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The Role of Allocative Efficiency in A Decade of Recovery

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  • Kaiji Chen

    (Emory University)

Abstract

The Chilean economy experienced a decade of sustained growth in aggregate output and productivity after the 1982 financial crisis. This paper analyzes the role of resource allocative efficiency on total factor productivity (TFP) of the manufacturing sector by applying the methodology of Hsieh and Klenow (2009) to the establishment data from the Chilean manufacturing census. We find that a reduction in resource misallocation accounts for about 46 percent of the growth in manufacturing TFP between 1983 and 1996. The improvement in allocative efficiency, moreover, is essentially driven by a reduction in the cross-sectional dispersion of output distortion. In particular, a reduction in the least productive plants' output subsidies is the most important reason for the reduction in resource misallocation during this period.

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  • Kaiji Chen, 2013. "The Role of Allocative Efficiency in A Decade of Recovery," 2013 Meeting Papers 886, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:886
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    Cited by:

    1. Manuel García-Santana & Enrique Moral-Benito & Josep Pijoan-Mas & Roberto Ramos, 2016. "Growing like Spain: 1995-2007," Economics Working Papers 1517, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, pages 151-174.
    3. Schelkle, Thomas, 2017. "Measuring Factor Misallocation: General Methods and Evidence on the Great Recession," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168105, Verein für Socialpolitik / German Economic Association.
    4. Daniel Dias & Carlos Robalo Marques & Christine Richmond, 2016. "A tale of two sectors: why is misallocation higher in services than in manufacturing?," Working Papers w201614, Banco de Portugal, Economics and Research Department.
    5. Sara Calligaris, 2015. "Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data," CEIS Research Paper 357, Tor Vergata University, CEIS, revised 14 Oct 2015.
    6. Stephen Ayerst, 2016. "Idiosyncratic Distortions and Technology Adoption," Working Papers tecipa-571, University of Toronto, Department of Economics.
    7. Daniel Dias & Carlos Robalo Marques & Christine Richmond, 2016. "A tale of two sectors: why is misallocation higher in services than in manufacturing?," Working Papers w201614, Banco de Portugal, Economics and Research Department.
    8. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, pages 46-70.
    9. T. Libert, 2017. "Misallocation Before, During and After the Great Recession," Working papers 658, Banque de France.
    10. Thomas Schelkle, 2016. "General Methods for Measuring Factor Misallocation," Working Paper Series in Economics 87, University of Cologne, Department of Economics.
    11. Carvalho, Daniel & Fidora, Michael, 2015. "Capital inflows and euro area long-term interest rates," Journal of International Money and Finance, Elsevier, pages 186-204.
    12. 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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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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