Grasping Reality on TypePad, by Brad DeLong

My tendency has been to describe recession as periods in which people “lost their jobs.”  However, the JOLTS data suggest that we might more accurately think of recessions as periods it hard to find a new job.

Abstract: Using hand-collected, proprietary data from the lending portfolio of a mid-sized regional bank in the United States, I empirically identify the channels that strengthen the relationship between a small business and its bank. I find that information exchange is only part of the mechanism that creates benefits from strong bank ties. I introduce two novel channels of relationship strength that embody an entrepreneur’s profit appeal for a bank: (1) the depth of cross-selling of non-loan products to the entrepreneur, and (2) the breadth of additional bank business referred through the entrepreneur’s social and professional connections. I show that a borrower’s intensive margin of profit (the depth and profitability of cross-selling) and extensive margin of profit (the quantity and profitability of referrals) lower the cost of borrowing and generate access to more credit. These effects are additive. A one-standard deviation increase in both cross-selling and referral profits is ass