TY - JOUR
T1 - Business failures, macroeconomic risk and the effect of recessions on long-run growth
T2 - a panel cointegration approach
AU - Santoro, Emiliano
AU - Gaffeo, Edoardo
N1 - JEL classification: G33, E30, C23
PY - 2009
Y1 - 2009
N2 - This paper uses panel data on Italian regions to test two competing theories of long-run productivity dynamics: the opportunity-cost model, according to which productivity-enhancing activities have a comparative advantage during recessions; and the risk-aversion model, which predicts a negative relationship between transitory disturbances and productivity growth. Panel ECM estimates suggest that macroeconomic risk factors impinge on business failures on the same direction both in the short and in the long-run, and that the adjustment to the steady-state relationship is quite slow. Thus, our findings lend support to the risk-aversion theory of productivity growth and indicate that bankruptcy risks play a significant role in the propagation of macroeconomic shocks.
AB - This paper uses panel data on Italian regions to test two competing theories of long-run productivity dynamics: the opportunity-cost model, according to which productivity-enhancing activities have a comparative advantage during recessions; and the risk-aversion model, which predicts a negative relationship between transitory disturbances and productivity growth. Panel ECM estimates suggest that macroeconomic risk factors impinge on business failures on the same direction both in the short and in the long-run, and that the adjustment to the steady-state relationship is quite slow. Thus, our findings lend support to the risk-aversion theory of productivity growth and indicate that bankruptcy risks play a significant role in the propagation of macroeconomic shocks.
KW - Faculty of Social Sciences
KW - bankruptcy
KW - macroeconomic instability
KW - cross-sectional dependence
U2 - 10.1016/j.jeconbus.2009.05.001
DO - 10.1016/j.jeconbus.2009.05.001
M3 - Journal article
SN - 0148-6195
VL - 61
SP - 435
EP - 452
JO - Journal of Economics and Business
JF - Journal of Economics and Business
IS - 6
ER -