Advanced Search
MyIDEAS: Login to save this paper or follow this series

Are We Undercounting Reallocation's Contribution to Growth?

Contents:

Author Info

  • Mitsukuni Nishida
  • Amil Petrin
  • T. Kirk White

Abstract

Reallocation growth occurs when an input moves from a lower marginal product to a higher marginal product activity. Three recent studies use two distinct methodologies to examine the sources of the strong surge in aggregate productivity growth (APG) in India’s manufacturing sector since 1990 following significant economic reforms. They all conclude that APG was primarily driven by within-plant increases in technical efficiency and not between-plant reallocation of inputs. Given the nature of the reforms, where many barriers to input reallocation were removed, this finding has surprised researchers and been dubbed “India’s Mysterious Manufacturing Miracle.” In this paper we show that these findings may be an artifact of the way the studies estimate reallocation. One approach counts all reallocation growth arising from the movement of intermediate inputs as technical efficiency growth. The second approach introduces measurement error into estimated reallocation by using plant-level average products - total factor productivity residuals - as a proxy for marginal products, which could be problematic as economic theory suggests that average products and marginal products are unrelated in equilibrium. Using microdata on manufacturing from 4 countries — the U.S., Chile, Colombia, and Slovenia — we show that both approaches significantly understate the true role of reallocation in economic growth. In the U.S. almost 50% of reallocation growth is due to movements of intermediate inputs, meaning if India is similar to the U.S. then reallocation’s share of total Indian manufacturing APG since 1990 increases from the previous estimate of one-third to almost two-thirds.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ftp2.census.gov/ces/wp/2013/CES-WP-13-55.pdf
File Function: First version, 2013
Download Restriction: no

Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 13-55.

as in new window
Length: 38 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:cen:wpaper:13-55

Contact details of provider:
Postal: 4600 Silver Hill Road, Washington, DC 20233
Phone: (301) 763-6460
Fax: (301) 763-5935
Email:
Web page: http://www.census.gov/ces
More information through EDIRC

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  2. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
  3. Ann E. Harrison & Leslie A. Martin & Shanthi Nataraj, 2013. "Learning versus Stealing: How Important Are Market-Share Reallocations to India's Productivity Growth?," World Bank Economic Review, World Bank Group, vol. 27(2), pages 202-228.
  4. Amil Petrin & T. Kirk White & Jerome P. Reiter, 2011. "The Impact of Plant-level Resource Reallocations and Technical Progress on U.S. Macroeconomic Growth," NBER Working Papers 16700, National Bureau of Economic Research, Inc.
  5. Amil Petrin & James Levinsohn, 2012. "Measuring aggregate productivity growth using plant-level data," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 705-725, December.
  6. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  7. Basu, Susanto & Fernald, John G., 2002. "Aggregate productivity and aggregate technology," European Economic Review, Elsevier, vol. 46(6), pages 963-991, June.
  8. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:13-55. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fariha Kamal).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.