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Productivity and Resource Misallocation in Latin America

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  • Busso, Matías
  • Madrigal, Lucía
  • Pagés, Carmen

Abstract

Total factor productivity (TFP) in Latin America has not increased since the mid- 1970s, and in many countries it has declined. Moreover, resource misallocation can lower aggregate TFP. This paper presents evidence based on firm-level data from 10 Latin American countries to quantify the heterogeneity of firm productivity and the degree of resource misallocation within countries. Productivity heterogeneity and resource misallocation are found to be much larger than in the United States. Achieving an efficient allocation of resources could boost manufacturing TFP between 45 percent and 127 percent depending on the countries and years considered.

Suggested Citation

  • Busso, Matías & Madrigal, Lucía & Pagés, Carmen, 2012. "Productivity and Resource Misallocation in Latin America," IDB Publications (Working Papers) 3955, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:3955
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    Cited by:

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    2. Marcelo Selowsky & Claudio Loser, 2015. "Improving Microeconomic Efficiency of Latin American Economies," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 7(2), pages 121-149, May.
    3. Matias Busso & Maria Victoria Fazio & Santiago Levy Algazi, 2012. "(In)Formal and (Un)Productive: The Productivity Costs of Excessive Informality in Mexico," Research Department Publications 4789, Inter-American Development Bank, Research Department.
    4. Arias Ortiz E. & Crespi, G. & Rasteletti, A. & Vargas, F., 2014. "Productivity in services in Latin America and the Caribbean," MERIT Working Papers 2014-056, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Julieta Caunedo, 2013. "Industry Dynamics, Investment and Business Cycles," 2013 Meeting Papers 1078, Society for Economic Dynamics.
    6. Fidel Aroche, 2018. "Estudio de la productividad y de la evolución económica en América del Norte. Una perspectiva estructural/A study on productivity and the economic evolution in North America. A structural perspecti," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(1), pages 151-191.
    7. Gaaitzen J. Vries, 2014. "Productivity in a Distorted Market: The Case of Brazil's Retail Sector," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 499-524, September.
    8. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    9. Doan Thi Thanh Ha & Kozo Kiyota & Kenta Yamanouchi, 2016. "Misallocation and Productivity: The Case of Vietnamese Manufacturing," Asian Development Review, MIT Press, vol. 33(2), pages 94-118, September.
    10. Fatma Bouattour, 2020. "Measuring financial constraints of Brazilian industries: Rajan and Zingales index revisited," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(6), pages 677-710, August.
    11. Andreas Schneider, 2019. "Deterrence Theory in Paraguay: Exploring Fraud and Violation of Trust Cases," Social Sciences, MDPI, vol. 8(1), pages 1-17, January.
    12. Busom, Isabel & Vélez-Ospina, Jorge Andrés, 2017. "Innovation, Public Support, and Productivity in Colombia. A Cross-industry Comparison," World Development, Elsevier, vol. 99(C), pages 75-94.
    13. Epstein, Brendan & Finkelstein Shapiro, Alan, 2017. "Employment and firm heterogeneity, capital allocation, and countercyclical labor market policies," Journal of Development Economics, Elsevier, vol. 127(C), pages 25-41.
    14. Finkelstein Shapiro, Alan & Mandelman, Federico S., 2016. "Remittances, entrepreneurship, and employment dynamics over the business cycle," Journal of International Economics, Elsevier, vol. 103(C), pages 184-199.
    15. Scot,Thiago & Rodella,Aude-Sophie, 2016. "Sifting through the Data : labor markets in Haiti through a turbulent decade (2001-2012)," Policy Research Working Paper Series 7562, The World Bank.
    16. Schneider, Andreas, 2019. "Deterrence Theory in Paraguay: Exploring Fraud and Violation of Trust Cases," MPRA Paper 102204, University Library of Munich, Germany.
    17. Fatma Bouattour, 2016. "Financial Constraints and Export Performances: Evidence from Brazilian Micro-Data," Working Papers DT/2016/18, DIAL (Développement, Institutions et Mondialisation).
    18. Elías Albagli & Mario Canales & Chad Syverson & Matías Tapia & Juan Wlasiuk, 2020. "Productivity Gaps and Job Flows: Evidence from Censal Microdata," Working Papers Central Bank of Chile 895, Central Bank of Chile.
    19. Victor Motta, 2020. "Lack of access to external finance and SME labor productivity: does project quality matter?," Small Business Economics, Springer, vol. 54(1), pages 119-134, January.
    20. Meyer, Leandro Garcia & Lucinda, Claudio Ribeiro de & Spolador, Humberto, 2021. "The payroll tax exemption in Brazil: structural and quasi-experimental perspectives," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 75(1), July.

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    More about this item

    Keywords

    Total factor productivity; Firm productivity; Firm heterogeneity; Misallocation costs;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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