collateral damage refinancing constraints and regional recessions in the current structure of the u s residential mortgage market a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates in this papr we show that this form of collateral constraint has greatly reduced refinancing in statds with depressed property markets we outline the interaction between regional recessions and refinancing constraints when adverse economic shocks cause property values in a region to decrease the damage to the collateral makes it difficult or impossible for some homeowners to obtain new mortgages in the recent period this has meant that homeowners in economically depressed regions have been unable to refinance their mortgages to take advantage of declining interest rates this inability to refinance has further economic impacts on the region through lowering the wealth and the discretionary income of local homeowners thereby deepening the regional recession while the possible link between regional declines in property values and refinancing activity has been understood for some time for example monsen 1992 the subject has received very little empirical attention we provide the first quantitative assessment of the impact of constraints arising from regional property market dynamics on refinancing activity to accomplish this we use a new data set on more than thirty five thousand individual mortgages the sample consists of all mortgages serviced by chemical bank with originations between june 1989 and may 1992

can self control explain avoiding free money evidence from interest free student loans abstract this paper uses insights from behavioral economics to explain a particularly surprising borrowing phenomenon one in six undergraduate students offered interest free loans turns them down models of impulse control predict that students may optimally reject subsidized loans to avoid excessive consumption during school using the national postsecondary student aid study we investigate students take up decisions and identify a group of students for whom the loans create an especially tempting liquidity increase students who would receive the loan in cash are significantly more likely to turn it down suggesting that consumers choose to limit their liquidity in economically meaningful situations

policy intervention in debt renegotiation evidence from the home affordable modification program we evaluate the effects of the 2009 home affordable modification program hamp that provided intermediaries with sizable financial incentives to renegotiate mortgages hamp increased intensity of renegotiations and prevented a substantial number of foreclosures but reached just one third of its targeted indebted households this shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary specific factors exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with a lower rate of foreclosures consumer debt delinquencies house price declines and an increase in durable spending

labor market flows in the cross section and over time many theoretical models of labor market search imply a tight link between worker flows hires and separations and job gains and losses at the employer level we use rich establishment level data to assess several theoretical models and to study the relationship between worker flows and jobs flows hires quits and layoffs exhibit strong highly nonlinear relationships to employer growth rates in the cross section simple statistical models of these relationships greatly improve our ability to account for fluctuations in aggregate worker flows and enable us to construct synthetic measures of hires separations quits and layoffs back to 1990

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

interest rates and equity extraction during the housing boom credit record panel data from 1999 2010 indicates that the likelihood of home equity extraction borrowing on average about 40 000 against one s home peaked in 2003 when mortgage rates reached historic lows we estimate a 27 percent rise in extraction in response to a 100 basis point rate decline and that house price growth amplifies this relationship differential responses to interest rates and home price appreciation by borrower age and credit score provide new evidence of financial frictions finally equity extractions are associated with higher default risk consistent with the use of borrowed funds for consumption or illiquid investment

default probabilities for mortgages abstract models now exist for valuing the default option embedded in a mortgage implicitly these models generate all the information necessary to determine the probability of default in any possible situation economists and policymakers may find such default probabilities considerably more interesting than the nonobservable dollar value of the default option this paper provides the analytical procedure necessary to calculate such probabilities and presents a wide range of results the decision to terminate a mortgage results in the loss of the options to default or prepay in the future because of this consideration the price of a house must fall below the point of zero equity before a rational borrower defaults we provide evidence that even in the absence of transaction costs this value of delay results in substantial levels of negative equity being observed without default occurring in fact by not accounting for the value of delay most of the current empirical literature cited in this article substantially overestimates the role of transaction costs in the decision to default

lender screening and the role of securitization evidence from prime and subprime mortgage markets this article examines the link between mortgage securitization and lender screening during the boom and bust of the u s housing market using comprehensive data on both prime and subprime securitized and bank held loans we provide evidence that securitization affected lenders screening decisions in the subprime market for low documentation loans through two channels the securitization rate and the time it takes to securitize a loan the change in decision making by subprime lenders occurs on dimensions that are unreported to investors examining the time series evolution of the securitization market further reinforces these findings we exploit heterogeneity across subprime and prime markets to illustrate that the potential for moral hazard may be reduced with greater collection of hard information and increased monitoring of lenders our results suggest that the policy debate regarding securitization and lenders underwriting standards should separately evaluate the agency and non agency markets with special attention toward the extent of soft information in assets being securitized the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

debt relief and debtor outcomes measuring the effects of consumer bankruptcy protection consumer bankruptcy is one of the largest social insurance programs in the united states but little is known about its impact on debtors we use 500 000 bankruptcy filings matched to administrative tax and foreclosure data to estimate the impact of chapter 13 bankruptcy protection on subsequent outcomes exploiting the random assignment of bankruptcy filings to judges we find that chapter 13 protection increases annual earnings by 5 562 decreases five year mortality by 1 2 percentage points and decreases five year foreclosure rates by 19 1 percentage points these results come primarily from the deterioration of outcomes among dismissed filers not gains by granted filers jel d14 i12 j22 j31 k35

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

agrarian structure and agricultural practice typology and application to western sudan a typology of models that explain patterns of variation in farm endowments and farm practices and yields shows that insecurity in renting land financing constraints and the absence of insurance generate patterns of factor use quite different from the famous inverse relationship caused by labor supervision problems one might expect to observe positive relationships between wealth and yields village level data from western sudan confirm that such positive relationships are not a theoretical curiosity wealthy farmers have higher levels of output per hectare because they use more labor per hectare insurance and financing constraints appear to be the crucial market failures

ma and sun on insider trading ethics ma and sun have recently argued that some forms of insider trading are ethically acceptable we argue that the authors fail to prove three key premises of their argument which is therefore unsound

mortgage terminations heterogeneity and the exercise of mortgage options as applied to the behavior of homeowners with mortgages option theoiy predicts that mortgage prepayment or default will be exercised if the call or put option is in the money by some specific amount our analysis tests the extent to which the option approach can explain default and prepayment behavior evaluates the practical importance of modeling both options simultaneouisly and models the unobserved heterogeneity of borrowers in the home mortgage market the paper presents a uinified model of the competing risks of mortgage termination by prepayment and default considering the two hazards as dependent competing risks that are estimated jointly it also accounts for the unobserved heterogeneity among borrowers and estimates the unobserved heterogeneity simultaneously with the parameters and baseline hazards associated with prepayment and default functions our results show that the option model in its most straightfolward version does a good job of explaininig default and prepayment but it is not enouigh by itself the simultaneity of the options is very important empirically in explaining behavior the results also show that there exists significant heterogeneity among mortgage borrowers ignoring this heterogeneity results in serious errors in estimating the prepayment behavior of homeowners

the ethics of insider trading despite the fact that a number of economists and philosophers of late defend insider trading both as a viable and useful practice in a free market and as not immoral i shall question the value of insider trading both from a moral and an economic point of view i shall argue that insider trading both in its present illegal form and as a legalized market mechanism undermines the efficient and proper functioning of a free market thereby bringing into question its own raison d etre it does so and is economically inefficient for the very reason that it is immoral thus this practice cannot be justified either from an economic or a moral point of view

analyzing insider trading from the perspectives of utilitarian ethics and rights theory the common view is that insider trading is always unethical and illegal but such is not the case some forms of insider trading are legal furthermore applying ethical principles to insider trading causes one to conclude that it is also sometimes ethical this paper attempts to get past the hype the press reports and the political grandstanding to get to the truth of the matter the author applies two sets of ethical principles utilitarianism and rights theory in an attempt to determine when and in what circumstances insider trading is ethical the views of henry manne an early proponent of insider trading are critically examined as are the major arguments against insider trading is insider trading good for the company if it is used as a form of executive compensation which makes it possible to pay lower salaries than would otherwise be the case does insider trading cause the stock market to work more efficiently if insider trading does increase efficiency is that sufficient to call for its total legalization or are there other things to be considered several arguments against insider trading have been put forth over the last few decades but there are problems with all of them one of the main arguments is the fairness argument the problem with this argument is that different people have different definitions of unfairness a closely related argument is the level playing field argument which advocates wider dissemination of information so that it is less asymmetric one problem with the level playing field argument is that it is better applied to sporting competitions than to trading in information some economists argue that forcing the disclosure of nonpublic information can actually result in more harm than good and must necessarily involve the violation of property rights other arguments examined in this chapter include the fiduciary duty argument the problem of outside traders the misappropriation doctrine and the restrictions that insider trading laws place on freedom of speech and press the article concludes by setting forth some principles or guidelines to determine when insider trading should be punished and when it should not

the rise in student loan defaults abstract we examine the rise in student loan defaults in the great recession by linking administrative student loan data at the individual borrower level to student loan borrowers individual tax records a blinder oaxaca style decomposition shows that shifts in the composition of student loan borrowers and the massive collapse in home prices during the great recession can each account for approximately 30 of the rise in student loan defaults falling home prices affect student loan defaults by impairing individuals labor earnings especially for low income jobs by contrast when comparing the default sensitivities of homeowners and renters we find no evidence that falling home prices affect student loan defaults through a home equity based liquidity channel the income based repayment ibr program introduced by the federal government in the wake of the great recession reduced both student loan defaults and their sensitivity to home price fluctuations thus providing student loan borrowers with valuable insurance against negative shocks

mines and migrants in south africa between 1971 and 1978 wages of more than one half million nonwhite laborers in the south african mines tripled in real terms in the same period the nonwhites employed in the mines switched from being 62 percent foreign to 62 percent domestic these changes followed a period from 1911 to 1971 during which real wages of black gold miners did not rise and terminated almost a century of reliance on foreign labor reserves for the majority of such labor 2 these dramatic events are examined here in the context of an econometric model of the demand for labor by the south african mining sector from 1946 to 1980 this affords an unusual opportunity to study the demand side of a market for internal and international migrants in a society where racial discrimination is formalized in the apartheid system where powerful mining houses wield potential monopsony power and where political factors in the region are major determinants of economic behavior to comprehend the derived demand for workers in this sector it is essential to outline at least certain aspects of the industry s organization and that of the market for labor this is undertaken in section i section ii develops a stylized model which is then estimated from data described in section iii for the gold diamond coal and other minerals sectors separately in section iv i organization of the mine labor market

reconciling theory and empirics on the role of unemployment in mortgage default abstract empirical models of mortgage default typically find that the influence of unemployment is negligible compared to other well known risk factors such as high borrower leverage or low borrower fico scores this is at odds with theory which assigns a critical role to unemployment in the decision to stop payment on a mortgage we help reconcile this divergence by employing a novel empirical strategy involving simulated unemployment histories to measure the severity of attenuation bias in loan level estimations of default risk due to a borrower becoming unemployed attenuation bias results because individual data on unemployment status is unobserved requiring that a market wide unemployment rate be used as a proxy attenuation is extreme with our results suggesting that the use of an aggregate unemployment rate in lieu of actual borrower unemployment status results in default risk from a borrower becoming unemployed being underestimated by a factor more than 100 in addition our analysis indicates that adding the unemployment rate as a proxy for the missing borrower specific unemployment indicator does not improve the accuracy of the estimated model over the specification without the proxy variable included hence aggregate portfolio level risk estimates for mortgage guarantors such as fha also are not improved these views represent those of the authors and not necessarily those of the federal reserve bank of new york or the federal reserve system this is a revised version of a paper that previously circulated under the title unemployment and unobserved credit risk in the fha single family mortgage insurance fund nber working paper no 18880 john grigsby provided excellent research assistance we appreciate the helpful comments of andrew haughwout wilbert van der klaauw the editor stuart rosenthal and referees but remain responsible for any errors

land use intensification potential in slash and burn farming through improvements in technical efficiency abstract much attention is being paid to find alternative land use options in slash and burn sab farming or forest fallow based shifting cultivation systems the conservation objective is often twofold that is to discourage farmers from expanding into the forest frontier and to reduce the ecological damage from burning plots options include the total abandonment of forest plots the adoption of productivity increasing green revolution type technologies and the application of modern evergreen agroforestry knowledge this paper evaluates another alternative the intensification of land use by improving technical efficiency in farming this involves the reduction of land clearing while at the same time maintaining crop output levels and the local and traditional low input technology the potential for such land use intensification is empirically assessed with ecological and socioeconomic household data from yucatan mexico the methodology is based on both parametric and nonparametric output and input distance functions in addition the sources of inefficiency are addressed the results of the analysis suggest that on and off farm labour diversification can play a key role to help shifting cultivating households to improve their technical efficiency in farming and thus to help to intensify land use furthermore while the empirical results point towards the positive effect of soil fertility mainly determined by the length of forest fallows on crop output levels farmers appear to overcome the ecological constraint of farming in less fertile soils by being more technically efficient

migration and technical efficiency in cereal production evidence from burkina faso this article uses a double bootstrap procedure and survey data from burkina faso in a two stage estimation to explore ways in which continental and intercontinental migration determine efficiency in cereal production of rural households findings suggest that continental migration has a positive relation and intercontinental migration no relation with technical efficiency for continental migrant households migration has removed surplus male labor a cause for inefficiency in production intercontinental migration leads to a gender imbalance in the household which cannot be compensated for by investments in farm equipment the failure of intercontinental migration to transform cereal production from traditional to modern is attributed to an imperfect market environment

can t pay or won t pay unemployment negative equity and strategic default this paper uses new data from the psid to quantify the relative importance of negative equity versus ability to pay in driving mortgage defaults between 2009 and 2013 these data allow us to construct household budgets sets that provide better measures of ability to pay changes in ability to pay have large estimated effects job loss has an equivalent effect on the propensity to default as a 35 decline in equity strategic motives are also found to be quantitatively important as we estimate more than 38 of households in default could make their mortgage payments without reducing consumption received september 29 2015 editorial decision june 2 2017 by editor philip strahan authors have furnished an internet appendix which is available on the oxford university pressweb site next to the link to the final published paper online

household food security and child nutrition the interaction of income and gender of household head abstract data from kenya and malawi suggest that food security and preschooler nutritional status are influenced by the interaction of income and gender of the head of household rather than simply one or the other not only is household food security influenced by total household income but the proportion of income controlled by women has a positive and significant influence on household caloric intake households were disaggregated not simply in male and female headed households but female headed households were further disaggregated into de jure legal head of household is a woman and de facto female headed households male head of household is absent more than 50 of the time in both kenya and malawi the de facto female headed households had the lowest income despite this low income preschoolers nutritional status was significantly better than in the higher income male headed and de jure female headed households the ability to improve nutritional status in a low income environment in the de facto female headed households is related to a combination of child feeding practices and other nurturing behavior the findings suggest that interventions that exploit incentives to invest in children can provide more immediate improvements in child health and nutrition where sustained income growth is possible only in the long term

rural nonfarm employment and income diversification in colombia abstract using data for rural households from colombia we find that off farm employment contributes a significant share 45 on average to household income but that the importance of off farm income and returns to household labor vary over the income distribution analysis reveals significant gains from specialization but for households able to specialize no systematic differences in returns to labor between farm and nonfarm sources we conclude that in colombia there is no conflict between development of the farm and the nonfarm sector but that to maximize gains from nonfarm development and reduce the scope for undesirable distributional consequences policies enabling households to specialize might be called for

migration and farm technical efficiency evidence from kosovo this article investigates the effect of migration on farm technical efficiency drawing on a large and representative sample of agricultural households in kosovo a two stage estimation procedure is applied a frontier technique to estimate the effect of migration on farm efficiency followed by a propensity score based matching approach to robustly estimate the sample average effect on efficiency for different levels of migration intensity migration is found to have an efficiency decreasing effect which is amplified for better educated workers the observed negative effect of migration on efficiency is evident even at low levels of migration intensity

factors affecting the technical efficiency among smallholder farmers in the slash and burn agriculture zone of cameroon abstract this paper estimates technical efficiency among small holder farmers in the slash and burn agriculture zone of cameroon and identifies sources of inefficiency using detailed survey data obtained from 450 farmers over 15 villages throughout 2001 2002 growing season we find that the mean levels of technical efficiency are 77 73 and 75 respectively for groundnut monocrop maize monocrop and maize groundnut farming systems suggesting existence of substantial gains in output and or decreases in cost with available technology and resources the efficiency differences are explained significantly by credit soil fertility social capital distance of the plot from the access road and extension services policy recommendations are drawn from these findings

migrant labor and farm technical efficiency in lesotho abstract the rural economy of lesotho is characterized by dependence on circular labor migration to south african mines and declining agricultural output per capita this paper attempts to improve the understanding of the relationship between circular labor migration and agricultural production by comparing the technical efficiency of farms that supply migrant laborers with that of farms that do not through analysis of the relative technical efficiency of these two farm categories conclusions are drawn concerning the likely impact of changing migration patterns on the agricultural sector

student loans do college students borrow too much or not enough total student loan debt rose to over 800 billion in june 2010 overtaking total credit card debt outstanding for the first time by the time this article sees print the continually updated student loan debt clock will show an accumulated total of roughly 1 trillion borrowing to finance educational expenditures has been increasing more than quadrupling in real dollars since the early 1990s the sheer magnitude of these figures has led to increased public commentary on the level of student borrowing the authors move the discussion of student loans away from anecdote by establishing a framework for considering the use of student loans in the optimal financing of collegiate investments from a financial perspective enrolling in college is equivalent to signing up for a lottery with large expected gains indeed the figures presented here suggest that college is on average a better investment today than it was a generation ago but it is also a lottery with significant probabilities of both larger positive and smaller or even negative returns the authors look to available albeit limited evidence to assess which types of students are likely to be borrowing too much or too little

the ethics of insider trading revisited following manne 1966 insider trading and the stock market new york free press we introduce a distinction between insider trading and market manipulation on the one hand and corporate insiders versus misappropriators on the other hand this gives rise to four types of alleged inside transactions we argue that the literature on insider trading has often targeted inside transactions type ii iii and iv but that these arguments do not necessarily hold for type i transactions we look for consequentionalist as well as non consequentionalist arguments against type i transactions and demonstrate that these are hard to find throughout the article we refer extensively to the economic literature on insider trading in order to overcome a relative divide between the economic legal and philosophical discussion on insider trading

what triggers mortgage default this paper assesses the relative importance of two key drivers of mortgage default negative equity and illiquidity to do so the authors combine loan level mortgage data with detailed credit bureau information about the borrower s broader balance sheet this gives them a direct way to measure illiquid borrowers those with high credit card utilization rates the authors find that both negative equity and illiquidity are significantly associated with mortgage default with comparably sized marginal effects moreover these two factors interact with each other the effect of illiquidity on default generally increases with high combined loan to value ratios cltv though it is significant even for low cltv county level unemployment shocks are also associated with higher default risk though less so than high utilization and strongly interact with cltv in addition having a second mortgage implies significantly higher default risk particularly for borrowers who have a first mortgage ltv approaching 100 percent this abstract was borrowed from another version of this item

frontier production functions and technical efficiency a survey of empirical applications in agricultural economics abstract the modelling and estimation of frontier production functions has been an important area of econometric research during the last two decades forsund lovell and schmidt 1980 and schmidt 1986 present reviews of the concepts and models involved and cite some of the empirical applications which had appeared to their respective times of publication this paper seeks to update the econometric modelling of frontier production functions associated with the estimation of technical efficiency of individual firms a survey of empirical applications in agricultural economics is an important part of the paper

the effects of restrictive south african migrant labor policy on the survival of rural households in southern africa a case study from rural swaziland confronted with high unemployment figures and widespread poverty among the black population one of the priorities of the first postapartheid government of south africa has been to combat poverty among its population by enlarging employment opportunities it is generally accepted that this policy will have a large impact on the number of foreigners called to work in south africa by taking swaziland where data were collected in 1990 as a case study this article investigates the impact on the capacity of swazi rural households to survive if the possibility for international labour migration should become constrained the paper first investigates whether common socioeconomic characteristics can be identified among homesteads whose survival is threatened next it investigates the possibilities and constraints for returning migrants to find employment in swaziland in the final section conclusions are presented on the prospects of swazi rural households to survive without migrant labour to south africa the main finding is that in the short run relatively young households with few working members and a weak economic position in the local rural economy are among the most vulnerable in the long run the survival of most swazi households with migrants in south africa is at stake bibliogr notes ref sum

interest rate pass through mortgage rates household consumption and voluntary deleveraging abstract exploiting variation in the timing of resets of adjustable rate mortgages arms we find that a sizable decline in mortgage payments up to 50 percent induces a significant increase in c

negative equity and foreclosure theory and evidence abstract recent declines in housing prices have focused attention on the relationship between negative housing equity and mortgage default theory implies that negative equity is a necessary condition for default but not a sufficient one this often misunderstood result is clearly illustrated in a dataset of massachusetts homeowners during the early 1990s fewer than 10 percent of borrowers likely to have had negative equity at the end of 1991 experienced a foreclosure during the following three years an econometric model of default estimated on two decades of massachusetts housing data also predicts low default rates for current negative equity borrowers we develop a simple theoretical model to interpret these empirical findings and to assess potential foreclosure reduction policies our results imply that lenders and policymakers face an information problem in trying to help borrowers with negative equity because it is hard to determine which owners really need help in order to stay in their homes

the labor market effects of credit market information we exploit a natural experiment to provide one of the first measurements of the causal effect of negative credit information on employment and earnings we estimate that one additional year of negative credit information reduces employment by 3 percentage points and wage earnings by 1 000 in comparison the decrease in credit is only one fourth as large negative credit information also causes an increase in self employment and a decrease in mobility further evidence suggests this cost of default is inefficiently borne by those most creditworthy among previous defaulters received april 5 2017 editorial decision september 2 2017 by editor andrew karolyi authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

the indefensibility of insider trading the article inside trading revisited has taken the stance that insider trading is neither unethical nor economically inefficient attacking my arguments to the contrary developed in an earlier article the ethics of inside trading journal of business ethics 1989 this article constructs careful arguments and even appeals to adam smith to justify its conclusions in my response to this article i shall clarify my position as well as that of smith to support my counter contention that insider trading is both unethical and inefficient

firm leverage consumer demand and employment losses during the great recession this article argues that firms balance sheets were instrumental in the transmission of consumer demand shocks during the great recession using micro level data from the u s census bureau we find that establishments of more highly levered firms experienced significantly larger employment losses in response to declines in local consumer demand these results are not driven by firms being less productive having expanded too much prior to the great recession or being generally more sensitive to fluctuations in either aggregate employment or house prices likewise at the county level we find that counties with more highly levered firms experienced significantly larger declines in employment in response to local consumer demand shocks accordingly firms balance sheets also matter for aggregate employment our results suggest a possible role for employment policies that target firms directly besides conventional stimulus