Why Does Misallocation Persist
Abhijit Banerjee,Benjamin Moll +1 more
TLDR
The authors distinguish between misallocation on the intensive and the extensive margin, and show that the former should disappear asymptotically under general conditions, while the latter may persist.Abstract:
Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in developing countries. But why does misallocation persists? That is, why don't distortions disappear on their own? This is particularly true for capital misallocation, a point we illustrate in a simple model of capital accumulation with credit constraints. We distinguish between misallocation on the intensive and the extensive margin, and show that the former should disappear asymptotically under general conditions, while the latter may persist. We conclude by discussing possible theories of persistent misallocation.read more
Citations
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Finance and Misallocation: Evidence from Plant-Level Data
Virgiliu Midrigan,Daniel Yi Xu +1 more
TL;DR: In this article, the role of financial frictions in determining total factor productivity (TFP) was evaluated using producer-level data, and a model of establishment dynamics was proposed to reduce TFP through two channels: finance frictions distort entry and technology adoption decisions.
Journal ArticleDOI
Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?
TL;DR: In this paper, the authors develop a highly tractable general equilibrium model in which heterogeneous producers face collateral constraints, and study the effect of financial frictions on capital misallocation and aggregate productivity.
Posted Content
Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters
TL;DR: The authors examined Chinese textile and clothing exports before and after the removal of externally imposed quotas and found that both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity.
Journal ArticleDOI
Misallocation and productivity
Diego Restuccia,Richard Rogerson +1 more
TL;DR: In this article, the authors summarize a recent literature that focuses on the reallocation of factors across heterogeneous production units as an important source of measured TFP differences across countries and conclude that a large portion of differences in output per capita across countries is explained by differences in total factor productivity.
Journal ArticleDOI
Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters
TL;DR: This article examined Chinese textile and clothing exports before and after the elimination of externally imposed export quotas and found that both the surge in export volume and the decline in export prices following quota removal are driven by net entry.
References
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