Why Does Misallocation Persist?
Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in developing countries. But why does misallocat...
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| Format: | Article |
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American Economic Association
2018
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| Online Access: | http://hdl.handle.net/1721.1/113837 https://orcid.org/0000-0001-9923-6088 |
| _version_ | 1826188967346700288 |
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| author | Banerjee, Abhijit Moll, Benjamin |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Banerjee, Abhijit Moll, Benjamin |
| author_sort | Banerjee, Abhijit |
| collection | MIT |
| description | Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in developing countries. But why does misallocation persists? That is, why don't distortions disappear on their own? This is particularly true for capital misallocation, a point we illustrate in a simple model of capital accumulation with credit constraints. We distinguish between misallocation on the intensive and the extensive margin, and show that the former should disappear asymptotically under general conditions, while the latter may persist. We conclude by discussing possible theories of persistent misallocation. |
| first_indexed | 2024-09-23T08:07:47Z |
| format | Article |
| id | mit-1721.1/113837 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T08:07:47Z |
| publishDate | 2018 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/1138372024-06-27T19:14:06Z Why Does Misallocation Persist? Banerjee, Abhijit Moll, Benjamin Massachusetts Institute of Technology. Department of Economics Banerjee, Abhijit Moll, Benjamin Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in developing countries. But why does misallocation persists? That is, why don't distortions disappear on their own? This is particularly true for capital misallocation, a point we illustrate in a simple model of capital accumulation with credit constraints. We distinguish between misallocation on the intensive and the extensive margin, and show that the former should disappear asymptotically under general conditions, while the latter may persist. We conclude by discussing possible theories of persistent misallocation. 2018-02-20T16:47:30Z 2018-02-20T16:47:30Z 2010-01 2018-02-20T15:05:06Z Article http://purl.org/eprint/type/JournalArticle 1945-7707 1945-7715 http://hdl.handle.net/1721.1/113837 Banerjee, Abhijit V., and Moll, Benjamin. “Why Does Misallocation Persist?” American Economic Journal: Macroeconomics 2, 1 (January 2010): 189–206 © 2017 American Economic Association https://orcid.org/0000-0001-9923-6088 http://dx.doi.org/10.1257/mac.2.1.189 American Economic Journal: Macroeconomics Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association American Economic Association |
| spellingShingle | Banerjee, Abhijit Moll, Benjamin Why Does Misallocation Persist? |
| title | Why Does Misallocation Persist? |
| title_full | Why Does Misallocation Persist? |
| title_fullStr | Why Does Misallocation Persist? |
| title_full_unstemmed | Why Does Misallocation Persist? |
| title_short | Why Does Misallocation Persist? |
| title_sort | why does misallocation persist |
| url | http://hdl.handle.net/1721.1/113837 https://orcid.org/0000-0001-9923-6088 |
| work_keys_str_mv | AT banerjeeabhijit whydoesmisallocationpersist AT mollbenjamin whydoesmisallocationpersist |