Working Paper: CEPR ID: DP14758
Authors: Fabiano Schivardi; Enrico Sette; Guido Tabellini
Abstract: Several papers study the real effects of zombie lending based onregressions showing that the performance of healthy firms relative to zombiefirms deteriorates as the fraction of zombie firms increases. This findingis interpreted as evidence of a negative spillover from zombies to healthyfirms. We argue that this commonly used approach faces a seriousidentification problem. Under general conditions on the distribution of firmperformance, the deterioration of the relative performance of healthy firmsis a mechanical consequence of an increase in the fraction of zombies andcannot be interpreted as evidence of negative spillovers.
Keywords: zombie lending; capital misallocation
JEL Codes: E44; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increase in the fraction of zombies (E19) | Deterioration of the relative performance of healthy firms (L25) |
| Common shocks (E32) | Performance of non-zombie firms and share of zombie firms (L25) |
| Deterioration of the relative performance of healthy firms (L25) | Negative spillovers from zombie firms (D22) |
| Identification problem (C62) | Flawed empirical framework in literature (C91) |
| Exogenous variation in share of zombies (E19) | Reliable causal inferences (C90) |