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Agglomeration and Industry Spillover Effects in the Aftermath of a Credit Shock

Author

Listed:
  • José Jorge

    (Faculdade de Economia, Universidade do Porto)

  • Joana Rocha

    (Faculdade de Economia, Universidade do Porto)

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.

Suggested Citation

  • José Jorge & Joana Rocha, 2018. "Agglomeration and Industry Spillover Effects in the Aftermath of a Credit Shock," GEE Papers 0115, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2018.
    • Handle: RePEc:mde:wpaper:0115
    as

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    File URL: https://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_115.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Banking; Financial Crises; Industry Spillovers; Production Externalities; Agglomeration;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G01 - Financial Economics - - General - - - Financial Crises
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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