Capital Specificity, the Distribution of Marginal Products and Aggregate Productivity

Andrea Lanteri and Pamela Medina

No 1107, Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: This paper studies the role of capital specificity and investment irreversibility on the distribution of marginal products of capital and aggregate TFP. We use a methodology new to the misallocation literature, based on the study of “mobility” across quantiles of a distribution. In a panel of Peruvian firms, we show that persistent dispersion in marginal products is explained to an important extent by the persistence of low marginal products. That is, by unproductive firms that take a long time to downsize. Using a quantitative general-equilibrium model of firm dynamics with idiosyncratic shocks, calibrated to match key features of our data, we argue that the persistence of low marginal products suggests that irreversibility frictions are large. Moreover, it is inconsistent with theories of misallocation based only on financing constraints.

Keywords: Economía; Investigación socioeconómica; Productividad (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:dbl:dblwop:1107

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