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Productivity and resource misallocation in Latin America

  • 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: 30

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Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:30:n:3
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  1. Hyeok Jeong & Robert M. Townsend, 2005. "Sources of TFP Growth: Occupational Choice and Financial Deepening," IEPR Working Papers 05.28, Institute of Economic Policy Research (IEPR), revised May 2005.
  2. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  3. Eslava, Marcela & Haltiwanger Jr, John C & Kugler, Adriana D. & Kugler, Maurice, 2004. "The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from Colombia," CEPR Discussion Papers 4569, C.E.P.R. Discussion Papers.
  4. Pablo Andres Neumeyer & Hugo Hopenhayn, 2004. "Latin America in the Twentieth Century: stagnation, then Collapse," Department of Economics Working Papers 028, Universidad Torcuato Di Tella.
  5. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1403-1448, November.
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  7. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, June.
  8. Diego Restuccia, 2008. "The Latin American Development Problem," Working Papers tecipa-318, University of Toronto, Department of Economics.
  9. Margarida Duarte & Diego Restuccia, 2006. "The Role of the Structural Transformation in Aggregate Productivity," 2006 Meeting Papers 415, Society for Economic Dynamics.
  10. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
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  12. Chad Syverson, 2008. "Markets: Ready-Mixed Concrete," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 217-234, Winter.
  13. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  14. Christian Daude & Eduardo Fernandez-Arias, 2010. "On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean," Research Department Publications 4653, Inter-American Development Bank, Research Department.
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