How to use natural experiments to estimate misallocation
By: Sraer, David and Thesmar,David
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Material type: 
BookPublisher: The American Economic Review Description: 113(4), Apr, 2023: p.906-938.
In:
The American Economic ReviewSummary: We propose a method to estimate the effect of firm policies (e.g., bankruptcy laws) on allocative efficiency using (quasi-)experimental evidence. Our approach takes general equilibrium effects into account and requires neither a structural estimation nor a precise assumption on how the experiment affects firms. Our aggregation formula relies on treatment effects of the policy on the distribution of output-to-capital ratios, which are easily estimated. We show this method is valid for a large class of commonly used models in macrofinance. We apply it to the French banking deregulation episode of the mid-1980s and find an increase in aggregate TFP of 5 percent.- Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 113(4), Apr, 2023: p.906-938 | Available | AR128916 |
We propose a method to estimate the effect of firm policies (e.g., bankruptcy laws) on allocative efficiency using (quasi-)experimental evidence. Our approach takes general equilibrium effects into account and requires neither a structural estimation nor a precise assumption on how the experiment affects firms. Our aggregation formula relies on treatment effects of the policy on the distribution of output-to-capital ratios, which are easily estimated. We show this method is valid for a large class of commonly used models in macrofinance. We apply it to the French banking deregulation episode of the mid-1980s and find an increase in aggregate TFP of 5 percent.- Reproduced
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