Agglomeration and Industry Spillover Effects in the Aftermath of a Credit Shock

José Jorge () and Joana Rocha ()
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José Jorge: Faculdade de Economia, Universidade do Porto, cef.up
Joana Rocha: Faculdade de Economia, Universidade do Porto

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper provides empirical evidence showing that industries with intense strategic complementarities exhibit stronger sensitivity to economic shocks. The Portuguese credit crunch of 2009 represents a negative shock for nonfinancial firms, which has created negative spillover effects among firms. Corporate investment declines significantly in industries with strong strategic complementarities following the onset of the crisis, controlling for firm fixed effects, time varying measures of financial constraints and investment opportunities. Consistent with a causal effect, the decline is greatest for firms in industries with strong strategic complementarities. To address sample selection concerns we consider several sample splits and apply a matching approach to find the best counterfactual, and confirm similar results.

Keywords: Banking; Financial Crises; Industry Spillovers; Production Externalities; Agglomeration (search for similar items in EconPapers)
JEL-codes: C23 D22 D62 G01 G21 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2018-02
New Economics Papers: this item is included in nep-sbm and nep-ure
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