Labor unemployment insurance and bank loans

I investigate the influence of unemployment insurance (UI) benefits on cost bank loans by exploiting changes in state laws as a source variation labor costs. The evidence shows that is significantly lower for firms headquartered states with more generous UI programs. relation between and pronounced face higher unionization rates, are intensive, or have layoff propensity. These results robust to controlling loan characteristics, macroeconomic conditions, borrower characteristics using fixed effect regressions. also find further causal through difference-in-differences (DID) approach. Overall, suggest credit market evaluates workers' costs while approving pricing contracts.