This work studies the mechanisms through which variations in bank credit supply affect the dynamics of aggregate labor productivity in the Italian manufacturing sector. In particular, the work distinguishes between the variation in firms' average productivity, labor force reallocation between firms with different productivity levels, and the contribution deriving from firm entry and exit from the market.
During the crisis period (2008-2015), credit supply restrictions lower firms' average productivity, but increase the reallocation of workers to more productive firms. Overall, these effects cancel each other out, resulting in a near-zero impact of credit supply on sectoral aggregate labor productivity.
Published in: International Journal of Central Banking, v. 18, 3, pp. 125-171
