Misallocation in Firm Production: A Nonparametric Analysis Using Procurement Lotteries

Paul Carrillo, Dave Donaldson, Dina Pomeranz and Monica Singhal

No 31311, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops new tools to study misallocation that do not require assumptions about the heterogeneity of firms’ technologies. We show how features of the distribution of marginal products can be identified from exogenous variation in firms’ input use and used both to test for misallocation and to quantify its resulting welfare losses. We apply this method to a setting with exogenous demand shocks from public procurement contracts for construction services in Ecuador. Our results reject the null of efficiency but our estimates of the resulting welfare losses from misallocation are small.

JEL-codes: D24 D61 H57 L10 O40 (search for similar items in EconPapers)
Date: 2023-06
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Working Paper: Misallocation in Firm Production: A Nonparametric Analysis Using Procurement Lotteries (2023)
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