Accounting for Plant-level Misallocation
AbstractUsing a micro-level dataset of all Korean manufacturing plants, we show that dispersion in the average product of capital are 1) volatile and persistent at the plant-level, 2) small at the industry-level (2- and 5-digit industries), and 3) systematically related to the size and age of a plant. Using a model of industry dynamics calibrated to match salient facts on plant-level investment, exit and growth, we find that non-convex capital adjustment costs account for a small fraction (less than 3%) of the observed dispersion in the average product of capital. In contrast, borrowing frictions account for a substantial fraction of the observed dispersion in the average product of capital. We also document the extent to which measurement issues (overhead labor, variable capacity utilization, departures from a Cobb-Douglas production function) can generate some of the observed dispersion in the average revenue product of capital.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 223.
Date of creation: 2009
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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- Devesh Raval, 2011. "Beyond Cobb-Douglas: Estimation of a CES Production Function with Factor Augmenting Technology," Working Papers 11-05, Center for Economic Studies, U.S. Census Bureau.
- Nicolas Roys, 2010. "Estimating Labor Market Rigidities with Heterogeneous Firms," 2010 Meeting Papers 127, Society for Economic Dynamics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
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