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Plant-Size Distribution and Cross-Country Income Differences

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  • Laura Alfaro
  • Andrew Charlton
  • Fabio Kanczuk

Abstract

We investigate, using plant-level data for 79 developed and developing countries, whether differences in the allocation of resources across heterogeneous plants are a significant determinant of cross-country differences in income per worker. For this purpose, we use a standard version of the neoclassical growth model augmented to incorporate monopolistic competition among heterogeneous plants. For our preferred calibration, the model explains 58% of the log variance of income per worker. This figure should be compared to the 42% success rate of the usual model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14060.

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Date of creation: Jun 2008
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Publication status: published as Plant-Size Distribution and Cross-Country Income Differences , Laura Alfaro, Andrew Charlton, Fabio Kanczuk. in NBER International Seminar on Macroeconomics 2008 , Frankel and Pissarides. 2009
Handle: RePEc:nbr:nberwo:14060

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