House Prices and Misallocation: The Impact of the Collateral Channel on Productivity

Elías Albagli, Mario Canales, Chad Syverson, Matías Tapia, Sergi Basco, David Lopez-Rodriguez and Enrique Moral-Benito

The Economic Journal, 2025, vol. 135, issue 665, 1-35

Abstract: This paper investigates the impact of local house price booms on capital misallocation within industries. Using the geographical variation provided by the Spanish housing boom (2003–7), we show that firms exposed to positive local house price shocks received more bank credit and their investment grew more when they had a higher proportion of real estate assets. This collateral channel results in an increasing dispersion of the capital-labour ratio within industries. A counterfactual calculation suggests that the capital misallocation generated by this channel can account for around 40% of the total factor productivity decline experienced by the Spanish economy during the housing boom.

Date: 2025
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Working Paper: House prices and misallocation: The impact of the collateral channel on productivity (2021)
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