Growing body of research looking at U.S. and Chinese real-estate markets suggests long booms may drag on productivity of the economy
By Mike Bird of The WSJ. Excerpt:
"New evidence comes from the Bank for International Settlements, with a paper by economist Sebastian Doerr showing that among U.S. listed companies, those with a higher share of real-estate assets are persistently less productive than their industry peers.
That alone wouldn’t be a problem as such. Some companies are always more productive than others. But rising real-estate prices make it easier for companies that own real estate to access funding because of their growing collateral, so multiyear booms in property prices compound the problem.
Looking at data covering the U.S. from 1993 to 2008, capital was reallocated toward productivity laggards over time, worsening the overall picture for the economy. For every 10% increase in real-estate prices, an industry would record a 0.6% relative decline in total-factor productivity due to the effect of skewed capital allocation."
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