Well-intended policies

摘要: Market failures provide a rationale for policy intervention. But policies are often hard to alter once in place. We argue that this inertia can result well-intended having sizable negative long-run effects on aggregate output and productivity. In our theory, financial frictions providing subsidized credit productive entrepreneurs alleviate the constraints they face. short run, such targeted subsidies have intended effect raise long however, individual productivities mean-revert while individual-specific remain fixed. As result, entry into entrepreneurship is distorted: The prop up were formerly but now unproductive, impeding of newly individuals. Therefore productivity depressed. Our theory provides an explanation two empirical observations developing countries: idiosyncratic distortions disproportionately affect establishments, temporary growth miracles followed by failures.