Firm Networks in the Great Depression

We study how firms allocate resources across their constituent establishments in response to local economic shocks in the context of the Great Depression. Using establishment-level data from the Census of Manufactures, we find that establishments in multi-plant firms are affected by local shocks in the regions in which the other establishments comprising the firm are located. In particular, establishment employment is positively affected by positive shocks to the local supply of credit to other establishments that make up the firm. Our results show the important role of firms in the geographic propagation of local economic shocks.