Cross-Sector Misallocation with Sector-Specific Distortions

Julio Leal Ordóñez

The World Bank Economic Review, 2017, vol. 30, issue Supplement_1, S42-S56

Abstract: In this paper, I seek to sharpen the understanding of the economic channels through which sector-specific distortions affect aggregate outcomes. I pay special attention on how cross-sector misallocation might arrive as a result of these distortions, and clarify how models of resource misallocation across heterogeneous firms differ from models of resource misallocation across sectors. I present facts that suggest the presence of such distortions in Mexico, a noteworthy developing country. The paper highlights the importance of understanding the origin and nature of sector-specific distortions for policy design.

JEL-codes: O1 O11 (search for similar items in EconPapers)
Date: 2017
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