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Real estate boom and resource misallocation in manufacturing industries: Evidence from China

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  • Wu, Yan
  • Heerink, Nico
  • Yu, Linhui

Abstract

Resource misallocations between firms have been found to have substantial impacts on the aggregate total factor of productivity. This study examines the impacts of a real estate boom on resource misallocations. We propose that real estate booms drive up demand in real estate-linked industries and that these ‘windfall’ demand spillovers reduce intra-industry competition and increase productivity inequality within industries. Using the difference-in-differences approach, we document that industries that are more linked to the real estate sector experienced increased dispersion in firm productivity in the post-boom era. Real estate booms therefore increase intra-industry resource misallocation.

Suggested Citation

  • Wu, Yan & Heerink, Nico & Yu, Linhui, 2020. "Real estate boom and resource misallocation in manufacturing industries: Evidence from China," China Economic Review, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:chieco:v:60:y:2020:i:c:s1043951x19301610
    DOI: 10.1016/j.chieco.2019.101400
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    More about this item

    Keywords

    Real estate boom; Resource misallocation; Productivity dispersion; Manufacturing industries;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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