House prices and misallocation: The impact of the collateral channel on productivity

Sergi Basco, David López-Rodríguez () and Enrique Moral-Benito
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David López-Rodríguez: Banco de España

No 2135, Working Papers from Banco de España

Abstract: This paper empirically investigates the impact of local house price booms on capital misallocation within manufacturing industries. Using the geographic variation provided by the salient Spanish housing boom (2003-2007), we show that manufacturing firms exposed to positive local house price shocks received more credit from banks and their investment grew more intensively when they had a larger proportion of collateralizable real estate assets. We exploit the geographical variation in both house prices and pre-boom urban land supply at municipality level to document that this collateral channel was exacerbated for firms located in urban land-constrained geographical areas where real estate appreciation was larger. The interaction of geographical conditions, that led to heterogeneous housing booms, with the collateral channel on investment resulted in an increasing dispersion of the capital-labor ratio within industries. A simple counterfactual calculation suggests that the misallocation generated by the collateral channel on investment could account for between one-quarter and half of the fall in TFP experienced in the Spanish manufacturing sector over the housing boom.

Keywords: housing boom; misallocation; collateral channel; productivity (search for similar items in EconPapers)
JEL-codes: E22 E44 O16 O47 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2021-09
New Economics Papers: this item is included in nep-eff, nep-fdg, nep-isf, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: House Prices and Misallocation: The Impact of the Collateral Channel on Productivity (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2135

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