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Productivity and Resource Misallocation in Latin America

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  • Matías Busso
  • Lucía Madrigal
  • Carmen Pagés

Abstract

Total factor productivity (TFP) in Latin America has not increased since the mid- 1970s, and in many countries it has declined. Moreover, resource misallocation can lower aggregate TFP. This paper presents evidence based on firm-level data from 10 Latin American countries to quantify the heterogeneity of firm productivity and the degree of resource misallocation within countries. Productivity heterogeneity and resource misallocation are found to be much larger than in the United States. Achieving an efficient allocation of resources could boost manufacturing TFP between 45 percent and 127 percent depending on the countries and years considered.

Suggested Citation

  • Matías Busso & Lucía Madrigal & Carmen Pagés, 2012. "Productivity and Resource Misallocation in Latin America," IDB Publications (Working Papers) 3955, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:3955
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    References listed on IDEAS

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    Cited by:

    1. Fatma Bouattour, 2016. "Financial Constraints and Export Performances: Evidence from Brazilian Micro-Data," Working Papers DT/2016/18, DIAL (Développement, Institutions et Mondialisation).
    2. Dias, Daniel A. & Marques, Carlos Robalo & Richmond, Christine, 2015. "Misallocation and Productivity in the Lead Up to the Eurozone Crisis," International Finance Discussion Papers 1146, Board of Governors of the Federal Reserve System (U.S.).
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    4. repec:aea:jecper:v:31:y:2017:i:3:p:151-74 is not listed on IDEAS
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    6. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    7. Ryzhenkov, Mykola, 2016. "Resource misallocation and manufacturing productivity: The case of Ukraine," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 41-55.
    8. Doan Thi Thanh Ha & Kozo Kiyota, 2015. "Misallocation, Productivity, and Trade Liberalization: The Case of Vietnamese Manufacturing," Keio-IES Discussion Paper Series 2015-007, Institute for Economics Studies, Keio University.
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    11. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    12. Matías Busso & Maria Victoria Fazio & Santiago Levy Algazi, 2012. "(In)Formal and (Un)Productive: The Productivity Costs of Excessive Informality in Mexico," IDB Publications (Working Papers) 4047, Inter-American Development Bank.
    13. Petre Caraiani, 2016. "A quantitative explanation of the low productivity in South-Eastern European economies: the role of misallocations," wiiw Balkan Observatory Working Papers 119, The Vienna Institute for International Economic Studies, wiiw.
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    16. Doan Thi Thanh Ha & Kozo Kiyota & Kenta Yamanouchi, 2016. "Misallocation and Productivity: The Case of Vietnamese Manufacturing," Asian Development Review, MIT Press, vol. 33(2), pages 94-118, September.
    17. Matías Busso & Maria Victoria Fazio & Santiago Levy Algazi, 2012. "(In)Formal and (Un)Productive: The Productivity Costs of Excessive Informality in Mexico," IDB Publications (Working Papers) 4047, Inter-American Development Bank.
    18. Lutz Kilian & Robert J. Vigfusson, 2017. "The Role of Oil Price Shocks in Causing U.S. Recessions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(8), pages 1747-1776, December.
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    More about this item

    Keywords

    Economic Development & Growth; Productivity; Total factor productivity; Firm productivity; Firm heterogeneity; Misallocation costs;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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