The Drivers and Consequences of Resource Misallocation: Exploiting Variation across Mexican Industries and States

Florian Misch and Christian Saborowski ()

Economía Journal, 2020, vol. Volume 20, Number 2, issue Spring 2020, 61-96

Abstract: This paper explores the role of specific structural distortions in explaining Mexico’s weak productivity growth through the misallocation of resources across firms. The paper makes two contributions. First, we show that there is a close correlation between the level of resource misallocation and per capita income across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states, together with unusually rich data at the establishment, local, and industry levels, to shed light on its determinants. We identify several well-defined and observable distortions that have a statistically and economically meaningful effect on productivity via resource misallocation. In particular, we find that misallocation rises with the prevalence of labor informality, crime, corruption, and market concentration and with weaker access to financial and telecommunications services.

Keywords: Resource misallocation; productivity; distortion (search for similar items in EconPapers)
JEL-codes: D25 O12 O47 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:019758

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