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Aggregate productivity, leased capital and market participation

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  • You, Linqing

Abstract

The operating lease accounts for a large fraction of firms’ total productive physical capital and it is important for firms’ investment and real production. Empirical facts show that the aggregate productivity measure is an overestimation without considering leased capital (Hu et al., 2024). In this paper, I explore the effect of leased capital on aggregate productivity in general equilibrium. Leased capital can directly alleviate collateral constraints and mitigate capital misallocation, boosting aggregate productivity (Hu et al., 2020). However, leasing can lead to an increased demand for labor, driving up wages, which results in a decrease in the number of producing firms and their optimal capital scale. These indirect effects can lead to a decline in aggregate productivity. Quantitatively, the indirect effects dominate the direct effects with counterfactual leasing-improved policy, and thus aggregate productivity with leased capital decreases.

Suggested Citation

  • You, Linqing, 2024. "Aggregate productivity, leased capital and market participation," Journal of Corporate Finance, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:corfin:v:87:y:2024:i:c:s092911992400083x
    DOI: 10.1016/j.jcorpfin.2024.102621
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    Keywords

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    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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