Economics at your fingertips  

Does Higher Productivity Dispersion Imply Greater Misallocation?A Theoretical and Empirical Analysis

J. David Brown (), Emin Dinlersoz () and John Earle ()

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Recent research maintains that the observed variation in productivity within industries reflects resource misallocation and concludes that large GDP gains may be obtained from market-liberalizing polices. Our theoretical analysis examines the impact on productivity dispersion of reallocation frictions in the form of costs of entry, operation, and restructuring, and shows that reforms reducing these frictions may raise dispersion of productivity across firms. The model does not imply a negative relationship between aggregate productivity and productivity dispersion. Our empirical analysis focuses on episodes of liberalizing policy reforms in the U.S. and six East European transition economies. Deregulation of U.S. telecommunications equipment manufacturing is associated with increased, not reduced, productivity dispersion, and every transition economy in our sample shows a sharp rise in dispersion after liberalization. Productivity dispersion under central planning is similar to that in the U.S., and it rises faster in countries adopting faster paces of liberalization. Lagged productivity dispersion predicts higher future productivity growth. The analysis suggests there is no simple relationship between the policy environment and productivity dispersion.

New Economics Papers: this item is included in nep-cse, nep-eff and nep-tid
Date: 2016-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link) First version, 2016 (application/pdf)

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:

Access Statistics for this paper

More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dawn Anderson ().

Page updated 2019-02-04
Handle: RePEc:cen:wpaper:16-42