 Why does structural change accelerate in recessions? The credit reallocation channelJournal of Financial Economics, 2022, vol. 144, issue 3, 933-952 Abstract: The decline of the U.S. manufacturing share since 1960 has occurred disproportionately during recessions. Using evidence from two natural experiments—the collapse of Lehman Brothers in 2008 and U.S. interstate banking deregulation in the 1980s—I find a role for credit reallocation in explaining this phenomenon by showing that losing access to credit disproportionately hurt manufacturing firms, and that the creation of new credit disproportionately benefited nonmanufacturing firms. These results arise endogenously from a model with technology-driven structural change and fixed costs of establishing new financial relationships. The model suggests an important role for long-run industry trajectories in properly accounting for the costs and benefits of policy interventions in credit markets. Keywords: Structural change; Reallocation; Financial frictions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:3:p:933-952 DOI: 10.1016/j.jfineco.2021.07.009 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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