Sectoral Productivity Gaps and Aggregate Productivity
Rishabh Sinha ()
The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 1, 37-71
The paper examines the aggregate impact of misallocation measured using gaps in labor productivity across sectors. A simple model of resource allocation is used to quantify the effect in which the gaps arise due to distortions in the form of asymmetrical taxes on hiring labor across sectors. From a development accounting approach, the gains from eliminating distortions are meager and are not consequential in accounting for cross-country variation in incomes. Nevertheless, the gains for some countries rival the growth that they have accumulated over several years. Of the 87 countries in the sample, the changes in distortions over time exert a net negative impact in 45 countries instead of providing tailwinds to growth. Changes in distortions account for just under 5.6% of the total growth when aiding growth. In turn, the output drag represents 3.4% of the actual growth on average for the sub-sample in which distortions yield a net negative effect. The move towards allocative efficiency bears a positive association with the quality of institutions.
Keywords: sectoral productivity gaps; misallocation; labor shares; aggregate productivity; agricultural productivity (search for similar items in EconPapers)
JEL-codes: O11 O47 O50 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
For access to full text, subscription to the journal or payment for the individual article is required.
Working Paper: Sectoral productivity gaps and aggregate productivity (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:21:y:2021:i:1:p:37-71:n:3
Ordering information: This journal article can be ordered from
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().