NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Capital Allocation and Productivity in South Europe

Gita Gopinath, Sebnem Kalemli-Ozcan, Loukas Karabarbounis, Carolina Villegas-Sanchez

NBER Working Paper No. 21453
Issued in August 2015, Revised in March 2017
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Productivity, Innovation, and Entrepreneurship

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.

download in pdf format
   (792 K)

email paper

A non-technical summary of this paper is available in the November 2015 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21453

Published: Gita Gopinath & Şebnem Kalemli-Özcan & Loukas Karabarbounis & Carolina Villegas-Sanchez, 2017. "Capital Allocation and Productivity in South Europe*," The Quarterly Journal of Economics, vol 132(4), pages 1915-1967. citation courtesy of

Users who downloaded this paper also downloaded* these:
Deming w21473 The Growing Importance of Social Skills in the Labor Market
Kalemli-Ozcan, Sorensen, Villegas-Sanchez, Volosovych, and Yesiltas w21558 How to Construct Nationally Representative Firm Level data from the ORBIS Global Database
Stiglitz w21444 Towards a General Theory of Deep Downturns
Duranton and Kerr w21452 The Logic of Agglomeration
Hsieh and Klenow w13290 Misallocation and Manufacturing TFP in China and India
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us