Capital Reallocation

37 Pages Posted: 24 Sep 2018 Last revised: 16 Jan 2022

See all articles by Andrea L. Eisfeldt

Andrea L. Eisfeldt

UCLA Anderson School of Management

Yu Shi

UCLA Anderson School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: September 2018


Capital reallocation is procyclical, despite measured productive reallocative opportunities being acyclical, or even countercyclical. This paper reviews the advances in the literature studying the causes and consequences of capital reallocation (or lack thereof). We provide a comprehensive set of capital reallocation stylized facts for the US, and an illustrative model of capital reallocation in equilibrium. We relate capital reallocation to the broader literatures on business cycles with financial frictions, and on resource misallocation and aggregate productivity. Throughout, we provide directions for future research.

Suggested Citation

Eisfeldt, Andrea L. and Shi, Yu, Capital Reallocation (September 2018). NBER Working Paper No. w25085, Available at SSRN:

Andrea L. Eisfeldt (Contact Author)

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://

Yu Shi

UCLA Anderson School of Management ( email )

Los Angeles, CA
United States

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