Working Paper: CEPR ID: DP18028
Authors: Esther Ann Bler; Andreas Moxnes; Karen Helene Ulltveitmoe
Abstract: This paper makes use of a reform that allowed firms to use patents as stand-alone collateral, to estimate the magnitude of collateral constraints and to quantify the aggregate impact of these constraints on misallocation and productivity. Using matched firm-bank data for Norway, we find that bank borrowing increased for firms affected by the reform relative to the control group. We also find an increase in the capital stock, employment and innovation as well as equity funding. We interpret the results through the lens of a model of monopolistic competition with potentially collateral constrained heterogeneous firms. Parameterizing the model using well-identified moments from the reduced form exercise, we find quantitatively large gains in output per worker in the sectors in the economy dominated by constrained (and intangible-intensive) firms. The gains are primarily driven by capital deepening, whereas within-industry misallocation plays a smaller role
Keywords: productivity; patents; credit constraints; misallocation; intangible capital
JEL Codes: D24; G32; L25; L26; O34; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reform allowing patents as collateral (O34) | Increased bank borrowing (G21) |
| Increased bank borrowing (G21) | Increase in capital stock (E22) |
| Increased bank borrowing (G21) | Increase in employment (J23) |
| Increased bank borrowing (G21) | Increase in innovation (O39) |
| Increased bank borrowing (G21) | Increase in equity funding (G24) |
| Removal of collateral constraints (G33) | Increase in labor productivity (O49) |
| Removal of collateral constraints (G33) | Capital deepening (E22) |
| Increased bank borrowing (G21) | Decline in marginal revenue product of capital (MRPK) (E11) |