Discussion paper

DP14758 Identifying the Real Effects of Zombie Lending

Several papers study the real effects of zombie lending based on
regressions showing that the performance of healthy firms relative to zombie
firms deteriorates as the fraction of zombie firms increases. This finding
is interpreted as evidence of a negative spillover from zombies to healthy
firms. We argue that this commonly used approach faces a serious
identification problem. Under general conditions on the distribution of firm
performance, the deterioration of the relative performance of healthy firms
is a mechanical consequence of an increase in the fraction of zombies and
cannot be interpreted as evidence of negative spillovers.


Schivardi, F, E Sette and G Tabellini (2020), ‘DP14758 Identifying the Real Effects of Zombie Lending‘, CEPR Discussion Paper No. 14758. CEPR Press, Paris & London. https://cepr.org/publications/dp14758