Assessing aggregate reallocation effects with heterogeneous inputs, and evidence across countries

Jon D. Samuels ()
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Jon D. Samuels: Bureau of Economic Analysis

Review of World Economics (Weltwirtschaftliches Archiv), 2017, vol. 153, issue 2, No 7, 385-410

Abstract: Abstract Theoretically, reallocating an input from a firm where the input has low marginal product to a firm where the input has high marginal product would increase aggregate productivity without any underlying change in technology. This paper argues that measuring these reallocation effects requires accounting for detailed input types because, for example, differences in wages across producers often reflect the skill mix of workers, not allocative inefficiency. The paper develops an approach to measuring reallocation that accounts for worker skill and the composition of capital assets, thus focuses on the set of countries for which this information is available. The results show once input heterogeneity is accounted for, the effects of reallocation on aggregate productivity were small on average, but sizable in a subset of countries. Panel regressions indicate that reallocation effects are related to population distribution and government effectiveness.

Keywords: Cross-country growth and productivity; Input composition; TFP; Reallocation (search for similar items in EconPapers)
JEL-codes: E01 E22 E23 E24 E25 O40 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10290-016-0273-x

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