International Sourcing, Trade Credit and Employment in Times of Financial Crisis : The Case of France

The global financial crisis has brought to center stage the international transmission of financial shocks. Similarly, recent global shocks, such as Covid-19 and the war in Ukraine, have shown the vulnerability of production chains relying on foreign suppliers. There has even been suggestions to cut cross border integration of production chains. The cross border transmission of shocks has generally been studied looking separately at trade linkages and financial linkages. The novelty of this paper is that, focusing on the transmission of global shocks during the Great Recession, it jointly analyzes trade and financial linkages in order to assess their effects on the real economy. Exploiting firm-level data on French firms, it uses pre-determined international sourcing and trade credit relations to identify the heterogeneous effects across firms of the global financial crisis on French employment. Estimated effects are significant and quantitatively relevant