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Productivity and resource misallocation in Latin America

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  • Busso Matias

    ()
    (Research Department, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC 20577, USA)

  • Madrigal Lucia

    (International Food Policy Research Institute (IFPRI), 2033 K St NW #400, Washington, DC, USA)

  • Pagés Carmen

    (Labor Markets Unit, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC, USA)

Abstract

Total factor productivity (TFP) in Latin America has declined relative to the US since the mid-1970s. This paper applies a comparable methodology to firm-level data of ten Latin American countries to quantify the heterogeneity of firm productivity and the extent to which resource misallocation can explain lower aggregate TFP. In general, productivity heterogeneity and resource misallocation are found to be much larger than in the US. Achieving an efficient allocation of resources could boost manufacturing TFP between 41% and 122% depending on the countries and years considered. We also find that difficulty in access to capital and restrictive labor regulations explain distortions faced by firms.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 13 (2013)
Issue (Month): 1 (June)
Pages: 30

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Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:30:n:3

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  1. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," Working Papers 134, Barcelona Graduate School of Economics.
  2. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  3. Hyeok Jeong & Robert Townsend, 2007. "Sources of TFP growth: occupational choice and financial deepening," Economic Theory, Springer, vol. 32(1), pages 179-221, July.
  4. Christian Daude & Eduardo Fernandez-Arias, 2010. "On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean," Research Department Publications 4653, Inter-American Development Bank, Research Department.
  5. Vries, G.J. de, 2009. "Productivity in a Distorted Market: The Case of Brazil's Retail Sector," GGDC Research Memorandum GD-112, Groningen Growth and Development Centre, University of Groningen.
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  7. Margarida Duarte & Diego Restuccia, 2006. "The Role of the Structural Transformation in Aggregate Productivity," 2006 Meeting Papers 415, Society for Economic Dynamics.
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  10. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  11. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  12. Andy Neumeyer & Hugo Hopenhayn, 2004. "Latin America in the Twentieth Century: Stagnation, then Collapse," Econometric Society 2004 Latin American Meetings 326, Econometric Society.
  13. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  14. Diego Restuccia, 2008. "The Latin American Development Problem," Working Papers tecipa-318, University of Toronto, Department of Economics.
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Cited by:
  1. Julieta Caunedo, 2013. "Industry Dynamics, Investment and Business Cycles," 2013 Meeting Papers 1078, Society for Economic Dynamics.

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