Firm Networks in the Great Depression
(with Chris Vickers and Nicolas L. Ziebarth)

First version: 2016
This version:  August 2018

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Abstract:

We develop a model of within-firm financing networks to examine how firms facing
working capital constraints channel resources in response to local shocks and
then test this model in the context of the Great Depression. Using data from the
Census of Manufactures consisting of establishments linked to their parent firms,
we study the sensitivity of establishment-level employment to changes in local
demand and financial conditions in single and multi-plant firms. Employment in
establishments in a multi-plant firm is almost twice as correlated with demand
and financial conditions than that of a single plant establishment. Furthermore,
an establishment is affected by shocks to establishments in other regions making
up the same firm.



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