Despite their importance, the discussion of spillover effects in empirical research often misses the rigor dedicated to endogeneity concerns. We analyze a broad set of workhorse models of firm interactions and show that spillovers naturally arise in many corporate finance settings. This has important implications for the estimation of treatment effects: i) even with random treatment, spillovers lead to a complicated bias, ii) fixed effects can exacerbate the spillover-induced bias. We propose simple diagnostic tools for empirical researchers and illustrate our guidance in an application.
|Place of Publication||London|
|Publisher||Centre for Economic Policy Research|
|Number of pages||58|
|Publication status||Published - Dec 2020|
|Series||Centre for Economic Policy Research. Discussion Papers|
- Direct vs. indirect effects
- Credit supply