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Human Capital Misallocation, TFP, and Redistributive Policies

Debasis Bandyopadhyay, Ian King and Xueli Tang

No 585, Discussion Papers Series from University of Queensland, School of Economics

Abstract: We analyse the impact of income inequality and redistribution on the misallocation of resources and TFP, in economies with financial market imperfections. We calibrate a model based on Benaboui's (2002) model of human capital, but with the addition of physical capital. In the absence of a credit market TFP losses due to misallocation can be signifcant and are comparable in size to those found in Hsieh and Klenow (2009). However, redistributive policies aimed at reducing these TFP losses have only small positive effects on TFP but large negative e§ects on per capita output.

Keywords: heterogeneous agents; misallocation; TFP; redistribution (search for similar items in EconPapers)
JEL-codes: E13 E25 E62 O11 O47 (search for similar items in EconPapers)
Date: 2017-11-08
New Economics Papers: this item is included in nep-fdg and nep-mac
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