Misallocation and Manufacturing TFP in China and India

Chang-Tai Hsieh () and Pete Klenow
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Chang-Tai Hsieh: University of California, Berkeley

No 07-006, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Resource misallocation can lower aggregate total factor productivity (TFP). We use micro data on manufacturing establishments to quantify the extent of this misallocation in China and India compared to the U.S. in recent years. Compared to the U.S., we measure sizable gaps in marginal products of labor and capital across plants within narrowlydefined industries in China and India. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the U.S., we calculate manufacturing TFP gains of 25-40% in China and 50-60% in India.

Keywords: resource allocation; China; India; total factor productivity; manufacturing (search for similar items in EconPapers)
JEL-codes: D61 (search for similar items in EconPapers)
Date: 2007-07
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Citations: View citations in EconPapers (94)

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Related works:
Journal Article: Misallocation and Manufacturing TFP in China and India (2009)
Working Paper: Misallocation and Manufacturing TFP in China and India (2009)
Working Paper: Misallocation and Manufacturing TFP in China and India (2008)
Working Paper: Misallocation and Manufacturing TFP in China and India (2007)
Working Paper: Misallocation and manufacturing TFP in China and India (2007)
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