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Using a unique matched bank-employer-employee administrative dataset for Italy,
we construct an exogenous firm-level measure of exposure to the credit shock during the
Global Financial Crisis, based on pre-crisis firm-bank relationships. We track outcomes
for firms and workers up to 11 years after the shock. More exposed firms experience
persistently lower growth in bank credit, which in turn leads to weaker investment and
employment dynamics due to capital-labor complementarity. More capital-intensive
firms and their workers suffer the most. Displaced workers reallocate primarily to less
capital-intensive firms, incurring persistent losses in labor earnings.
