Policy Distortions and Aggregate Productivity with Heterogeneous Plants

Richard Rogerson and Diego Restuccia

No 69, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We formulate a version of the growth model in which production is carried out by heterogeneous plants and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across heterogeneous plants may be a significant factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured TFP, on the order of 30%. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP

Keywords: Plant heterogeneity; productivity; policy distortions (search for similar items in EconPapers)
JEL-codes: O1 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dge and nep-reg
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2008)
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2007)
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2007)
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