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Capital Specificity, the Distribution of Marginal Products and Aggregate Productivity

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  • Lanteri, Andrea
  • Medina, Pamela

Abstract

This paper studies the role of capital specificity and investment irreversibility on the distribution of marginal products of capital and aggregate TFP. We use a methodology new to the misallocation literature, based on the study of “mobility” across quantiles of a distribution. In a panel of Peruvian firms, we show that persistent dispersion in marginal products is explained to an important extent by the persistence of low marginal products. That is, by unproductive firms that take a long time to downsize. Using a quantitative general-equilibrium model of firm dynamics with idiosyncratic shocks, calibrated to match key features of our data, we argue that the persistence of low marginal products suggests that irreversibility frictions are large. Moreover, it is inconsistent with theories of misallocation based only on financing constraints.

Suggested Citation

  • Lanteri, Andrea & Medina, Pamela, 2017. "Capital Specificity, the Distribution of Marginal Products and Aggregate Productivity," Research Department working papers 1107, CAF Development Bank Of Latinamerica.
    • Handle: RePEc:dbl:dblwop:1107
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    File URL: https://scioteca.caf.com/handle/123456789/1107
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Capital Specificity, the Distribution of Marginal Products and Aggregate Productivity
      by Christian Zimmermann in NEP-DGE blog on 2017-11-22 23:56:58

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    Keywords

    Economía; Investigación socioeconómica; Productividad;
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