Working Papers
Real Effects of Credit Supply Shocks: Evidence from Danish Banks, Firms, and Workers with Simon Juul Hviid
Contractions in credit supply can lead firms to reduce their level of employment, yet little is known about how these shocks affect the composition of firms’ employees and outcomes at the worker level. This paper investigates how bank distress affects credit provision and its effects on employment beyond firm-level aggregates. To do so, we use a novel dataset built from administrative and tax records linking all banks, firms, and workers in Denmark. We show that banks that were particularly exposed to the 2008-09 financial crisis cut lending to firms, and firms were unable to fully compensate with financing from alternate sources. The decrease in credit supply led to a drop in firm-level employment, with effects concentrated among firms with low pre-crisis liquidity, and on employment of low-educated and non-managerial workers. At the worker level, we find that positive effects on unemployment were driven by effects on low-educated, non-managerial and short-tenured workers. Our estimates suggest that cuts in bank lending can account for at least 5% of the fall in employment of low-educated workers in our sample, and are an important factor behind heterogeneous employment dynamics in times of contractionary credit.
Does Wealth Inhibit Criminal Behavior? Evidence from Lottery Winners in Sweden and the United States with David Cesarini, Adam Isen, Erik Lindqvist, and Robert Östling
We estimate the effect of financial resources on criminal behavior using data from lotteries in Sweden and the United States matched to criminal convictions (Sweden) and incarceration (United States). While institutional environments vary between the two countries, we fail to detect statistically significant effects on criminal behavior in either sample, including for at-risk populations. Moreover, our estimates allow us to rule out effects much smaller than the cross-sectional gradients between income and crime. We also estimate null effects of parental lottery wealth on child delinquency. The results challenge theories that emphasize the lack of economic resources as a key determinant of criminal behavior.
What Shapes Spillovers from Monetary Policy Shocks in the United States to Emerging Market Economies? with Erik Andres-Escayola, Peter McQuade, and Marcel Tirpák
Monetary policy decisions by the Federal Reserve System in the US are widely recognised to have spillover effects on the rest of the world. In this paper, we focus on the asymmetric effects of US monetary policy shocks on macro-financial outcomes in emerging market economies (EMEs). We shed light on how domestic factors shape external monetary policy spillover effects using indicators on the macro-financial vulnerabilities and monetary policy stances of EMEs. We find that a surprise tightening of monetary policy in the US leads to an immediate tightening of financial conditions which leads to a decline in activity and prices in EMEs over one year. Importantly, these effects are amplified in periods of high vulnerabilities and attenuated when EMEs follow a prudent monetary policy stance. Our findings help explain the greater resilience of many EMEs to the Fed's post-COVID-19 tightening cycle, and highlight the benefits of the broad improvements of monetary policy frameworks in these countries.
Publications
Schroeder, C. and Stracca, L. (2025). Pollution Havens? Carbon Taxes, Globalization, and the Geography of Emissions, IMF Economic Review.
This paper examines the impact of national carbon taxes on CO2 emissions. To achieve this, we conduct local projections on a cross-country panel dataset, aligning measures of carbon dioxide emissions with data on the introduction of carbon taxes and their associated prices. Importantly, we consider both territorial emissions — those emitted within a country's borders — and consumption emissions — those emitted globally to satisfy domestic demand. We find that carbon taxes reduce territorial emissions over time but have no significant effect on consumption emissions. Our estimates are robust to propensity-score weighting adjustments, controlling for the role of other environmental policies, and are primarily driven by countries that are more open to trade. In contrast, we find that variation in carbon prices from the European Union's Emissions Trading System (ETS) have a negative impact on both territorial and consumption emissions. Overall, our findings underscore the limitations of national carbon pricing schemes and emphasize the importance of international cooperation in reducing global emissions.
Works in Progress
Employment Effects of EU-ETS Prices
This paper studies the employment effects of carbon pricing under the European Union's Emissions Trading System (EU-ETS). Applying standard methods from the literature to data from the EU’s LFS, I define two dimensions of jobs: how “green” and “polluting” a job is. A set of stylized facts shows that the vast majority of workers in Europe work in jobs that are not very green nor very polluting. The average environmental characteristics of jobs vary across countries, over time, and for different subsets of workers. Workers in greener jobs are more likely to be men, highly educated, and to work in urban areas, whereas workers in more polluting jobs are also more likely to be men, less educated, and to work in rural areas. Leveraging a series of exogenous EU-ETS price shocks, this paper then turns to an empirical analysis of their dynamic impacts on employment. The panel local projections estimates reveal that shocks to EU-ETS prices have a negative effect on aggregate employment. A 1% increase in EU-ETS prices is estimated to lead to a roughly 0.2% decline in employment after one and a half years. Impacts on employment in more polluting jobs are estimated to be even stronger, while impacts on employment in greener jobs are also estimated to be negative, albeit less pronounced. Two factors play an important role in shaping these responses: the allocation of free allowances and the degree of employment protection. When relatively fewer emissions are covered by freely allocated allowances, the negative employment effects of EU-ETS price shocks are stronger. Similarly, when employment protection legislation is tighter, the estimated impact is more muted. The findings underscore the economic consequences of carbon pricing, offering valuable insights for policymakers balancing climate objectives with labor market considerations.
A Model of Search in Credit and Labour Markets with Heterogeneous Workers
How do frictions in credit markets affect firms' choices over which workers to hire? To study this question, I build a search and matching model of credit and labour markets with heterogeneous labour. Firms first search for a bank to cover the costs of posting a vacancy. Firms that secure financing then search for workers of varying skill in the labour market. Upon meeting a worker the firm faces a trade-off: hire that worker in the present period and produce output, or wait for a potentially higher skilled worker to come along. Firms' optimal behaviour is determined by tightness in the labour market, itself determined by frictions in both credit and labour markets. Greater credit market frictions drive labour market tightness down, leading firms to seek higher skilled workers.
Forecasting the Euro Area Job Vacancy Rate with Earnings Calls with Agostino Consolo, Claudia Foroni, and Claudio Lissona, draft coming soon!
Evaluating the Impact of Weather on Employment in the Euro Area with Miles Parker, draft coming soon!