Globally Consistent Creditor Protection, Reallocation, and Productivity
102 Pages Posted: 29 Oct 2020 Last revised: 21 Nov 2024
Date Written: October 19, 2020
Abstract
This paper documents across-firm reallocation as an important channel through which creditor rights affect real outcomes. I exploit the staggered adoption of an international convention that provides globally consistent strong creditor protection for aircraft finance. After this reform, country-level productivity increases by 12%, driven mostly by across-firm reallocation. Productive airlines borrow more, expand, and adopt new technology at the expense of unproductive ones. Such reallocation is facilitated by (i) easier and quicker asset redeployment; and (ii) the influx of foreign financiers offering innovative financial products, which improves credit allocative efficiency, allowing productive airlines to borrow and invest more.
Keywords: Creditor Rights, Allocative Effciency, Reallocation, Productivity and Growth, Law and Finance
JEL Classification: D22, D24, G32, G33, K12, K33, L11
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