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Misallocation and Manufacturing TFP in China and India

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  • Chang-Tai Hsieh

    (UC Berkeley)

  • Peter J Klenow

    (Stanford University)

Abstract

Resource misallocation can lower aggregate total factor productivity (TFP). We use micro data on manufacturing establishments to quantify the extent of this misallocation in China and India compared to the U.S. in recent years. Compared to the U.S., we measure sizable gaps in marginal products of labor and capital across plants within narrowly-defined industries in China and India. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the U.S., we calculate manufacturing TFP gains of 25-40% in China and 50-60% in India.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 121.

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Date of creation: 2008
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Handle: RePEc:red:sed008:121

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Citations

Blog mentions

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    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2012-12-10 03:33:00
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  4. Defining Development Economics
    by dvollrath in The Growth Economics Blog on 2014-04-18 20:49:15
  5. Restuccia and Santaeulalia-Llopis on Land Misallocation
    by dvollrath in The Growth Economics Blog on 2014-07-13 15:12:49
  6. David, Hopenhayn, and Venkateswaran on Misallocation
    by dvollrath in The Growth Economics Blog on 2014-07-13 14:53:20
  7. The 57,000 Page Tax Return
    by Alex Tabarrok in Marginal Revolution on 2011-11-22 12:38:52
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