Description

This paper estimates the impact of a credit crunch on output and productivity growth by disentangling two complementary channels: technical and allocative efficiency. Starting from the census of Chilean firms and exploiting a large-scale natural experiment during the 2008-09 crisis, I show that a sharp contraction in credit supply had persistent real effects, as the output of more affected firms did not catch up with that of less affected firms. A negative but moderate effect on firm-level productivity helps to explain this persistence. Also, the dispersion of the marginal productivity of capital increases within more affected firms. In the aggregate, productivity growth explains around a third of the impact of the credit crunch on output growth in the medium run. In turn, allocative efficiency explains twice as much as technical efficiency of productivity growth.