Finance Seminar with Farzad Saidi, Stockholm School of Economics

The Department of Finance is proud to announce the upcoming seminar with Farzad Saidi, Stockholm School of Economics.

Farzad Saidi will present:

The Effects of Credit Supply on Wage Inequality between and within Firms

ABSTRACT
In this paper, we study the effect of a credit supply shock on the distribution of wages within and between firms. We construct a novel dataset combining administrative linked employer-employee data with information on firms' preexisting bank relationships in the credit market. We use the introduction of negative monetary policy rates in the euro area as a source of variation in banks' credit supply to firms in Germany. We find that this credit supply shock leads to higher within-firm wage inequality at more affected employers. At the same time, we find a reduction in between-firm wage inequality due to relatively higher average wages among initially lower-paying employers. Our results suggest that monetary policy can have important distributional consequences through affecting credit supply and firm pay heterogeneity.