Misallocation and financial frictions: The role of long-term financing

We analyze misallocation of capital in a model where firms face different types financial constraints. Private borrow subject to collateral constraint while public issue long-term bonds default risk. estimate our using employment and statistics reflecting the overall distribution conjunction with firm-level data on credit spreads that we target for set firms. In model, productive private firm is unable grow fast if its limited. But can overcome constraints because it faces low borrowing costs debt market, relationship also verify data. As result, frictions disrupt investment behavior greater degree generate larger resources relative