Natural Resources and Global Misallocation

Alexander Monge-Naranjo, Juan Sanchez and Raul Santaeulalia-Llopis ()

No 2015-13, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We explore the efficiency in the allocation of physical capital and human capital across countries. The observed marginal products can differ across countries because of differences in technology (i.e. production functions) and in distortions (i.e. differences in use of factors) across countries. To identify differences in technology, we use new data and propose a simple method to estimate output shares of natural resources, and thus adjust the estimated marginal products of physical and human capital. With a sample of 79 countries from 1970 to 2005, we find that the world has decidedly moved in the direction of efficiency in the allocation of physical capital, from global output losses around 7% in the 1970s to a still substantial 2% by 2005. This trend is accounted for by domestic capital accumulation, as external flows have had little impact. There is also a large degree of heterogeneity in the net gains across countries. For example, we find larger gains for countries with more interventionist policies. With respect to human capital, we uncover much larger global losses from its misallocation. Indeed, contrary to physical capital, we find that the human capital allocation had worsened over time.

Keywords: Natural Resources; Factor Shares; Misallocation; Investment; Capital Flows; Human Capital (search for similar items in EconPapers)
JEL-codes: O11 O16 O41 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2015-07-07
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Natural Resources and Global Misallocation (2019)
Working Paper: Natural Resources and Global Misallocation (2017)
Working Paper: Natural Resources and Global Misallocation (2015)
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DOI: 10.20955/wp.2015.013

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