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Misallocation of Resources, Firm Characteristics, and Structural Factors: Evidence from Mexico

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  • Orozco Vázquez Miguel

Abstract

This paper aims to measure the gross output loss due to misallocation of resources in Mexico during 2008-2018 and to study what determines this resource misallocation. To do so, I use an extension of Hsieh and Klenow (2009) and Mexican Economic Censuses. Alternatively, I estimate resource misallocation using data processed with a Bayesian model to correct for measurement error. I find that the misallocation in Mexico is mainly in the service sector, as a result of capital and labor misallocation. Furthermore, econometric results show that formal firms are more affected than informal firms by distortions to their capital and labor utilization. Similarly, firms with a bank account to operate their business were more affected than those firms without a bank account. Finally, insecurity and corruption faced by firms, especially in the service sector, are structural factors related to the misallocation of resources in Mexico.

Suggested Citation

  • Orozco Vázquez Miguel, 2023. "Misallocation of Resources, Firm Characteristics, and Structural Factors: Evidence from Mexico," Working Papers 2023-11, Banco de México.
    • Handle: RePEc:bdm:wpaper:2023-11
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    More about this item

    Keywords

    Misallocation of Resources; Productivity; Distortions; Mexico;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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