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Reallocation, Competition, and Productivity: Evidence from a Financial Liberalization Episode

Liliana Varela ()

Review of Economic Studies, 2018, vol. 85, issue 2, 1279-1313

Abstract: This article studies the impact of distortions in the access to international capital markets on competition and productivity. I show that a reduction in these distortions leads to an increase in aggregate productivity through two different channels. First, firms that were previously credit constrained respond to better financing terms by increasing their investment in technology, a reallocation effect. Secondly, non-constrained firms also expand their investment in technology because of increased competition, a pro-competitive effect. I provide evidence for these two channels using firm-level census data from the deregulation of international financial flows in Hungary.

Keywords: TFP; Firm-level distortions; Market competition; Financial liberalization; Capital controls (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Reallocation, Competition and Productivity: Evidence from a Financial Liberalization Episode (2015) Downloads
Working Paper: Reallocation, Competition and Productivity: Evidence from a Financial Liberalization Episode (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:85:y:2018:i:2:p:1279-1313.

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