TY - JOUR
T1 - Capital allocation and productivity in south europe
AU - Gopinath, Gita
AU - Kalemli-Özcan, ŞEbnem
AU - Karabarbounis, Loukas
AU - Villegas-Sanchez, Carolina
N1 - Funding Information:
∗We are grateful to Mark Aguiar, Marios Angeletos, Pol Antràs, Nick Bloom, Kinda Hachem, John Haltiwanger, Chang-Tai Hsieh, Oleg Itskhoki, Pete Klenow, Matteo Maggiori, Virgiliu Midrigan, Ben Moll, Brent Neiman, Ricardo Reis, Diego Restuccia, Richard Rogerson, John Van Reenen, Ivan Werning, five anonymous referees, and numerous participants in seminars and conferences for useful comments and helpful discussions. We thank Serdar Birinci, Laura Blattner, and Kurt Gerard See for excellent research assistance. Villegas-Sanchez thanks Banco Sabadell and AGAUR-Generalitat de Catalunya for financial support. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
Publisher Copyright:
© The Author(s) 2017. Published by Oxford University Press, on behalf of President and Fellows of Harvard College. All rights reserved.
PY - 2017/11/1
Y1 - 2017/11/1
N2 - Starting in the early 1990s, countries in southern Europe experienced low productivity growth alongside declining real interest rates.We use data for manufacturing firms in Spain between 1999 and 2012 to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor, and a significant increase in productivity losses from capital misallocation over time.We develop a model with size-dependent financial frictions that is consistent with important aspects of firms' behavior in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a significant decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We show that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway. JEL Codes: D24, E22, F41, O16, O47.
AB - Starting in the early 1990s, countries in southern Europe experienced low productivity growth alongside declining real interest rates.We use data for manufacturing firms in Spain between 1999 and 2012 to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor, and a significant increase in productivity losses from capital misallocation over time.We develop a model with size-dependent financial frictions that is consistent with important aspects of firms' behavior in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a significant decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We show that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway. JEL Codes: D24, E22, F41, O16, O47.
UR - http://www.scopus.com/inward/record.url?scp=85034802763&partnerID=8YFLogxK
U2 - 10.1093/qje/qjx024
DO - 10.1093/qje/qjx024
M3 - Article
AN - SCOPUS:85034802763
SN - 0033-5533
VL - 132
SP - 1915
EP - 1967
JO - Quarterly Journal of Economics
JF - Quarterly Journal of Economics
IS - 4
ER -