Cross-Country Differences in Productivity: The Role of Allocation and Selection

Eric Bartelsman, John Haltiwanger and Stefano Scarpetta

American Economic Review, 2013, vol. 103, issue 1, 305-34

Abstract: This paper investigates the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. Exploiting harmonized firm‑level data for a number of countries, we show that there is substantial and systematic cross‑country variation in the within-industry covariance between size and productivity. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and distortions. The model can be readily calibrated so that variations in the distribution of distortions allow matching the observed cross-country moments. We show that the differences in the distortions that account for the size-productivity covariance imply substantial differences in aggregate performance. (JEL D24, L25, O47)

JEL-codes: D24 L25 O47 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.1.305
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Citations: View citations in EconPapers (658)

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Related works:
Working Paper: Cross-Country Differences in Productivity: The Role of Allocation and Selection (2009)
Working Paper: Cross-Country Differences in Productivity: The Role of Allocation and Selection (2009)
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