This paper embeds a long-term financial contract subject to asymmetric information into an industry equilibrium model to explore the quantitative implications of endogenous financing constraints for job reallocation. In the model, firms sign upon entry long-term contracts with banks that finance...

We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less...