Hiroyuki Nemoto

How can policies encourage adoption of a new technology under financial frictions? This paper answers the question through the lens of a Ramsey problem, using a standard growth model with borrowing constraints and endogenous adoption decisions. I study the transition following the arrival of a new technology. Calibrated to a typical developing country, the model shows that financial frictions limit adoption, reducing welfare gains from the new technology by nearly half.  To substantially increase welfare gains, the optimal policy requires different tax rates by technology that raise the relative profitability of adoption. Adjusting a common tax rate yields little additional gain relative to the baseline.

Does improving the access to financing lead to more productive firms? We study the implications of complementarity on productivity under financial frictions. We develop a model of heterogeneous producers facing collateral constraints and a technology adoption decision. Producers’ choices are connected through the final good market, creating complementarity in adoption. We find that more complementarity between producers amplifies the effects of financial frictions through more sensitive adoption. In a high-complementarity economy, adopters increase up to 219% relative to the self-financing economy. Misallocation accounts for 84% of the TFP loss when complementarity is low, but only 15% when it is high, where the loss mostly reflects reduced adoption. Our results imply that economies with high complementarity benefit more from financial liberalizations, incentivizing the adoption of more productive technologies.

This paper empirically examines whether credit availability affects land price by using Japanese city-level data during the bubble period of 1980 to 1990. The number of branches of local banks is used as a proxy for credit availability to control for the reverse causality. We assume that the number of branches is not affected by asset price in line with the administrative guidance regarding branch-related restrictions provided by the Ministry of Finance. The main result is that credit availability influences land price directly and positively. Most importantly, the analysis yields qualitatively similar results even when using the subsample of rural areas, where land prices are typically low.