The Misallocation of Land and Other Factors of Production in India

65 Pages Posted: 20 Apr 2016

See all articles by Gilles Duranton

Gilles Duranton

University of Pennsylvania - Real Estate Department

Syed Ejaz Ghani

World Bank

Arti Grover Goswami

World Bank

William Kerr

Harvard University - Entrepreneurial Management Unit

Date Written: March 23, 2015

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.

Keywords: Fiscal & Monetary Policy, Urban Economics, Private Sector Development Law, Industrial Economics, Urban Communities, Private Sector Economics, National Urban Development Policies & Strategies, Equity and Development, Employment and Shared Growth, Economic Theory & Research, Economic Growth, Consumption, City to City Alliances, Achieving Shared Growth, Regional Urban Development, Marketing, Urban Economic Development, Pro-Poor Growth

Suggested Citation

Duranton, Gilles and Ghani, Ejaz and Goswami, Arti Grover and Kerr, William R., The Misallocation of Land and Other Factors of Production in India (March 23, 2015). World Bank Policy Research Working Paper No. 7221. Available at SSRN: https://ssrn.com/abstract=2584246

Gilles Duranton (Contact Author)

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

Ejaz Ghani

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Arti Grover Goswami

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

William R. Kerr

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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