Endogenous Rigidities and Capital Misallocation: Evidence from Containerships

Maria Garcia-Osipenk, Nicholas Vreugdenhil and Nahim Bin Zahur ()
Additional contact information
Maria Garcia-Osipenk: Arizona State University
Nicholas Vreugdenhil: Arizona State University
Nahim Bin Zahur: Queen's University

No 1536, Working Paper from Economics Department, Queen's University

Abstract: We investigate how endogenous rigidities inhibit physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue when agents sign longer contracts in booms when markets are thin, they generate a contracting externality which further amplifies thinness and impedes the adjustment of markets to shocks. We develop a framework with booms and busts where agents search and choose match duration. Applying the framework to the containership leasing market, we find substantial misallocation from endogenous rigidities, particularly in the transition after a crash. We also quantify implications for designing industrial policy.

Keywords: TBA (search for similar items in EconPapers)
JEL-codes: D22 D23 L14 L22 L91 R40 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2025-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1536.pdf First version 2025 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1536

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().