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Management and misallocation in Mexico

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  • Bloom, Nicholas
  • Iacovone, Leonardo
  • Pereira-Lopez, Mariana
  • Van Reenen, John

Abstract

We argue that greater misallocation is a key driver of the worse management practices in Mexico compared to the US. These management practices are strongly associated with higher productivity, growth, trade, and innovation. One indicator of greater misallocation in Mexico is the weaker size-management relationship compared to the US, particularly in the highly distorted Mexican service sector. Second, the size-management relationship is weaker in smaller markets, measured by distance to the US for manufacturing firms and population density for service firms. Third, municipalities with weaker institutions, measured by contract enforcement, crime, and corruption, have a weaker size-management relation. These results are consistent with frictions lowering aggregate management quality and productivity.

Suggested Citation

  • Bloom, Nicholas & Iacovone, Leonardo & Pereira-Lopez, Mariana & Van Reenen, John, 2022. "Management and misallocation in Mexico," LSE Research Online Documents on Economics 117752, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:117752
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    File URL: http://eprints.lse.ac.uk/117752/
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    Cited by:

    1. Alex Rivadeneira, 2024. "Unconditional convergence in the Mexican manufacturing sector (1988-2018)," BIS Working Papers 1186, Bank for International Settlements.
    2. Mascarúa Lara Miguel A., 2022. "Imperfect Law Enforcement, Informality, and Organized Crime," Working Papers 2022-16, Banco de México.

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    More about this item

    Keywords

    misallocation; management; performance; services; manufacturing; Mexico;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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