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The Role Of Resource Misallocation In Cross-Country Differences In Manufacturing Productivity

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  • Inklaar, Robert
  • Lashitew, Addisu A.
  • Timmer, Marcel P.

Abstract

Misallocation of resources across firms leads to lower aggregate productivity. In this paper, we provide new estimates of manufacturing productivity differences across countries and establish by how much they would be reduced if such misallocation were eliminated. Using World Bank survey data for formal manufacturing firms in 52 low- and middle-income countries, we show that manufacturing productivity would increase by an average of 62%, but productivity gaps relative to the United States would remain large. We also find that lower-income countries do not have more to gain from reducing misallocation, as efficiency of resource allocation is uncorrelated with income levels.

Suggested Citation

  • Inklaar, Robert & Lashitew, Addisu A. & Timmer, Marcel P., 2017. "The Role Of Resource Misallocation In Cross-Country Differences In Manufacturing Productivity," Macroeconomic Dynamics, Cambridge University Press, vol. 21(3), pages 733-756, April.
    • Handle: RePEc:cup:macdyn:v:21:y:2017:i:03:p:733-756_00
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    Cited by:

    1. Jan Hagemejer & Peter Szewczyk & Joanna Tyrowicz, 2018. "Misallocations go a long way: evidence from firm-level data," GRAPE Working Papers 31, GRAPE Group for Research in Applied Economics.
    2. Bastien Dufau, 2020. "The influence of a carbon tax on cost competitiveness," Working Papers 2005, Chaire Economie du climat.
    3. Xiaoxiao Chu & Hong Geng & Wen Guo, 2019. "How Does Energy Misallocation Affect Carbon Emission Efficiency in China? An Empirical Study Based on the Spatial Econometric Model," Sustainability, MDPI, vol. 11(7), pages 1-16, April.
    4. Konstantins Benkovskis, 2018. "Misallocation, productivity and fragmentation of production: the case of Latvia," Journal of Productivity Analysis, Springer, vol. 49(2), pages 187-206, June.
    5. Ling-Yun He & Xiao-Feng Qi, 2021. "Resource Misallocation and Energy-Related Pollution," IJERPH, MDPI, vol. 18(10), pages 1-19, May.
    6. Lashitew, Addisu A., 2017. "The Uneven Effect of Financial Constraints: Size, Public Ownership, and Firm Investment in Ethiopia," World Development, Elsevier, vol. 97(C), pages 178-198.
    7. Daniel Gallardo‐Albarrán & Robert Inklaar, 2021. "The Role Of Capital And Productivity In Accounting For Income Differences Since 1913," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 952-974, July.
    8. BAH, Mamadou Mouminy, 2021. "Agglomeration Economies and Labour Misallocation in Cote d’Ivoire," MPRA Paper 109314, University Library of Munich, Germany.

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