Firm networks in the great depression

We study how firms facing working capital constraints allocate resources across their constituent establishments in response to local shocks in the context of the Great Depression. Using data from the Census of Manufactures consisting of establishments linked to their parent firms, we find the employment in establishments in a multi-plant firm is more correlated with local retail sales than that of single plant establishments. Furthermore, in a long difference specification, we show that establishments are affected by shocks to the local credit supply of the other establishments that make up the same firm. These results show the important role of firms in the geographic propagation and amplification of local shocks.