IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Misallocation and Manufacturing TFP in China and India

  • Chang-Tai Hsieh


    (University of California, Berkeley)

  • Peter J. Klenow


    (Stanford University)

Resource misallocation can lower aggregate total factor productivity (TFP). We use micro data on manufacturing establishments to quantify the extent of this misallocation in China and India compared to the U.S. in recent years. Compared to the U.S., we measure sizable gaps in marginal products of labor and capital across plants within narrowlydefined industries in China and India. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the U.S., we calculate manufacturing TFP gains of 25-40% in China and 50-60% in India.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-006.

in new window

Date of creation: Jul 2007
Date of revision:
Handle: RePEc:sip:dpaper:07-006
Contact details of provider: Postal: 366 Galvez Street, Stanford, California 94305-6015
Phone: (650) 725-1874
Fax: (650) 723-8611
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Francisco J. Buera & Yongseok Shin, 2013. "Financial Frictions and the Persistence of History: A Quantitative Exploration," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 221 - 272.
  2. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Comparing alternative representations and alternative methodologies in business cycle accounting," Working Papers 647, Federal Reserve Bank of Minneapolis.
  4. Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
  5. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  6. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  7. Xu Yi & Nezih Guner & Gustavo Ventura, 2005. "Macroeconomic Implications of Size Dependent Policies," 2005 Meeting Papers 530, Society for Economic Dynamics.
  8. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Business cycle accounting," Staff Report 328, Federal Reserve Bank of Minneapolis.
  9. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  10. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  11. Philippe Aghion & Robin Burgess & Stephen Redding & Fabrizio Zilibotti, 2006. "The unequal effects of liberalization: evidence from dismantling the License Raj in India," LSE Research Online Documents on Economics 3773, London School of Economics and Political Science, LSE Library.
  12. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  13. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
  14. Amartya Lahiri & Kei-Mu Yi, 2006. "A tale of two states: Maharashtra and West Bengal," Working Papers 06-16, Federal Reserve Bank of Philadelphia.
  15. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," NBER Working Papers 13018, National Bureau of Economic Research, Inc.
  16. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  17. Francesco Caselli & Nicola Gennaioli, 2006. "Dynastic Management," CEP Discussion Papers dp0741, Centre for Economic Performance, LSE.
  18. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
  19. Stefano Scarpetta: & John Haltiwanger & Eric Bartelsman:, 2007. "Cross Country Differences in Productivity: The Role of Allocative Efficiency," 2007 Meeting Papers 134, Society for Economic Dynamics.
  20. Arturo Galindo & Fabio Schiantarelli & Andrew Weiss, 2002. "Does Financial Liberalization Improve the Allocation of Investment?: Micro Evidence from Developing Countries," IDB Publications (Working Papers) 6496, Inter-American Development Bank.
  21. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," IMF Working Papers 07/9, International Monetary Fund.
  22. repec:ttp:iibwps:08 is not listed on IDEAS
  23. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, June.
  24. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  25. Laura Alfaro & Andrew Charlton & Fabio Kanczuk, 2008. "Plant-Size Distribution and Cross-Country Income Differences," NBER Working Papers 14060, National Bureau of Economic Research, Inc.
  26. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:07-006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Shor)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.