Resource misallocation and total factor productivity: Manufacturing firms in South Africa

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: Misallocation of labour and capital can greatly reduce aggregate productivity. In this study, we use tax administrative data to examine the extent of resource misallocation in the South African context. In addition, we zoom in on how different government incentives affect the allocation (or misallocation) of capital and labour across firms, and we quantify the extent to which alleviating these policy-induced distortions would improve productivity for the manufacturing sector in South Africa. We also analyse heterogeneity in the extent of misallocation along the firm size distribution and identify firm size categories where these policy distortions are having the biggest impact on productivity.

The asymmetric impact of economic policy uncertainty on firm-level investment in South Africa: Firm-level evidence from administrative tax data

“…Medium-sized firms reduce their investment spending more sharply when policy uncertainty increases. As there are grounds for believing that large firms are less credit-constrained than medium-sized or small firms (Lesame 2019;Newman et al 2019), these findings support an argument that policy uncertainty has an asymmetric impact on investment across firms due to financial frictions. This is the first paper, to our knowledge, to examine the effect of uncertainty on firm-level investment in South Africa in the presence of credit constraints.…”

Trade liberalisation and product mix adjustments: Evidence from South African firms

“…Besides this heterogeneity of productivity growth between industries, there also exists a pronounced heterogeneity within industries, which is mostly driven by large firms. Newman et al (2019) identify significant misallocations of labour and capital that hamper manufacturing productivity growth. 3 With regard to dynamics among South African exporters, empirical work on the SARS-NT firm level panel confirmed common findings in the literature on exporters.…”

“…Policy measures explaining misallocation across firms include policies related to research and development incentives which allow for a tax deduction of 150% of expenditure for R&D or general depreciation allowances on movable capital equipment. For more details see Newman et al (2019).…”