Joint Econ-Real Estate: Dr Nahim Bin Zahur (Queen’s University)
Endogenous Rigidities and Capital Misallocation: Evidence from Containerships
We investigate how endogenous rigidities inhibit efficient physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue that when agents choose to sign longer contracts in booms when asset markets are thin, they generate a contracting externality which further reduces available capacity and amplifies market thinness. This causes equilibrium contracts to be inefficiently long in booms and impedes the adjustment of these markets to shocks. We develop an equilibrium dynamic matching framework with booms and busts, where agents search and choose for how long to match. We apply the framework to the market for containership leasing contracts, an important part of the supply chain. We quantify misallocation in the decentralized equilibrium and find it is particularly substantial in the transition after an aggregate shock. We also quantify implications for the significant resources devoted to industrial policy in this setting.
Date
Wednesday, 22 April 2026
Time
4pm to 5.30pm
Venue
In-Person Seminar
AS2-05-10
AS2-05-10