Policy Distortions and Aggregate Productivity with Heterogeneous Plants

Diego Restuccia () and Richard Rogerson ()

Working Papers from University of Toronto, Department of Economics

Abstract: We formulate a version of the growth model in which production is carried out by heterogeneous plants and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across heterogeneous plants may be an important factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured TFP in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.

Keywords: Plant heterogeneity; productivity; policy (search for similar items in EconPapers)
JEL-codes: O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-eff
Date: Written 2007-03-29
View list of references View citations in EconPapers

Downloads: (external link)
http://repec.economics.utoronto.ca/files/tecipa-283.pdf Main Text (application/pdf)

Related works:
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2004)
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2007)
Journal Article: Policy Distortions and Aggregate Productivity with Heterogeneous Plants
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Working Papers from University of Toronto, Department of Economics
Address: 150 St. George Street, Toronto, Ontario
Series data maintained by RePEc Maintainer ().