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Analyzing the Sources of Misallocation in Indian Manufacturing: A Gross-Output Approach

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  • Sujana Kabiraj

    (University of Wisconsin-Stevens Point, United States. E-mail:)

Abstract

It is well established that misallocation of factor resources lowers productivity. In this paper, I use data from both formal and informal firms to study distortions in input and output markets as sources of misallocation in the Indian manufacturing sector. My work extends the seminal work of Hsieh and Klenow (2009). I consider output, capital, raw material, energy, and service sector distortions in a monopolistically competitive framework to measure the aggregate dispersion in total factor revenue productivity (TFPR). I also decompose the variance in TFPR and show that raw material and output distortions play a major role in defining aggregate misallocation.

Suggested Citation

  • Sujana Kabiraj, 2020. "Analyzing the Sources of Misallocation in Indian Manufacturing: A Gross-Output Approach," Asian Development Review, MIT Press, vol. 37(2), pages 134-166, September.
    • Handle: RePEc:tpr:adbadr:v:37:y:2020:i:2:p:134-166
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    References listed on IDEAS

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    More about this item

    Keywords

    distortion; Indian manufacturing; misallocation; productivity;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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