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Productivity and Resource Misallocation in Latin America

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  • Busso, Matías
  • Madrigal, Lucía
  • Pagés, Carmen

Abstract

Total factor productivity (TFP) in Latin America has not increased since the mid- 1970s, and in many countries it has declined. Moreover, resource misallocation can lower aggregate TFP. This paper presents evidence based on firm-level data from 10 Latin American countries to quantify the heterogeneity of firm productivity and the degree of resource misallocation within countries. Productivity heterogeneity and resource misallocation are found to be much larger than in the United States. Achieving an efficient allocation of resources could boost manufacturing TFP between 45 percent and 127 percent depending on the countries and years considered.

Suggested Citation

  • Busso, Matías & Madrigal, Lucía & Pagés, Carmen, 2012. "Productivity and Resource Misallocation in Latin America," IDB Publications (Working Papers) 3955, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:3955
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    More about this item

    Keywords

    Total factor productivity; Firm productivity; Firm heterogeneity; Misallocation costs;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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