Misallocation and manufacturing TFP in Ecuador: formal, semi-formal and informal firms

Rafaela Bastidas and H.Nicolás Acosta-González

Journal of Economic Structures, 2019, vol. 8, issue 1, 1-29

Abstract: Abstract Resource misallocation can lower the aggregate total factor productivity (TFP). We use micro-data on manufacturing establishments from the Instituto Ecuatoriano de Estadística y Censos to quantify the differences in productivity and diagnose the efficiency in the allocation of resources between formal and informal firms in the Ecuadorian in the manufacturing sector. We use the model proposed by Hsieh and Klenow (Q J Econ 124(4):1403–1448, 2009) to find informal firms have lower physical productivity than formal firms. We also found formal firms have a restricted growth due to capital and output distortions. These results indicate the existence of an inefficient allocation of resources between firms. By reallocating resources to equalize marginal productivity in the manufacturing sector, we calculate TFP gains of 80% in 2002 and 69% in 2015.

Keywords: Total factor productivity; Informality; Distortions; Reallocation of resources; Production factors; Ecuador (search for similar items in EconPapers)
JEL-codes: D24 O47 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1186/s40008-019-0147-1 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecstr:v:8:y:2019:i:1:d:10.1186_s40008-019-0147-1

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40008

DOI: 10.1186/s40008-019-0147-1

Access Statistics for this article

Journal of Economic Structures is currently edited by Shigemi Kagawa and Kazuhiko Nishimura

More articles in Journal of Economic Structures from Springer, Pan-Pacific Association of Input-Output Studies (PAPAIOS) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().