Good Dispersion, Bad Dispersion

Matthias Kehrig and Nicolas Vincent

No 13772, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Dispersion in marginal revenue products of inputs across plants is commonly thought to reflect misallocation, i.e., dispersion is "bad." We document that most dispersion occurs across plants within rather than between firms. In a model of multi-plant firms, we then show that dispersion can be "good": Eliminating frictions increases productivity dispersion and raises overall output. Based on this framework, we argue that in U.S. manufacturing, one-quarter of the total variance of revenue products reflects good dispersion. In contrast, we find that in emerging economies, almost all dispersion is bad and the gains from eliminating distortions are larger than previously thought.

Keywords: Misallocation; Productivity dispersion; Multi-plant firms; Internal capital markets (search for similar items in EconPapers)
JEL-codes: E2 G3 L2 O4 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-mac, nep-ore and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://cepr.org/publications/DP13772 (application/pdf)

Related works:
Working Paper: Good Dispersion, Bad Dispersion (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13772

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13772

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().