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Housing booms, reallocation and productivity

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  • Sebastian Doerr

Abstract

I establish that US public firms holding real estate have persistently lower levels of productivity than non-holders. Rising real estate values relax collateral constraints for companies that own real estate and allow them to expand production. Consequently, an increase in house prices reallocates capital and labor towards inefficient firms, with negative consequences for aggregate industry productivity. Industries with a stronger relative increase in real estate values see a significant decline in total factor productivity, and the within-industry covariance between firm size and productivity declines. My results suggest a novel channel through which real estate booms affect productivity and have implications for monetary policy.

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  • Sebastian Doerr, 2020. "Housing booms, reallocation and productivity," BIS Working Papers 904, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:904
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    Cited by:

    1. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling Interest Rates and Credit Misallocation: Lessons from General Equilibrium," Working Papers 1268, Barcelona Graduate School of Economics.
    2. Vladimir Asriyan & Luc Laeven & Alberto Martín, 2018. "Collateral Booms and Information Depletion," Working Papers 1064, Barcelona Graduate School of Economics.
    3. Doerr, Sebastian & Marin, Dalia & Suverato, Davide & Verdier, Thierry, 2020. "Mis-allocation Within Firms: Internal Finance and International Trade," CEPR Discussion Papers 14478, C.E.P.R. Discussion Papers.
    4. Bednarek, Peter & Dinger, Valeriya & te Kaat, Daniel Marcel & von Westernhagen, Natalja, 2020. "Central bank funding and credit risk-taking," Discussion Papers 36/2020, Deutsche Bundesbank.
    5. Hui Wang & Shu Xu, 2022. "Heterogeneity Effect of Corporate Financialization on Total Factor Productivity," Sustainability, MDPI, vol. 14(11), pages 1-17, May.
    6. Bednarek, Peter & Dinger, Valeriya & Kaat, Daniel Marcel te & Westernhagen, Natalja von, 2021. "To whom do banks channel central bank funds?," Journal of Banking & Finance, Elsevier, vol. 128(C).
    7. Alimov, Behzod, 2019. "Private debt, public debt, and capital misallocation," IWH-CompNet Discussion Papers 7/2019, Halle Institute for Economic Research (IWH).
    8. Bank for International Settlements, 2022. "Private sector debt and financial stability," CGFS Papers, Bank for International Settlements, number 67.
    9. Peter Bednarek & Daniel Marcel te Kaat & Chang Ma & Alessandro Rebucci, 2021. "Capital Flows, Real Estate, and Local Cycles:Evidence from German Cities, Banks, and Firms," Review of Financial Studies, Society for Financial Studies, vol. 34(10), pages 5077-5134.
    10. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling interest rates and credit reallocation: Lessons from general equilibrium," Economics Working Papers 1784, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2022.
    11. Sebastian Doerr & Dalia Marin & Davide Suverato & Thierry Verdier, 2022. "Mis-allocation within firms: internal finance and international trade," BIS Working Papers 1030, Bank for International Settlements.

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    More about this item

    Keywords

    housing boom; collateral; misallocation; productivity; low interest rates;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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