A Trade-Based Misallocation Index

Orhun Sevinc

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper, based on a model of trade in the presence of sectoral distortions, develops a one dimensional sectoral misallocation index. It estimates the index using product-level bilateral trade data at the sector-country-year level since 1962. The geographical distribution of the misallocation index suggests substantial within-region differences across countries and across time. Notably, a large and historical allocative efficiency gap exists across the West and the East of Europe, while the latter shows a remarkable progress in catching up. On the other hand, the substantial gap between the North and South America is highly persistent. The paper then investigates the negative association of misallocation to economic performance through multivariate regression analysis. The index of misallocation inversely and robustly predicts cross-country productivity differences, contains valuable information on top of factors of production, and outperforms measures of diversification, product sophistication, and openness when time invariant country characteristics are accounted for.

Keywords: Trade; Misallocation; Comparative advantage (search for similar items in EconPapers)
JEL-codes: F10 F14 O10 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-int
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2019/19-18 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1918

Access Statistics for this paper

More papers in Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by Sermet Pekin () and Ilker Cakar () and ().