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Assessing aggregate reallocation effects with heterogeneous inputs, and evidence across countries

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  • Jon D. Samuels

    () (Bureau of Economic Analysis
    Institute for Quantitative Social Science)

Abstract

Abstract Theoretically, reallocating an input from a firm where the input has low marginal product to a firm where the input has high marginal product would increase aggregate productivity without any underlying change in technology. This paper argues that measuring these reallocation effects requires accounting for detailed input types because, for example, differences in wages across producers often reflect the skill mix of workers, not allocative inefficiency. The paper develops an approach to measuring reallocation that accounts for worker skill and the composition of capital assets, thus focuses on the set of countries for which this information is available. The results show once input heterogeneity is accounted for, the effects of reallocation on aggregate productivity were small on average, but sizable in a subset of countries. Panel regressions indicate that reallocation effects are related to population distribution and government effectiveness.

Suggested Citation

  • Jon D. Samuels, 2017. "Assessing aggregate reallocation effects with heterogeneous inputs, and evidence across countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(2), pages 385-410, May.
  • Handle: RePEc:spr:weltar:v:153:y:2017:i:2:d:10.1007_s10290-016-0273-x
    DOI: 10.1007/s10290-016-0273-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Cross-country growth and productivity; Input composition; TFP; Reallocation;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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