The drivers and consequences of resource misallocation: exploiting variation across Mexican industries and states

Florian Misch and Christian Saborowski

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper explores the role of specific structural distortions in explaining Mexico’s weak productivity growth through the misallocation of resources across firms. The paper makes two contributions. First, we show that there is a close correlation between the level of resource misallocation and per capita income across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states, together with unusually rich data at the establishment, local, and industry levels, to shed light on its determinants. We identify several well-defined and observable distortions that have a statistically and economically meaningful effect on productivity via resource misallocation. In particular, we find that misallocation rises with the prevalence of labor informality, crime, corruption, and market concentration and with weaker access to financial and telecommunications services.

Keywords: resource misallocation; productivity; distortions (search for similar items in EconPapers)
JEL-codes: D24 O12 O47 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2020-04-01
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Published in Economía, 1, April, 2020, 20(2), pp. 61 - 96. ISSN: 1529-7470

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:123325

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