 Quantifying the impact of red tape on investment: A survey data approachBruno Pellegrino and Geoffery Zheng Journal of Financial Economics, 2024, vol. 152, issue C Abstract: An important strand of research in macro-finance investigates which factors impede enterprise investment, and what is their aggregate economic cost. In this paper, we make two contributions to this literature. The first contribution is methodological: we introduce a novel framework to calibrate macroeconomic models with firm-level distortions using enterprise survey micro-data. The core of our innovation is to explicitly model the firms' decisions to report in the survey the distortions they face. Our second contribution is to apply our method across seven countries to characterize the distribution of these distortions and estimate the gross domestic product (GDP) loss induced by distortionary red tape. Our estimates are based on a dynamic general equilibrium model with heterogeneous firms whose capital investment decisions are distorted by red tape. We find that the aggregate cost of red tape varies widely across the countries in our dataset, with an average cost of 0.8% of annual GDP. Our framework opens up a new range of applications for enterprise surveys in macro-financial modeling and policy analysis. Keywords: Bureaucracy; Growth; Investment; Misallocation; Regulations; Survey (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:152:y:2024:i:c:s0304405x23002039 DOI: 10.1016/j.jfineco.2023.103763 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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