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The misallocation of land and other factors of production in India

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  • Duranton,Gilles
  • Ghani,Syed Ejaz
  • Goswami,Arti Grover
  • Kerr,William Robert

Abstract

This paper quantifies the misallocation of manufacturing output and factors of production between establishments across Indian districts during 1989-2010. It first distills a number of stylized facts about misallocation in India, and demonstrates the validity of misallocation metrics by connecting them to regulatory changes in India that affected real property. With this background, the study next quantifies the implications and determinants of factor and output misallocation. Although more-productive establishments in India tend to produce more output, factors of production are grossly misallocated. A better allocation of output and factors of production is associated with greater output per worker. Misallocation of land plays a particularly important role in these challenges.

Suggested Citation

  • Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "The misallocation of land and other factors of production in India," Policy Research Working Paper Series 7221, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7221
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why are Indian firms five times less productive than American ones? One reason is land
      by Ejaz Ghani in Let's Talk Development on 2015-10-09 19:00:18

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    Cited by:

    1. Chang-Tai Hsieh & Enrico Moretti, 2015. "Housing Constraints and Spatial Misallocation," NBER Working Papers 21154, National Bureau of Economic Research, Inc.
    2. Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2016. "A detailed anatomy of factor misallocation in India," Policy Research Working Paper Series 7547, The World Bank.
    3. World Bank, 2015. "Peru Building on Success," World Bank Other Operational Studies 22984, The World Bank.
    4. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2014. "Spatial dynamics of electricity usage in India," Policy Research Working Paper Series 7055, The World Bank.
    5. Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "Effects of land misallocation on capital allocations in India," Policy Research Working Paper Series 7451, The World Bank.
    6. A. Bergeaud & S.Ray, 2017. "Adjustment Costs and Factor Demand: New Evidence From Firms’ Real Estate," Working papers 641, Banque de France.
    7. Hsieh, Chang-Tai & Moretti, Enrico, 2015. "Why Do Cities Matter? Local Growth and Aggregate Growth," CEPR Discussion Papers 10604, C.E.P.R. Discussion Papers.

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    Keywords

    Economic Theory&Research; Labor Policies; Urban Housing; Urban Slums Upgrading; Urban Services to the Poor;

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