Trade Development and Political Economy and Moynihan Institute present:

Dan Lu, Professor of Economics, University of Rochester

Do Financial Frictions Explain Chinese Firms’ Saving and Misallocation?

This paper uses Chinese firm-level data to quantify financial frictions in China and asks to what extent they can explain firms’ saving and capital misallocation. An important finding is that financial frictions can explain aggregate firm saving, the co-movement between saving and investment across firms, and around 60 percent of the dispersion in the marginal product of capital (MPK). The endogenous financial frictions, however, generate an opposite MPK-size relationship, which has important implications for total factor productivity losses.

Dan Lu is Assistant Professor of Economics at the University of Rochester. She holds a PhD from the University of Chicago. Her research interests are in international trade, macroeconomics and economic growth.

For information on accessibility, contact Marc Albert, malber01@syr.edu

Sponsored by the Trade Development and Political Economy at  the Moynihan Institute of Global Affair