Real estate boom and resource misallocation in manufacturing industries: Evidence from China

Yan Wu, Nico Heerink, Linhui Yu*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Resource misallocations between firms have been found to have substantial impacts on the aggregate total factor of productivity. This study examines the impacts of a real estate boom on resource misallocations. We propose that real estate booms drive up demand in real estate-linked industries and that these ‘windfall’ demand spillovers reduce intra-industry competition and increase productivity inequality within industries. Using the difference-in-differences approach, we document that industries that are more linked to the real estate sector experienced increased dispersion in firm productivity in the post-boom era. Real estate booms therefore increase intra-industry resource misallocation.

Original languageEnglish
Article number101400
JournalChina Economic Review
Volume60
DOIs
Publication statusPublished - 1 Apr 2020

Keywords

  • Manufacturing industries
  • Productivity dispersion
  • Real estate boom
  • Resource misallocation

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