Misallocation and Manufacturing TFP in China and India
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)
NBER Working Paper No. w13290
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
Date posted: August 9, 2007
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