Firm dynamics, financing and aggregate productivity
Abstract/Contents
- Abstract
- (Chapter 1. Leverage and Productivity Financial frictions can reduce aggregate productivity) in particular when firms with high productivity cannot borrow against their earnings. This paper investigates the quantitative importance of this form of borrowing constraint using a large panel of firms in Japan. The firms are young and unlisted, precisely the firms for which credit frictions are expected to be the most severe. In this data, I find that firm leverage (asset-to-equity ratio) and firm output-to-capital ratios rise with firm productivity, both over time in a firm and across firms of the same age and cohort. I use these facts in indirect inference to estimate a standard general equilibrium model where financial frictions arise from the limited pledgeability of earnings and assets. In this model more financially constrained firms have higher output-to-capital ratios. The model matches the two facts the best when firms can pledge the equivalent of over half of their one-year-ahead earnings and one-fifth of their assets. Compared to the common assumption that firms can pledge only assets, aggregate productivity loss due to financing frictions is one-third smaller when earnings are also pledgeable to the degree seen in Japan. (Chapter 2. Income fluctuation problem) This paper studies the income fluctuation problem without imposing bounds on utility, assets, income or consumption. We prove that the Coleman operator is a contraction mapping over the natural class of candidate consumption policies when endowed with a metric that evaluates consumption differences in terms of marginal utility. We show that this metric is complete, and that the fixed point of the operator coincides with the unique optimal policy. As a consequence, even in this unbounded setting, policy function iteration always converges to the optimal policy at a geometric rate. (Chapter 3. Errorbounds) This paper derives explicit error bounds for numerical policies of $\eta$-concave stochastic dynamic programming problems, without assuming the optimal policy is interior. We demonstrate the usefulness of our error bound by using it to pinpoint the states at which the borrowing constraint binds in a widely used income fluctuation problem with standard calibrations and a firm production problem with financial constraints.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2015 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Li, Huiyu |
|---|---|
| Associated with | Stanford University, Department of Economics. |
| Primary advisor | Klenow, Peter J |
| Thesis advisor | Klenow, Peter J |
| Thesis advisor | Bloom, Nick, 1973- |
| Thesis advisor | Hoshi, Takeo |
| Thesis advisor | Schneider, Martin, (Professor of economics) |
| Advisor | Bloom, Nick, 1973- |
| Advisor | Hoshi, Takeo |
| Advisor | Schneider, Martin, (Professor of economics) |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Huiyu Li. |
|---|---|
| Note | Submitted to the Department of Economics. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2015. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2015 by Huiyu Li
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
Also listed in
Loading usage metrics...