Abstract
I establish that US public firms holding real estate have persistently lower levels of productivity than non-holders. Rising real estate values, which relax companies' collateral constraints and allow them to expand production, hence reallocate capital and labor towards inefficient firms. The reallocation has negative consequences for aggregate industry productivity. Industries with a stronger relative increase in real estate values see a significant decline in total factor productivity, and the within-industry covariance between firm size and productivity declines. My results suggest a novel channel through which real estate booms affect productivity and have implications for monetary policy.
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