The Role of Skilled Labor in Income-based Government-directed Bank Lending
We show that when governments direct banks to lend based on income, the outcomes differ by how closely capital matches the availability of skilled labor in the target population. We document that when skilled labor in the target area is high, additional credit is absorbed in small businesses and future welfare outlays are reduced. In contrast, if skilled labor is relatively low, then capital flows to mortgages and results in housing price growth. Our results point towards the importance of developing skilled labor, alongside credit-provision, for overall development of under-privileged communities.
bank lending, skilled labor
SMU Cox: Finance (Topic)