Misallocation of Resources, Firm Characteristics, and Structural Factors: Evidence from Mexico

Orozco Vázquez Miguel

No 2023-11, Working Papers from Banco de México

Abstract: This paper aims to measure the gross output loss due to misallocation of resources in Mexico during 2008-2018 and to study what determines this resource misallocation. To do so, I use an extension of Hsieh and Klenow (2009) and Mexican Economic Censuses. Alternatively, I estimate resource misallocation using data processed with a Bayesian model to correct for measurement error. I find that the misallocation in Mexico is mainly in the service sector, as a result of capital and labor misallocation. Furthermore, econometric results show that formal firms are more affected than informal firms by distortions to their capital and labor utilization. Similarly, firms with a bank account to operate their business were more affected than those firms without a bank account. Finally, insecurity and corruption faced by firms, especially in the service sector, are structural factors related to the misallocation of resources in Mexico.

Keywords: Misallocation of Resources; Productivity; Distortions; Mexico (search for similar items in EconPapers)
JEL-codes: D24 O12 O47 (search for similar items in EconPapers)
Date: 2023-10
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