A Simple Accounting Framework for the Effect of Resource Misallocation on Aggregate Productivity

Shuhei Aoki ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops a simple accounting framework that measures the effect of resource misallocation on aggregate productivity. This framework is based on a multi-sector general equilibrium model with sector-specific frictions in the form of taxes on sectoral factor inputs. Our framework is flexible for the assumption on preferences or aggregate production functions. Moreover, this framework is consistent with that commonly used in productivity analysis. I apply this framework to measure the extent to which resource misallocation explains the difference in aggregate productivity across developed countries. I find that resource misallocation explains, on average, 17% of the difference in the measured aggregate productivity among developed countries. I also provide the methods to decompose the causes of the misallocation effect.

Keywords: distortions; frictions; productivity; resource allocation (search for similar items in EconPapers)
JEL-codes: O11 O41 O47 E23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-mac
Date: 2008-10-26, Revised 2009-01-05
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http://mpra.ub.uni-muenchen.de/11511/ orginal version
http://mpra.ub.uni-muenchen.de/12506/ revised version

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:11511

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