Identifying the Real Effects of Zombie Lending

22 Pages Posted: 20 May 2020

See all articles by Fabiano Schivardi

Fabiano Schivardi

Luiss Guido Carli - Department of Economics and Finance; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR)

Enrico Sette

Bank of Italy

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Date Written: May 2020

Abstract

Several papers study the real effects of zombie lending based on regressions showing that the performance of healthy firms relative to zombie firms deteriorates as the fraction of zombie firms increases. This finding is interpreted as evidence of a negative spillover from zombies to healthy firms. We argue that this commonly used approach faces a serious identification problem. Under general conditions on the distribution of firm performance, the deterioration of the relative performance of healthy firms is a mechanical consequence of an increase in the fraction of zombies and cannot be interpreted as evidence of negative spillovers.

Keywords: capital misallocation, zombie lending

JEL Classification: E44, G21

Suggested Citation

Schivardi, Fabiano and Sette, Enrico and Tabellini, Guido, Identifying the Real Effects of Zombie Lending (May 2020). CEPR Discussion Paper No. DP14758, Available at SSRN: https://ssrn.com/abstract=3603990

Fabiano Schivardi (Contact Author)

Luiss Guido Carli - Department of Economics and Finance ( email )

Viale Romania 32
Rome, Rome 00187
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Enrico Sette

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Guido Tabellini

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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