Misallocation, Establishment Size, and Productivity | Academic Article individual record
abstract

We consider a model of heterogeneous production units with endogenous entry and productivity investment to assess the quantitative impact of policy distortions: when the productivity elasticity of distortions increases from 0.09 in the United States to 0.5 in India, aggregate output and average establishment size fall by 53 and 86 percent (37 and 0 percent in the standard factor misallocation model). Entry productivity and factor misallocation contribute equally to the reduction in output, whereas lower life-cycle productivity growth is fully offset by increased entry and reduced productivity dispersion. Establishment size differences are consistent with evidence from a new comprehensive cross-country dataset. (JEL D92, E23, E24, L25, L60, O10, O14)

authors
publication outlet

American Economic Journal: Macroeconomics

author list (cited authors)
Bento, P., & Restuccia, D
publication date
2017
keywords
  • Establishment Size
  • Idiosyncratic Distortions.
  • Misallocation
  • Investment
  • Productivity
altmetric score

18.0

citation count

68

identifier
103842SE
Digital Object Identifier (DOI)
start page
267
end page
303
volume
9
issue
3
UN Sustainable Development Goals