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The misallocation of land and other factors of production in India

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  • Duranton,Gilles
  • Ghani,Syed Ejaz
  • Grover,Arti Goswami
  • Kerr,William Robert
  • Duranton,Gilles
  • Ghani,Syed Ejaz
  • Goswami,Arti Grover
  • Kerr,William Robert

Abstract

This paper quantifies the misallocation of manufacturing output and factors of production between establishments across Indian districts during 1989-2010. It first distills a number of stylized facts about misallocation in India, and demonstrates the validity of misallocation metrics by connecting them to regulatory changes in India that affected real property. With this background, the study next quantifies the implications and determinants of factor and output misallocation. Although more-productive establishments in India tend to produce more output, factors of production are grossly misallocated. A better allocation of output and factors of production is associated with greater output per worker. Misallocation of land plays a particularly important role in these challenges.

Suggested Citation

  • Duranton,Gilles & Ghani,Syed Ejaz & Grover,Arti Goswami & Kerr,William Robert & Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "The misallocation of land and other factors of production in India," Policy Research Working Paper Series 7221, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7221
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why are Indian firms five times less productive than American ones? One reason is land
      by Ejaz Ghani in Let's Talk Development on 2015-10-09 19:00:18

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    3. Sergey Kichko, 2020. "Competition, land prices and city size [Gravity redux: estimation of gravity-equation coefficients, elasticities of substitution, and general equilibrium comparative statics under asymmetric bilate," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1313-1329.
    4. Xiaodong Zhang & Kaifeng Duan & Lun Yang & Xiaokun Wei, 2024. "Land Regulation and Local Service Provision: Can Economic Growth and Environmental Protection Be Achieved Simultaneously?," Land, MDPI, vol. 13(9), pages 1-23, September.
    5. Antonin Bergeaud & Simon Ray, 2021. "Adjustment Costs and Factor Demand: New Evidence from Firms’ Real Estate [The heterogeneous impact of market size on innovation: evidence from French firm-level exports]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 70-100.
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    7. Xi, Qiangmin & Mei, Lin, 2022. "How did development zones affect China’s land transfers? The scale, marketization, and resource allocation effect," Land Use Policy, Elsevier, vol. 119(C).
    8. Kumari, Ranpati Dewage Thilini Sumudu & Chen, Shawn Xiaoguang & Li, Bei & Tang, Sam Hak Kan, 2023. "Can land misallocation be a greater barrier to development than capital? Evidence from manufacturing firms in Sri Lanka," Economic Modelling, Elsevier, vol. 126(C).
    9. Duranton,Gilles & Ghani,Syed Ejaz & Grover,Arti Goswami & Kerr,William Robert & Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2016. "A detailed anatomy of factor misallocation in India," Policy Research Working Paper Series 7547, The World Bank.
    10. Sampreet Singh Goraya, 2019. "How does Caste Affect Entrepreneurship? Birth vs Worth," Working Papers 1104, Barcelona School of Economics.
    11. Alberto Criscuolo & Ifeyinwa Uchenna Onugha & Gonzalo Varela, 2014. "Oriental Republic of Uruguay," World Bank Publications - Reports 30469, The World Bank Group.
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    14. Clémence Berson & Pierre-Philippe Combes & Laurent Gobillon & Aurélie Sotura, 2023. "Time-Varying Agglomeration Economies and Aggregate Wage Growth," Working Papers hal-04346733, HAL.
    15. Bergeaud Antonin & Ray Simon, 2020. "The macroeconomics of teleworking [Macroéconomie du télétravail]," Bulletin de la Banque de France, Banque de France, issue 231.
    16. Enrica Di Stefano & Daniela Marconi, 2016. "Structural transformation and allocation efficiency in China and India," Temi di discussione (Economic working papers) 1093, Bank of Italy, Economic Research and International Relations Area.
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    19. Fei, Xuan, 2020. "The misallocation in the Chinese land market," BOFIT Discussion Papers 23/2020, Bank of Finland, Institute for Economies in Transition.
    20. Pal, Sarmistha & Chowdhury, Prabal Roy & Saher, Zoya, 2021. "Land Ceiling Legislations, Land Acquisition and De-industrialisation: Theory and Evidence from the Indian States," IZA Discussion Papers 14624, Institute of Labor Economics (IZA).
    21. Zhou, Di & Huang, Qing & Chong, Zhaohui, 2022. "Analysis on the effect and mechanism of land misallocation on carbon emissions efficiency: Evidence from China," Land Use Policy, Elsevier, vol. 121(C).
    22. Hongfeng Zhang & Lu Huang & Yan Zhu & Hongyun Si & Xu He, 2021. "Does Low-Carbon City Construction Improve Total Factor Productivity? Evidence from a Quasi-Natural Experiment in China," IJERPH, MDPI, vol. 18(22), pages 1-21, November.
    23. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2014. "Spatial dynamics of electricity usage in India," Policy Research Working Paper Series 7055, The World Bank.
    24. Duranton,Gilles & Ghani,Syed Ejaz & Grover,Arti Goswami & Kerr,William Robert & Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "Effects of land misallocation on capital allocations in India," Policy Research Working Paper Series 7451, The World Bank.
    25. Moretti, Enrico & Hsieh, Chang-Tai, 2015. "Why Do Cities Matter? Local Growth and Aggregate Growth," CEPR Discussion Papers 10604, C.E.P.R. Discussion Papers.

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