Working Paper: CEPR ID: DP13972
Authors: Jonathan Haskel; Carol Corrado; Cecilia Jona Lasinio
Abstract: How has capital reallocation affected productivity growth since the financial cri-sis? For example, have low interest rates disrupted the reallocation process? Thispaper calculates the effect on productivity growth of capital reallocation betweenindustries. It uses an accounting framework, due to Jorgenson and his co-authors,that computes the contribution of capital services to productivity growth relativeto one where rates of return are equalised between sectors: if capital persists in thelow return sectors, the reallocation measure falls. Using data from 11 countries (themajor EU economies plus the US), in 1997-2013, we nd: (a) the contribution ofcapital reallocation to productivity growth is lower in most economies after thanbefore the financial crisis, notably in Mediterranean countries; (b) more capital real-location is correlated with lower real interest rates, contrary to the hypothesis thatlow real interest rates have hurt capital reallocation; (c) controlling for shocks, lowercapital reallocation is associated with lower optimism, and weaker financial systems.
Keywords: Productivity growth; Capital reallocation; Intangible capital
JEL Codes: O47; E22; E01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial crisis (G01) | lower contribution of capital reallocation to productivity growth (O49) |
| higher capital reallocation (D25) | lower real interest rates (E43) |
| lower real interest rates (E43) | higher capital reallocation (D25) |
| lower capital reallocation (G31) | lower economic optimism (E66) |
| lower capital reallocation (G31) | weaker financial systems (P34) |
| lower economic optimism and weaker financial systems (F65) | lower capital reallocation (G31) |