Policy Distortions and Aggregate Productivity with Heterogeneous Plants
36 Pages Posted: 14 Apr 2007 Last revised: 29 Jul 2022
Date Written: April 2007
Abstract
We formulate a version of the growth model in which production is carried out by heterogeneous plants and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across heterogeneous plants may be an important factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured TFP in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Misallocation and Manufacturing TFP in China and India
By Chang-tai Hsieh and Peter J. Klenow
-
Misallocation and Manufacturing TFP in China and India
By Chang-tai Hsieh and Peter J. Klenow
-
Growth Theory Through the Lens of Development Economics
By Abhijit V. Banerjee and Esther Duflo
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Stephen J. Redding, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
Macroeconomic Implications of Size-Dependent Policies
By Nezih Guner, Gustavo Ventura, ...
-
By Zheng Michael Song, Kjetil Storesletten, ...
-
Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China
By David Dollar and Shang-jin Wei