Work in Progress
Housing Wealth and Business Dynamism
I study the impact of housing wealth shocks on business creation. The creation of new employer firms and establishments fell sharply during the Great Recession and hasn’t recovered since. I document that new entrepreneurs are disproportionately more likely to have been recently turned down credit and that the wealth of new start-up founders is more likely to reside in housing compared to the rest of the population. To study the impact of house prices on firm and establishment entry, I propose a new instrumental-variable strategy that exploits a local area’s pre-existing exposure to credit risk using mortgages characteristics. I find that while credit conditions are related to business creation, house price changes do not affect the likelihood of firm or establishment entry.
Productivity and Misallocation in the Caucasus and Central Asia Region (with Benedicte Baduel and Gaelle Pierre)
Our study uses the World Bank Enterprise Survey for the Caucasus, Central Asia (CCA) and Emerging Europe. We find that firms in CCA, initially less productive than other firms in Emerging Europe have partially caught up between 2009 and 2013, before falling behind more recently. However, productivity remains more dispersed in CCA, potentially signalling the presence of greater distortions. Decomposing misallocation arising from capital inputs to misallocation from labour inputs reveals that distortions in the access to capital are more important. We investigate the determinants of higher capital misallocation in the CCA region by comparing access finance, the business regulatory environment and corruption levels with Emerging Europe. Our empirical analysis highlights the importance of greater financial inclusion in the CCA region to achieve a more efficient allocation of resources.