1st Finance and Productivity Conference (FINPRO)

The second day started with an engaging discussion on the micro foundations of aggregate productivity. Kalina Manovaon then presented her paper on trade, productivity and misallocation. She highlighted how misallocation of resources acts as a factor that can amplify, dampen or even reverse the gain occurring from trade. Therefore, optimal design of trade policy and structural reforms should take the role of misallocation into account. Looking at policy and crisis transmission, Vahid Saadi presented his research in which he and his coauthors tested the cleansing effects of banking crises in the U.S. The results showed a clear trade-off: Greater levels of bank restructuring are associated with higher destruction in the real sector; however, bank restructuring helps by having a much faster postcrisis recovery in terms of job creation, firm entry and TFP growth. In a wrap-up, the organisers stressed the potential of further merging the productivity and finance literature, as well as the need to further work on new methodological frameworks either to improve or to challenge older ones. With respect to both these two issues, CompNet is already working to provide an improved dataset including fundamental variables as entry/exit of firms, firm age and zombie firms. Find more information on CompNets work here.

Authors: Tommaso Bighelli, Sergio Inferrera, Marco Christophori