Dynamic Inputs and Resource (Mis)Allocation

Asker, John; Collard-Wexler, Allan; Loecker, Jan De

doi:10.1086/677072

Cited by 308 publications

(234 citation statements)

References 25 publications

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“…Furthermore, this result suggests that the cyclicality of capital reallocation should not be interpreted as strong evidence in favor of a particular type of shock or in favor of the role of financial frictions in business-cycle dynamics. 2 In this sense, this paper is related to Asker et al (2014), who show that static measures of cross-sectional dispersion in marginal products do not necessarily provide evidence for "misallocation" in a welfare sense in models with investment adjustment costs. Consistent with their result, the present paper suggests that time-series variation in the dispersion of marginal products also does not necessarily imply that the allocation improves or worsens in a welfare sense over time.…”

Section: Related Literaturementioning

confidence: 91%

The Market for Used Capital: Endogenous Irreversibility and Reallocation Over the Business Cycle

Lanteri

2016

SSRN Journal

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Capital reallocation is procyclical in the data, but countercyclical in standard businesscycle models. To solve this puzzle, I build a model of endogenous partial irreversibility, with heterogeneous firms facing aggregate and idiosyncratic productivity shocks. Used investment goods are imperfect substitutes for new ones because of firm-level capital specificity. The price of used capital responds to aggregate shocks, leading to equilibrium real-option effects on investment and reallocation. The model generates procyclical capital reallocation and procyclical price of used capital, consistent with new industrylevel evidence I present, and provides a microfoundation for both micro and macro capital adjustment costs.

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Section: Related Literaturementioning

confidence: 91%

The Market for Used Capital: Endogenous Irreversibility and Reallocation Over the Business Cycle

Lanteri

2016

SSRN Journal

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“…Kehrig (2015) presents evidence for a countercyclical dispersion of (revenue) productivity in U.S. manufacturing. Asker, Collard-Wexler, and De Loecker (2014) show how risk and adjustment costs in capital accumulation can rationalize dispersion of firm-level revenue productivity. Following their observation, our model allows for the possibility that increases in the dispersion of firm-level outcomes are driven by changes in second moments of the stochastic process governing idiosyncratic productivity.…”

Section: We Use a Firm-level Dataset From Orbis-amadeus That Covers Mmentioning

confidence: 98%

Capital Allocation and Productivity in South Europe

Gopinath¹,

et al. 2015

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Starting in the early 1990s, countries in southern Europe experienced low productivity growth alongside declining real interest rates. We use data for manufacturing firms in Spain between 1999 and 2012 to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor, and a significant increase in productivity losses from capital misallocation over time. We develop a model with size-dependent financial frictions that is consistent with important aspects of firms' behavior in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a significant decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We show that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway.

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“…associated with Shortage, suggesting that coal plants are being run more to respond to a tighter supply-demand balance. 6 Furthermore, Alam (2013) shows that Peak Shortage is correlated with her measure of blackouts, which is based on nighttime lights measured by satellites, and our main empirical results will show that Shortage is strongly correlated with hydroelectricity supply and with manufacturing outcomes such as self-generation. The CEA has lost its reservoir data for 2000 and its hydro plant generation data for 1992, so we impute data in those years using rainfall within the watershed.…”

Section: Ib Power Sector Datamentioning

confidence: 70%

How Do Electricity Shortages Affect Industry? Evidence from India

Allcott¹,

Collard-Wexler²,

O’Connell³

2014

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We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India's average reported level of shortages reduces the average plant's revenues and producer surplus by five to ten percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impact of shortages. AbstractWe estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India's average reported level of shortages reduces the average plant's revenues and producer surplus by five to ten percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impact of shortages.JEL Codes: D04, D24, L11, L94, O12, O13, Q41.

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Dynamic Inputs and Resource (Mis)Allocation

Cited by 308 publications

References 25 publications

The Market for Used Capital: Endogenous Irreversibility and Reallocation Over the Business Cycle

The Market for Used Capital: Endogenous Irreversibility and Reallocation Over the Business Cycle

Capital Allocation and Productivity in South Europe

How Do Electricity Shortages Affect Industry? Evidence from India

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