Housing Booms, Reallocation and Productivity
21 Pages Posted: 5 Jun 2018 Last revised: 21 Nov 2020
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: Suggested Citation