A detailed anatomy of factor misallocation in India

Gilles Duranton, Syed Ejaz Ghani, Arti Goswami Grover, William Robert Kerr, Gilles Duranton, Syed Ejaz Ghani, Arti Grover Goswami and William Robert Kerr
Authors registered in the RePEc Author Service: Gilles Duranton, William Kerr, SYED Ejaz Ghani () and Arti Grover

No 7547, Policy Research Working Paper Series from The World Bank

Abstract: This paper complements the results of earlier work on factor misallocation. The paper first expands the methodology and provides two important decompositions for the main indices. The main result is that factor and output misallocation across districts is at least as important as misallocation within districts. Second, the paper provides an exploration of the service sector that complements earlier work on manufacturing. The analysis shows that labor plays a fundamental role for misallocation in services, whereas land is the determining factor in manufacturing. Third, the paper expands our earlier work on the effects of policies on misallocation by looking at a much broader range of policies, and find strong evidence of their effects on misallocation. Finally, the paper take steps towards the identification of the causal effect of misallocation on output per worker by developing a novel instrumental variable approach and a simulation approach that allows for checking the consistency of the empirical results.

Keywords: Textiles; Apparel&Leather Industry; Common Carriers Industry; General Manufacturing; Plastics&Rubber Industry; Pulp&Paper Industry; Food&Beverage Industry; Business Cycles and Stabilization Policies; Construction Industry; Transport Services; Public Finance Decentralization and Poverty Reduction; Economic Adjustment and Lending; Macro-Fiscal Policy; Taxation&Subsidies; Public Sector Economics; Disease Control&Prevention; Human Rights (search for similar items in EconPapers)
Date: 2016-01-28
New Economics Papers: this item is included in nep-tid
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