Resource Misallocation in European Firms: The Role of Constraints, Firm Characteristics and Managerial Decisions

46 Pages Posted: 2 Apr 2018

See all articles by Yuriy Gorodnichenko

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Debora Revoltella

UniCredit Group

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Christoph Weiss

European Union - European Investment Bank

Multiple version iconThere are 3 versions of this paper

Abstract

Using a new survey, we show that the dispersion of marginal products across firms in the European Union is about twice as large as that in the United States. Reducing it to the US level would increase EU GDP by more than 30 percent. Alternatively, removing barriers between industries and countries would raise EU GDP by at least 25 percent. Firm characteristics, such as demographics, quality of inputs, utilization of resources, and dynamic adjustment of inputs, are predictors of the marginal products of capital and labor.We emphasize that some firm characteristics may reflect compensating differentials rather than constraints and the effect of constraints on the dispersion of marginal products may hence be smaller than has been assumed in the literature. We also show that cross-country differences in the dispersion of marginal products are more due to differences in how the business, institutional and policy environment translates firm characteristics into outcomes than to the differences in firm characteristics per se.

Keywords: marginal products, resource allocation, firm-specific factors, economic growth

JEL Classification: O12, O47, O52, D22, D24

Suggested Citation

Gorodnichenko, Yuriy and Revoltella, Debora and Svejnar, Jan and Weiss, Christoph, Resource Misallocation in European Firms: The Role of Constraints, Firm Characteristics and Managerial Decisions. Available at SSRN: https://ssrn.com/abstract=3153365 or http://dx.doi.org/10.2139/ssrn.3153365

Yuriy Gorodnichenko (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.econ.berkeley.edu/~ygorodni/index.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Debora Revoltella

UniCredit Group ( email )

Via Tortona 33
Milan, 20121
Italy
+39 02 4762 4053 (Phone)
+39 02 4762 4057 (Fax)

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

Christoph Weiss

European Union - European Investment Bank ( email )

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
17
Abstract Views
308
PlumX Metrics