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A Simple Accounting Framework for the Effect of Resource Misallocation on Aggregate Productivity

  • Aoki, Shuhei

This paper develops a simple accounting framework that measures the effect of resource misallocation on aggregate productivity. This framework is based on a multi-sector general equilibrium model with sector-specific frictions in the form of taxes on sectoral factor inputs. Our framework is flexible for the assumption on preferences or aggregate production functions. Moreover, this framework is consistent with that commonly used in productivity analysis. I apply this framework to measure to what extent resource misallocation explains the differences in aggregate productivity across developed countries. I find that resource misallocation explains, on average, about 25% of the differences in the measured aggregate productivity among developed countries. I also provide methods to decompose the causes of the misallocation effect.

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File URL: https://mpra.ub.uni-muenchen.de/12506/1/MPRA_paper_12506.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11511.

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Date of creation: 26 Oct 2008
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Handle: RePEc:pra:mprapa:11511
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  23. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2003. "Accounting for the Great Depression," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-8.
  24. de Melo, Jaime A P, 1977. "Distortions in the Factor Market: Some General Equilibrium Estimates," The Review of Economics and Statistics, MIT Press, vol. 59(4), pages 398-405, November.
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