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Productivity and resource misallocation in Latin America

Listed author(s):
  • Busso Matias

    ()

    (Research Department, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC 20577, USA)

  • Madrigal Lucia

    (International Food Policy Research Institute (IFPRI), 2033 K St NW #400, Washington, DC, USA)

  • Pagés Carmen

    (Labor Markets Unit, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC, USA)

Total factor productivity (TFP) in Latin America has declined relative to the US since the mid-1970s. This paper applies a comparable methodology to firm-level data of ten Latin American countries to quantify the heterogeneity of firm productivity and the extent to which resource misallocation can explain lower aggregate TFP. In general, productivity heterogeneity and resource misallocation are found to be much larger than in the US. Achieving an efficient allocation of resources could boost manufacturing TFP between 41% and 122% depending on the countries and years considered. We also find that difficulty in access to capital and restrictive labor regulations explain distortions faced by firms.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 13 (2013)
Issue (Month): 1 (June)
Pages: 1-30

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Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:30:n:3
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