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Misallocation and manufacturing TFP in China and India

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  • Chang, Tai Hsieh
  • Peter, J- Klenow

Abstract

Resource misallocation can lower aggregate total factor productivity (TFP).We use microdata on manufacturing establishments to quantify the potential extent of misallocation in China and India versus the United States. We measure sizable gaps in marginal products of labor and capital across plants within narrowly defined industries in China and India compared with the United States. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the United States, we calculate manufacturing TFP gains of 30%–50% in China and 40%–60% in India.

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File URL: http://mpra.ub.uni-muenchen.de/35084/1/MPRA_paper_35084.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35084.

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Date of creation: 30 Jun 2007
Date of revision: 15 Jun 2007
Publication status: Published in The Quaterly Journal Of Economics 1.1(2007): pp. 1403-1447
Handle: RePEc:pra:mprapa:35084
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Keywords: India; China; Economy;

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Find related papers by JEL classification:
  • D2 - Microeconomics - - Production and Organizations
  • C0 - Mathematical and Quantitative Methods - - General
  • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
  • D3 - Microeconomics - - Distribution
  • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
  • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
  • B0 - Schools of Economic Thought and Methodology - - General
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