Potential Growth, Misallocation, and Institutional Obstacles: Firm-Level Evidence

Abstract

The views expressed in this paper are those of the author and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

Structural Transformation and Allocation Efficiency in China and India

“…The dispersion of marginal products across firms is a measure of idiosyncratic distortions that impede more productive firms to reach their optimal size and scale of production. The literature points to the existence of large inefficiencies in factor allocations between firms, particularly in emerging and transition countries (Restuccia and Rogerson, 2013;Hsieh and Klenow, 2009;Gamberoni et al 2016;Leòn-Ledesma, 2016).…”

Productivity and Resource Misallocation: Evidence From Firms in Middle East and North Africa (MENA) Region Countries

“…We should notice that in this framework we consider firms in the same defined sector expressed by the 4-digit International Standard Industrial Classification (ISIC). Following Hsieh and Klenow (2009) and other studies (León-Ledesma, 2016;Cirera et al, 2017;Chuah et al, 2018) the firm maximizes the profit as:…”

“…We should notice that we followed the approach by Cirera et al (2017) who tested the results using a value of =5, as also we tried with values equal at 2 and 4 and our results remain very similar, but we do not present them. Also we should notice that the Cobb-Douglas we assume is not innocuous, if the elasticity of substitution between labour and capital is different from one, then the dispersion of the MPK and thus the gains from reallocation can substantially change (León Ledesma et al, 2010;León-Ledesma, 2016). Following Oberfield (2013) and Hsieh and Klenow (2009) we measure the total misallocation as the ratio between the output level one would observe if the production factors were efficiently allocated and the actual aggregate production.…”

Productivity and Resource Misallocation: Empirical Findings from Firms in the Middle East and North Africa (MENA) Region and Turkey

“…Standard Industrial Classification (ISIC). Following Hsieh and Klenow (2009) and other studies (León-Ledesma, 2016;Cirera et al, 2017;Chuah et al, 2018), the firm maximizes the profit as:…”

“…We should notice that we followed the approach by Cirera et al (2017), who tested the results using a value of 𝜎=5, as also wried with values equal at 2 and 4 and our results remain very similar, but we do not present them. Also, we should notice that the Cobb-Douglas we assume is not innocuous, if the elasticity of substitution between labor and capital is different from one, then the dispersion of the MPK and thus the gains from reallocation can substantially change (León-Ledesma, McAdam & Willman, 2010;León-Ledesma, 2016). Following Oberfield (2013) and Hsieh and Klenow (2009), we measure the total misallocation as the ratio between the output level one would observe if the production factors were efficiently allocated and the actual aggregate production.…”