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Misallocation and Manufacturing TFP in China and India


Chang-Tai Hsieh


University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Peter J. Klenow


Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

August 2007

NBER Working Paper No. w13290

Abstract:     
Resource misallocation can lower aggregate total factor productivity (TFP). We use micro data on manufacturing establishments to quantify the potential extent of misallocation in China and India compared to the U.S. Compared to the U.S., we measure sizable gaps in marginal products of labor and capital across plants within narrowly-defined 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 30-50% in China and 40-60% in India.

Number of Pages in PDF File: 61

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Date posted: August 9, 2007  

Suggested Citation

Hsieh, Chang-Tai and Klenow, Peter J., Misallocation and Manufacturing TFP in China and India (August 2007). NBER Working Paper No. w13290. Available at SSRN: http://ssrn.com/abstract=1005603

Contact Information

Chang-Tai Hsieh (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Peter J. Klenow
Stanford University - Department of Economics ( email )
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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