Housing Booms, Reallocation and Productivity

21 Pages Posted: 5 Jun 2018 Last revised: 21 Nov 2020

See all articles by Sebastian Doerr

Sebastian Doerr

Bank for International Settlements

Date Written: November 2020

Abstract

I establish that US public firms holding real estate have persistently lower levels of productivity than non-holders. Rising real estate values, which relax companies' collateral constraints and allow them to expand production, hence reallocate capital and labor towards inefficient firms. The reallocation has 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.

Keywords: housing boom, collateral, misallocation, productivity, low interest rates

JEL Classification: D22, D24, O16, O47, R3

Suggested Citation

Doerr, Sebastian, Housing Booms, Reallocation and Productivity (November 2020). Available at SSRN: https://ssrn.com/abstract=3184162 or http://dx.doi.org/10.2139/ssrn.3184162

Sebastian Doerr (Contact Author)

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.sdoerr.com

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