Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity

José-María Da-Rocha, Marina Tavares and Diego Restuccia
Authors registered in the RePEc Author Service: Jose Maria Da Rocha

No 23339, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What accounts for income per capita and total factor productivity (TFP) differences across countries? We study resource misallocation across heterogeneous production units in a general equilibrium model where establishment productivity and size are affected by policy distortions. We solve the model in closed form and show that policy distortions have a substantial negative effect on establishment productivity growth, average establishment size, and aggregate productivity. Calibrating a distorted benchmark economy to U.S. data, we find that empirically reasonable variations in distortions generate reductions in aggregate TFP of more than 24 percent while slightly increasing concentration in the establishment size distribution. If distortions in addition lower the exit rate of incumbent establishments, as supported by some empirical evidence, the aggregate TFP loss doubles to 48 percent.

JEL-codes: E0 E1 O1 O4 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-dge, nep-eff, nep-mac and nep-tid
Note: DEV EFG PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published as José-María Da-Rocha & Diego Restuccia & Marina M. Tavares, 2023. "Policy distortions and aggregate productivity with endogenous establishment-level productivity," European Economic Review, .

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Related works:
Journal Article: Policy distortions and aggregate productivity with endogenous establishment-level productivity (2023)
Working Paper: Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity (2023)
Working Paper: Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity (2022)
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Working Paper: Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity (2014)
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