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Productivity and resource misallocation in Latin America

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Busso Matias & Madrigal Lucia & Pagés Carmen, 2013. "Productivity and resource misallocation in Latin America," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 1-30, June.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:30:n:3
    DOI: 10.1515/bejm-2012-0087
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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