and

standardized labour force information). This allows us to isolate banks’credit supply from firms’credit demand (by studying how several banks change their lending towards the same borrower),

and to analyse causal implications for employment across different types of jobs and employees.

Understanding whether and how access to credit affects firms’human resource decisions provides

insights into the societal value of a healthy financial sector. This offers guidance, for example on

whether public funds should be used to support banks during crises, and –f so–on how they should

best be allocated. Adding to our academic contribution, we therefore expect our project to be of

interest to policymakers and society at large.