- Title
- Real Estate Boom and Misallocation of Capital in China
- Author(s)
- Ting Chen Ting Chen (Princeton University)
- Laura Xiaolei Liu Laura Liu ( Guanghua School of Management)
- Wei Xiong Wei Xiong (Princeton University)
- Li-An Zhou Li-An Zhou ( Guanghua School of Management)
- Abstract
- This paper analyzes how real estate shocks affect corporate investment in China. In addition to the widely documented collateral channel, we also uncover two other channels: the speculation channel—rapidly rising commercial land prices induce manufacturing and service firms to buy more commercial land, which is unrelated to their core businesses, and to reduce other investments and innovation activities, and the crowding out channel—in response to rising land prices, banks grant more credit to land-holding firms, crowding out financing to non-land-holding firms. Through both channels, a 100-percentage-point increase in land price leads to 26 percentage points of TFP losses due to misallocation of capital.
- Creation Date
- 2017-12
- Section URL ID
- Paper Number
- 2017-1
- URL
- https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=CICF2018&paper_id=915
- File Function
- Jel
- E44, G21, G31
- Keyword(s)
- China, Land Prices, Collateral Channel, Speculation Channel, Crowding Out Channel, Misallocation of Capital
- Suppress
- false
- Series
- 13