Survive another day: using changes in the composition of investments to measure the cost of credit constraints
Luis Garicano and Claudia Steinwender
We introduce a novel empirical strategy to measure the size of credit shocks. Theoretically, we show that credit shocks reduce the value of long-term relative to short-term investments. Empirically, we can therefore compare the reduction of long-term relative to short-term investments within firms, allowing for firm-times-year fixed effects. Using Spanish firmlevel data, we estimate the credit crunch to be equivalent to an additional tax rate of around 11% on the longest-lived capital. To pin down credit constraints as the underlying cause, we apply triple-differences strategies using foreign ownership or precrisis debt maturity. ? 2016 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
1 December 2016
The Review of Economics and Statistics 98(5) , pp.913-924, 2016
http://eprints.lse.ac.uk/65862/
This Journal article is published under the centre's Growth programme.