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

The Costs of Financial Crises: Resource Misallocation, Productivity and Welfare in the 2001 Argentine Crisis

Contents:

Author Info

  • Guido Sandleris
  • Mark L.J. Wright

Abstract

Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective -- factor usage does not decline as much as output, resulting in large falls in measured productivity -- and from a theoretical perspective. Towards a resolution of this puzzle, we present a framework that allows us to (i) account for changes in a country's measured productivity during a financial crises as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors driven both by reallocation amongst existing plants and by entry and exit; and (ii) measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level data-set and find that more than half of the roughly 10% decline in measured total factor productivity can be accounted for by deterioration in the allocation of resources both across and within sectors. We measure the decline in welfare to be on the order of one-quarter of one years GDP.

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: http://www.nber.org/papers/w17552.pdf
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17552.

as in new window
Length:
Date of creation: Oct 2011
Date of revision:
Publication status: published as Guido Sandleris & Mark L. J. Wright, 2014. "The Costs of Financial Crises: Resource Misallocation, Productivity, and Welfare in the 2001 Argentine Crisis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 87-127, 01.
Handle: RePEc:nbr:nberwo:17552

Note: EFG IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

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. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  2. Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
  3. Knowles, J.C. & Pernia, E.M., Racelis, M., 1999. "Social Consequences of the Financial Crisis in Asia," Papers, Asian Development Bank 60, Asian Development Bank.
  4. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report, Federal Reserve Bank of Minneapolis 382, Federal Reserve Bank of Minneapolis.
  5. Benjamin David & Meza Felipe, 2009. "Total Factor Productivity and Labor Reallocation: The Case of the Korean 1997 Crisis," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 9(1), pages 1-41, July.
  6. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
  7. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2009. "Productivity, Welfare and Reallocation: Theory and Firm Level Evidence," Boston College Working Papers in Economics, Boston College Department of Economics 728, Boston College Department of Economics, revised 12 Jul 2010.
  8. Pablo A. Neumeyer & Fabrizio Perri, 2001. "Business Cycles in Emerging Economies:The Role of Interest Rates," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 01-12, New York University, Leonard N. Stern School of Business, Department of Economics.
  9. Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002. "Online Appendix to Argentina's Lost Decade and the Subsequent Recovery Puzzle," Technical Appendices kydland02, Review of Economic Dynamics.
  10. Finn E. Kydland & Carlos E.J.M. Zarazaga, 2001. "Argentina's lost decade," Center for Latin America Working Papers, Federal Reserve Bank of Dallas 0401, Federal Reserve Bank of Dallas.
  11. Timothy J. Kehoe & Kim Ruhl, 2008. "Data Appendix to "Are Shocks to the Terms of Trade Shocks to Productivity?"," Technical Appendices 07-40, Review of Economic Dynamics.
  12. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
  13. Gopinath, Gita & Neiman, Brent, 2014. "Trade Adjustment and Productivity in Large Crises," Scholarly Articles 12330899, Harvard University Department of Economics.
  14. Lawrence J. Christiano & Christopher Gust & Jorge Roldos, 2002. "Monetary policy in a financial crisis," Working Paper 0204, Federal Reserve Bank of Cleveland.
  15. Amil Petrin & James Levinsohn, 2005. "Measuring Aggregate Productivity Growth Using Plant-Level Data," NBER Working Papers 11887, National Bureau of Economic Research, Inc.
  16. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(4), pages 745-75, August.
  17. Timothy J. Kehoe & Kim J. Ruhl, 2007. "Are Shocks to the Terms of Trade Shocks to Productivity?," NBER Working Papers 13111, National Bureau of Economic Research, Inc.
  18. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Sudden Stops, Sectoral Reallocations, and the Real Exchange Rate," NBER Working Papers 14395, National Bureau of Economic Research, Inc.
  19. Enrique G. Mendoza & Katherine A. Smith, 2004. "Quantitative Implication of A Debt-Deflation Theory of Sudden Stops and Asset Prices," NBER Working Papers 10940, National Bureau of Economic Research, Inc.
  20. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  21. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 84-103, March.
  22. Pritchett, Lant & Suryahadi, Asep & Sumarto, Sudarno & Suharso, Yusuf, 2000. "The evolution of poverty during the crisis in Indonesia, 1996-99," Policy Research Working Paper Series 2435, The World Bank.
  23. Enrique G. Mendoza, 2006. "Endogenous Sudden Stops in a Business Cycle Model with Collateral Constraints:A Fisherian Deflation of Tobin's Q," NBER Working Papers 12564, National Bureau of Economic Research, Inc.
  24. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
  25. Felipe Meza & Erwan Quintin, 2005. "Financial Crises and Total Factor Productivity: The Mexican Case," 2005 Meeting Papers, Society for Economic Dynamics 478, Society for Economic Dynamics.
  26. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers, Federal Reserve Bank of Dallas 0105, Federal Reserve Bank of Dallas.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. George Alessandria & Sangeeta Pratap & Vivian Yue, 2013. "Export Dynamics in Large Devaluations," Working Papers 062013, Hong Kong Institute for Monetary Research.
  2. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2012. "Productivity and the welfare of nations," Economics Working Papers 1312, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Alberto Martin & Jaume Ventura, 2012. "Economic Growth with Bubbles," American Economic Review, American Economic Association, American Economic Association, vol. 102(6), pages 3033-58, October.
  4. Pengfei Wang & Jianjun Miao, 2012. "Sectoral Bubbles and Endogenous Growth," 2012 Meeting Papers, Society for Economic Dynamics 227, Society for Economic Dynamics.
  5. Ezra Oberfield, 2012. "Online Appendix to "Productivity and Misallocation During a Crisis: Evidence from the Chilean Crisis of 1982"," Technical Appendices 11-215, Review of Economic Dynamics.
  6. Kyoji Fukao & Tsutomu Miyagawa & Hak K. Pyo & Keun Hee Rhee, 2011. "Estimates of Total Factor Productivity, the Contribution of ICT, and Resource Reallocation Effects in Japan and Korea," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd10-177, Institute of Economic Research, Hitotsubashi University.

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:nbr:nberwo:17552. 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: ().

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.