<p>This is a massive area of research, revived recently under the title of "<a href="https://scholar.google.com/scholar?q=capital+misallocation" rel="nofollow noreferrer">capital misallocation</a>".</p>

<p>Some reason why capital do not fully adjust:</p>

<ul>
<li><p>grow in <a href="https://www.federalreserve.gov/econresdata/feds/2017/files/2017009pap.pdf" rel="nofollow noreferrer">intangible capital-intensive</a> sectors (which require more internal financing than other sectors) + low interest rates.</p></li>
<li><p><a href="http://www.nber.org/papers/w23129" rel="nofollow noreferrer">quadratic adjustment costs</a> on investment.</p></li>
<li><p><a href="https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=RESConf2016&amp;paper_id=437" rel="nofollow noreferrer">financial frictions</a> lowers access to credit to small yet highly productive firms.</p></li>
<li><p><a href="https://www.jstor.org/stable/2698185?seq=1#page_scan_tab_contents" rel="nofollow noreferrer">industry-specific</a> physical and human capital.</p></li>
</ul>

<p>The are many more papers studying financial frictions and related aspects of the financial market, showing that the role of finance is very important.</p>

CC BY-SA 3.0
2017-08-16T08:05:24.483Z
2017-08-16T08:05:24.483Z
luchonacho
<p>What are some restrictions to the competitive restoration of proportionality across industries in regards to capital mobility? What is generally impeding the free flow of capital from less profitable sectors into those with higher profitable potentiality and from eroding larger firms market share? Also does the integration of finance capital and industrial capital play any role in this? Lastly, why isn't new capital entering these markets and averaging out profit rates?</p>

<industrial-organisation><profits><capital-mobility>
Capital mobility across industries and equalization of profit rates
david
# Capital mobility across industries and equalization of profit rates

(Asked by: username_0 on 2017-08-14)

What are some restrictions to the competitive restoration of proportionality across industries in regards to capital mobility? What is generally impeding the free flow of capital from less profitable sectors into those with higher profitable potentiality and from eroding larger firms market share? Also does the integration of finance capital and industrial capital play any role in this? Lastly, why isn't new capital entering these markets and averaging out profit rates?

**Tags:** industrial-organisation, profits, capital-mobility

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## 1 answers

### Answer by username_1 on 2017-08-16. Score: 1 | Accepted answer

This is a massive area of research, revived recently under the title of "[capital misallocation](https://scholar.google.com/scholar?q=capital+misallocation)".

Some reason why capital do not fully adjust:

* grow in [intangible capital-intensive](https://www.federalreserve.gov/econresdata/feds/2017/files/2017009pap.pdf) sectors (which require more internal financing than other sectors) + low interest rates.
* [quadratic adjustment costs](http://www.nber.org/papers/w23129) on investment.
* [financial frictions](https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=RESConf2016&paper_id=437) lowers access to credit to small yet highly productive firms.
* [industry-specific](https://www.jstor.org/stable/2698185?seq=1#page_scan_tab_contents) physical and human capital.

The are many more papers studying financial frictions and related aspects of the financial market, showing that the role of finance is very important.


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