IMF Working Papers

Sectoral Booms and Misallocation of Managerial Talent: Evidence from the Chinese Real Estate Boom

By Yu Shi

September 28, 2018

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Format: Chicago

Yu Shi. Sectoral Booms and Misallocation of Managerial Talent: Evidence from the Chinese Real Estate Boom, (USA: International Monetary Fund, 2018) accessed November 21, 2024

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Summary

This paper identifies a new mechanism leading to inefficiency in capital reallocation at the extensive margin when an economy experiences a sectoral boom. I argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent. Using comprehensive firm-level data from China, I first provide evidence that more productive firms reallocate capital to the booming real estate sector, and demonstrate that the pattern is likely driven by fewer financial constraints on these firms. I then use a structural estimation to verify the talent misallocation. Finally, I calibrate a dynamic model and find that the without the misallocation, the TFP growth in the manufacturing sector would have improved by 0.5% per year.

Subject: Comparative advantage, Economic sectors, Housing, Housing prices, International trade, Land prices, Manufacturing, National accounts, Prices

Keywords: A-class company, Aggregate productivity, Capital reallocation, Comparative advantage, Credit constraint, Debt dependence, Financial market, Financing ability, Firm-specific performance measurement, Housing, Housing prices, Land prices, Manufacturing, Manufacturing business, Manufacturing firm, Misallocation, Property development firm data, Real estate boom, Registration information, WP

Publication Details

  • Pages:

    87

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/221

  • Stock No:

    WPIEA2018221

  • ISBN:

    9781484378465

  • ISSN:

    1018-5941