We study corporate real estate frictions and their effect on firm dynamics and labour demand. We build and simulate a general equilibrium model with heterogeneous firms that predicts the response of firms to a productivity shock in the presence of fixed adjustment costs on real estate. Using a large firm-level database merged with local real estate prices, we then exploit variations in the tax on capital gains to document a causal effect of adjustment costs on firms’ labour demand and derive new results on the causes and implications of firms’ local relocation.
Antonin Bergeaud and Simon Ray
1 January 2021
The Economic Journal 131(633) , pp.70-100, 2021
DOI: 10.1093/ej/ueaa094
https://academic.oup.com/ej/article/131/633/70/5877907
This work is published under POID and the CEP's Growth programme.