Capital Allocation and Productivity in South Europe

Gita Gopinath, Şebnem Kalemli-Özcan, Loukas Karabarbounis and Carolina Villegas-Sanchez ()

The Quarterly Journal of Economics, 2017, vol. 132, issue 4, 1915-1967

Abstract: Starting in the early 1990s, countries in southern Europe experienced low productivity growth alongside declining real interest rates. We use data for manufacturing firms in Spain between 1999 and 2012 to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor, and a significant increase in productivity losses from capital misallocation over time. We develop a model with size-dependent financial frictions that is consistent with important aspects of firms’ behavior in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a significant decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We show that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway.

JEL-codes: D24 E22 F41 O16 O47 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (473)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjx024 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Capital Allocation and Productivity in South Europe (2015)
Working Paper: Capital Allocation and Productivity in South Europe (2015)
Working Paper: Capital Allocation and Productivity in South Europe (2015)
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:oup:qjecon:v:132:y:2017:i:4:p:1915-1967.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().