Jacopo Ponticelli

Credit Allocation Under Economic Stimulus: Evidence from China

We study credit allocation across firms in developing economies with severe financial frictions. We illustrate the effects of financial frictions on credit allocation in a dynamic setting, and find that credit expansions during recessions can slow down or even reverse the gradual reallocation of resources from low to high productivity firms. We test the model empirically using China’s economic stimulus plan introduced in 2008, which triggered an unprecedented policy-driven credit expansion. Using private firm-level data we show that new credit was allocated disproportionately more towards state-owned, low-productivity firms than to privately-owned, high-productivity firms, with significant impact on the real economy.

Caught with the Hand in the Cookie Jar: Firm Growth and Labor Reallocation after Exposure of Corrupt Practices

Corrupt practices in the assignment of government contracts are largely diffused and can generate misallocation of resources across firms. We study how disclosure of such practices affects firm growth and labor reallocation. We exploit exogenous variation in the exposure of illegally favored firms using random municipality audits by a large anti-corruption government program in Brazil. Firms exposed by the auditing program experience a decline in employment growth relative to their peers. We document that young, less-educated workers that do not occupy a managerial position have higher probability to leave the exposed firms. Released workers tend to reallocate to firms not found to be illegally favored. Within-sector firm size dispersion decreases in audited municipalities with respect to non-audited ones. Our evidence suggests that random auditing programs can reduce labor misallocation across firms.

Capital Allocation Across Regions, Sectors and Firms: Evidence from a Commodity Boom in Brazil

Several scholars argue that high agricultural productivity growth can retard industrial development as it draws resources towards the comparative advantage sector, agriculture. However, agricultural productivity growth can increase savings and the supply of capital, generating an expansion of the capital-intensive sector, manufacturing. We highlight this mechanism in a simple model and test its predictions in the context of a large and exogenous increase in agricultural productivity due to the adoption of genetically engineered soy in Brazil. We find that agricultural productivity growth generated an increase in savings, but these were not reinvested locally. Instead, there were capital outflows from rural areas. Capital reallocated towards urban regions, where it was invested in the industrial and service sectors. The degree of financial integration affected the speed of structural transformation. Regions that were more financially integrated with soy-producing areas through bank branch networks experienced faster growth in non-agricultural lending. Within these regions, firms with pre-existing relationships with banks receiving funds from the soy area experienced faster growth in borrowing and employment.