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Resource Misallocation and Productivity: Evidence from Mexico

Christian Saborowski and Florian Misch

No 2018/112, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the role for specific structural distortions in explaining Mexico’s weak productivity growth through the resource misallocation channel. The paper makes two contributions. First, we validate the approach of measuring misallocation indirectly (Hsieh and Klenow, 2009) by illustrating a close correlation between misallocation and per capita incomes across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states together with unusually rich data at the firm, local, and industry level to shed light on its determinants. We identify several well-defined distortions that have a statistically and economically meaningful effect on productivity via resource misallocation.

Keywords: WP; resource misallocation; market concentration; dependent variable; TFP gain; Productivity; Distortions Author’s; output wedge; wage bill; industry-state pair; Total factor productivity; Corruption; Global (search for similar items in EconPapers)
Pages: 32
Date: 2018-05-15
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