Softening Budget Constraints in the US Economy — Presentation Detail — Celebration of Scholars

Instructions

Student presentations must have a faculty sponsor.

Abstracts must include a title and a description of the research, scholarship, or creative work. The description should be 150-225 words in length and constructed in a format or style appropriate for the presenter’s discipline.

The following points should be addressed within the selected format or style for the abstract:

A clear statement of the problem or question you pursued, or the scholarly goal or creative theme achieved in your work.
A brief comment about the significance or uniqueness of the work.
A clear description of the methods used to achieve the purpose or goals for the work.
A statement of the conclusions, results, outcomes, or recommendations, or if the work is still in progress, the results you expect to report at the event.

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Additional Information

More information is available at carthage.edu/celebration-scholars/. The following are members of the Research, Scholarship, and Creativity Committee who are eager to listen to ideas and answer questions:

Jun Wang
Kim Instenes
John Kirk
Nora Nickels
Andrew Pustina
James Ripley

Softening Budget Constraints in the US Economy

Name: Troy Durie
Major: Economics
Hometown: Carlsbad, CA
Faculty Sponsor:
Other Sponsors:
Type of research: SURE

Abstract

This paper explores the concept of softening budget constraints to answer the research question: are softening budget constraints revealing themselves in the United States economy through certain indicators at the firm level and causing a decline in firm dynamism? Softening budget constraints, movement away from competitive markets, have been revealing themselves through certain indicators of lessening financial strength. Additionally, there are signs of a decline in firm dynamism defined as job creation from firm entry and exit based on firm size and by industry. In an era of prolonged low interest rates, there have been rising debt levels, but investment has not increased simultaneously leading to low productivity levels, among other factors. Firm level data reveals low-profitability firms are finding ways to raise their debt levels despite their poor financial strength leading to an inefficient use of this debt. This paper shows firm dynamism based on firm size and by industry small firms are having less of an impact due to low competition, and certain industries being impacted the most. Finally, there will be discussion about some of the ways to alleviate this phenomenon to avoid a large rise of zombie firms in the United States and implications of these policy suggestions.

Poster file