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Productivity and resource misallocation in Latin America1)

Author

Listed:
  • Busso Matias

    (Research Department, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC 20577, USA)

  • Madrigal Lucia

    (International Food Policy Research Institute (IFPRI), 2033 K St NW #400, Washington, DC, USA)

  • Pagés Carmen

    (Labor Markets Unit, Inter-American Development Bank, 1300 New York Avenue NW, Washington, DC, USA)

Abstract

Total factor productivity (TFP) in Latin America has declined relative to the US since the mid-1970s. This paper applies a comparable methodology to firm-level data of ten Latin American countries to quantify the heterogeneity of firm productivity and the extent to which resource misallocation can explain lower aggregate TFP. In general, productivity heterogeneity and resource misallocation are found to be much larger than in the US. Achieving an efficient allocation of resources could boost manufacturing TFP between 41% and 122% depending on the countries and years considered. We also find that difficulty in access to capital and restrictive labor regulations explain distortions faced by firms.

Suggested Citation

  • Busso Matias & Madrigal Lucia & Pagés Carmen, 2013. "Productivity and resource misallocation in Latin America1)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 903-932, June.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:30:n:3
    DOI: 10.1515/bejm-2012-0087
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    References listed on IDEAS

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    More about this item

    Keywords

    distortions; firm heterogeneity; firm productivity; Latin America; misallocation costs; total factor productivity; JEL Classification: D24; O47; L25;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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