On the Measure of Distortions

Hugo A. Hopenhayn
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Hugo A. Hopenhayn: UCLA

No 189, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: The paper considers formally the mapping from distortions to the allocations of resources across firms to aggregate productivity. TFP gaps are characterized as the integral of a strictly concave function with respect to an employment-weighted measure of distortions. Size related distortions are shown to correspond to a mean preserving spread of this measure, explaining the stronger effects on TFP found in the literature. An empirical lower bound on distortions based on size distribution of firms is derived and analyzed. The effect of curvature on the impact and measurement of distortions is also considered.

Date: 2013
New Economics Papers: this item is included in nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:189

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