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Factor Misallocation and Development

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  • Diego Restuccia

Abstract

The large differences in income per capita across countries are mostly explained by differences in total factor productivity (TFP). This article summarizes the evidence on the importance of resource allocation across productive units in explaining the observed differences in TFP across countries.

Suggested Citation

  • Diego Restuccia, 2013. "Factor Misallocation and Development," Working Papers tecipa-502, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-502
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    References listed on IDEAS

    as
    1. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1421-1449.
    2. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2013. "Factor Market Distortions Across Time, Space, and Sectors in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 39-58, January.
    3. Sebnem Kalemli-Ozcan & Bent E. Sørensen, 2014. "Misallocation, Property Rights, and Access to Finance: Evidence from within and across Africa," NBER Chapters,in: African Successes, Volume III: Modernization and Development, pages 183-211 National Bureau of Economic Research, Inc.
    4. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2013. "Trade and Market Selection: Evidence from Manufacturing Plants in Colombia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 135-158, January.
    5. Jeremy Greenwood & Juan Sanchez & Cheng Wang, 2013. "Quantifying the Impact of Financial Development on Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 194-215, January.
    6. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    7. Ranasinghe, Ashantha, 2017. "Property rights, extortion and the misallocation of talent," European Economic Review, Elsevier, vol. 98(C), pages 86-110.
    8. Alain Gabler & Markus Poschke, 2013. "Experimentation by Firms, Distortions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 26-38, January.
    9. Chang-Tai Hsieh & Peter J. Klenow, 2014. "The Life Cycle of Plants in India and Mexico," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1035-1084.
    10. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    11. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    12. Eric Bond & Mario Crucini & Joel Rodrigue & Tristan Potter, 2013. "Misallocation and Productivity Effects of the Smoot-Hawley Tariff," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 120-134, January.
    13. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
    14. 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.
    15. 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 915-938, October.
    16. Ranasinghe, Ashantha, 2014. "Impact of policy distortions on firm-level innovation, productivity dynamics and TFP," Journal of Economic Dynamics and Control, Elsevier, vol. 46(C), pages 114-129.
    17. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
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    More about this item

    Keywords

    misallocation; productivity; heterogeneous establishments; distortions.;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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