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The Role of Allocative Efficiency in A Decade of Recovery

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  • Kaiji Chen

    (Emory University)

Abstract

The Chilean economy experienced a decade of sustained growth in aggregate output and productivity after the 1982 financial crisis. This paper analyzes the role of resource allocative efficiency on total factor productivity (TFP) of the manufacturing sector by applying the methodology of Hsieh and Klenow (2009) to the establishment data from the Chilean manufacturing census. We find that a reduction in resource misallocation accounts for about 46 percent of the growth in manufacturing TFP between 1983 and 1996. The improvement in allocative efficiency, moreover, is essentially driven by a reduction in the cross-sectional dispersion of output distortion. In particular, a reduction in the least productive plants' output subsidies is the most important reason for the reduction in resource misallocation during this period.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 886.

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Date of creation: 2013
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Handle: RePEc:red:sed013:886

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  1. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
  2. Yongseok Shin & Benjamin Moll & Francisco J. Buera, 2011. "Well-Intended Policies," 2011 Meeting Papers 1244, Society for Economic Dynamics.
  3. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2001. "A Decade Lost and Found: Mexico and Chile in the 1980s," Documentos de Trabajo 110, Centro de Economía Aplicada, Universidad de Chile.
  4. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "Data Appendix to A Decade Lost and Found: Mexico and Chile in the 1980s," Technical Appendices bergoeing02, Review of Economic Dynamics.
  5. Francisco J. Buera & Joseph Kaboski & Yongseok Shin, 2009. "Finance and Development: A Tale of Two Sectors," NBER Working Papers 14914, National Bureau of Economic Research, Inc.
  6. Adriana Camacho & Emily Conover, 2010. "Misallocation and Productivity in Colombia’s Manufacturing Industries," Research Department Publications 4654, Inter-American Development Bank, Research Department.
  7. Lee E. Ohanian, 2010. "The Economic Crisis from a Neoclassical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 45-66, Fall.
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