Allocating Misallocation: Decomposing Measures of Aggregate Allocative Efficiency

Glenn Blackwood, John Haltiwanger and Zoltan Wolf

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

Abstract: We explore sources of measured misallocation using establishment data from U.S. manufacturing industries. We decompose standard revenue productivity dispersion statistics into contributions by dispersion in revenue margins over costs and dispersion in input cost shares across plants. We establish a formal link between these components and measured allocative efficiency. The results indicate the components contribute similarly to apparent rising misallocation in US manufacturing. We use the mapping between distortions that influence these distinct components to explore the relationship between inferred distortions and mechanisms that influence one or both sources of revenue productivity dispersion. Finally, we show rising misallocation in the US manufacturing sector in the last several decades is pervasive, and yet a few industries account for over half of the aggregate decline.

Keywords: Misallocation; Productivity Dispersion; Allocative Efficiency (search for similar items in EconPapers)
JEL-codes: D24 E23 L16 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-bec
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https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-26.pdf First version, 2026 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-26

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