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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
Joana Rocha: Faculdade de Economia, Universidade do Porto

No 115, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

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: G21 D22 G01 D62 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-sbm and nep-ure
Date: 2018-11, Revised 2018-11
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http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_115.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0115

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