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Misallocation and Manufacturing TFP in the Market Liberalization Period of Bolivia

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Author Info
Carlos Gustavo Machicado () (Institute for Advanced Development Studies)
Juan Cristóbal Birbuet () (Centre for the Promotion of Sustainable Technologies (CPTS))
Abstract

This paper analyzes productivity levels, dispersion and growth in the Bolivian Manufacturing Sector during the Market Liberalization Period: 1988-2001. These years are characterized first, by a period of macroeconomic stabilization and 1st Generation Reforms (1988-1993), second, by a period of privatization and 2nd Generation Reforms (1994-1997) and third, by a Post-reforms period (1998-2001). The 1st and 2nd Generation Reforms were framed in line with the Washington Consensus and their main objectives were to guarantee macroeconomic stability, to improve the efficiency and allocation of resources in the economy and to promote economic growth with fairness. We show that in contrast to what was expected, productivity in the manufacturing sector decreased steadily. We compute Total Factor Productivity (TFP), for the first time, using firm-level data and in addition we break down this measure in productivity per se and resource misallocation. We find that both issues contributed to the decline in productivity and if resource misallocation were eliminated, the gains in productivity would have been in the order of 60 percent, but the trend of productivity along time would have been the same, which means that there are also structural problems that affect productivity in Bolivia. In addition, we evaluate TFP considering exporting firms, size of firms, age of firms and geographical location.

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Paper provided by Institute for Advanced Development Studies in its series Development Research Working Paper Series with number 06/2009.

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Length: 49 pages
Date of creation: Aug 2009
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Handle: RePEc:adv:wpaper:200906

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Related research
Keywords: TFP; Market Structure; Manufacturing;

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L6 - Industrial Organization - - Industry Studies: Manufacturing

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  1. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March. [Downloadable!]
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  2. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
  4. De Gregorio, José, 2008. "El crecimiento económico de la América Latina. Del desencanto del siglo XX a los desafíos del XXI," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(297), pages 5-45, enero-mar.
  5. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  6. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth. Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc. [Downloadable!]
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