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Multi-establishment firms, misallocation, and productivity

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  • Xi, Xican

Abstract

This paper presents an equilibrium model of firm growth that emphasizes multi-establishment operations. The model captures key features of firm growth and the firm size distribution in the US, and is used to analyze the effects of establishment-level distortions in developing countries. The distortions substantially reduce aggregate output and play a key role in generating cross-country differences in firm and establishment sizes. When compared to a model that considers only single-establishment firms, my model finds a 17% and 13% larger impact of distortions on aggregate output for India and Mexico, respectively. This amplification effect is due to the decreased proportion of multi-establishment firms.

Suggested Citation

  • Xi, Xican, 2023. "Multi-establishment firms, misallocation, and productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:dyncon:v:154:y:2023:i:c:s0165188923001112
    DOI: 10.1016/j.jedc.2023.104705
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    More about this item

    Keywords

    Misallocation; Technology capital; Multi-establishment firms; Aggregate productivity;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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