Real estate boom and resource misallocation in manufacturing industries: Evidence from China
Wu, Yan ; Heerink, Nico ; Yu, Linhui - \ 2020
China Economic Review 60 (2020). - ISSN 1043-951X
Manufacturing industries - Productivity dispersion - Real estate boom - Resource misallocation
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.