A Simple Accounting Framework for the Effect of Resource Misallocation on Aggregate Productivity
MPRA Paper from University Library of Munich, Germany
This paper develops a simple accounting framework that measures the effect of resource misallocation on aggregate productivity. This framework is based on a multi-sector general equilibrium model with sector-specific frictions in the form of taxes on sectoral factor inputs. Our framework is flexible for the assumption on preferences or aggregate production functions. Moreover, this framework is consistent with that commonly used in productivity analysis. I apply this framework to measure to what extent resource misallocation explains the differences in aggregate productivity across developed countries. I find that resource misallocation explains, on average, about 25% of the differences in the measured aggregate productivity among developed countries. I also provide methods to decompose the causes of the misallocation effect.
Keywords: distortions; frictions; productivity; resource allocation (search for similar items in EconPapers)
JEL-codes: E23 O11 O41 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-mac
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https://mpra.ub.uni-muenchen.de/12506/1/MPRA_paper_12506.pdf revised version (application/pdf)
Journal Article: A simple accounting framework for the effect of resource misallocation on aggregate productivity (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11511
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