Events

Dr. Julien Sauvagnat
Associate Professor of Finance
Bocconi University

We investigate the labor market effects of a loan guarantee program targeting French SMEs in the midst of the financial crisis. Exploiting worker-level panel data and differences in treatment intensity across regions, we find that the program has a significant and persistent positive impact on workers’ employment and earnings trajectories, in particular for those initially employed in high unemployment areas. However, the program dampens workers’ reallocation towards productive firms, especially for workers with high earnings capacity. In the aggregate, we find that the program is revenue-positive for the government, as the savings in unemployment benefits outweigh the losses from the defaults of guaranteed loans, but that around half the employment effect of the program is offset by a reduction in the reallocation of workers towards productive firms.