Survive another day: using changes in the composition of investments to measure the cost of credit constraints
Garicano, L.
& Steinwender, C.
(2016).
Survive another day: using changes in the composition of investments to measure the cost of credit constraints.
Review of Economics and Statistics,
98(5), 913-924.
https://doi.org/10.1162/REST_a_00566
& Steinwender, C.
(2016).
Survive another day: using changes in the composition of investments to measure the cost of credit constraints.
Review of Economics and Statistics,
98(5), 913-924.
https://doi.org/10.1162/REST_a_00566
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 firm level 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 pre-crisis debt maturity.
Explore Further
- D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
- E22 - Capital; Investment (including Inventories); Capacity
- E32 - Business Fluctuations; Cycles
- G31 - Capital Budgeting; Fixed Investment and Inventory Studies
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Garicano, L. & Steinwender, C.
(2015).
Replication data for: “Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints”.
[Dataset]. Harvard Dataverse.
https://doi.org/10.7910/dvn/fmejrm