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Finance in the New U.S. Economy: Local Finance and Service Job Growth in the Post-industrial Economy

Published online by Cambridge University Press:  16 April 2021

Elizabeth A. Berger Open the ORCID record for Elizabeth A. Berger [Opens in a new window]
Elizabeth A. Berger*
Affiliation:
Cornell University Johnson Graduate School of Management
*
eberger@uh.edu (corresponding author)
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Abstract

I examine whether local bank finance facilitated the transition to a service-based economy in the U.S. I identify a causal role for local finance in service job creation. I use county-level changes to alcohol laws as demand shocks to service employers across a subsample of U.S. counties. Counties with more local finance experience more service job creation. This leads to labor market transitions that reflect shifts in the broader economy. Information asymmetry and collateral constraints connect local finance to service sector employment. The findings identify a unique role for local finance in the evolution to a postindustrial service-based economy.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 5 , August 2022 , pp. 1987 - 2021
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

I thank an anonymous referee, Alex Butler, Gustavo Grullon, Jarrad Harford (the editor), Natalia Sizova, and James Weston. In addition, I am grateful for helpful comments and suggestions by Kerry Back, Murillo Campello, David De Angelis, Andrew Karolyi, Alberto Teguia, and Morad Zekhnini; seminar participants at the University of Nebraska–Lincoln, Fordham University, Brandeis University, Washington University in St. Louis, Southern Methodist University, Emory University, Cornell University, the University of Miami, the University of Utah, the University of Virginia, the University of Kentucky, Michigan State University, the Rice University Student Brownbag Series, and the Rice University Faculty Seminar Series; and participants at the 2016 Labor and Finance Conference, 2017 SFS Cavalcade, and 2017 European Finance Association.

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