A Simple Accounting Framework for the Effect of Resource Misallocation on Aggregate Productivity
نویسنده
چکیده
This paper develops a simple accounting framework that measures the effect of resource misallocation on aggregate productivity. This framework is based on a multi-sector general equilibrium model with sector-specific frictions in the form of taxes on sectoral factor inputs. This framework is flexible for demand side assumptions such as preference and aggregate production function. Moreover, this framework is consistent with that commonly used in productivity analysis. Finally, I apply this framework to measure to what extent resource misallocation affects aggregate productivity and explains the differences in aggregate productivity across developed countries. I find that the effect of resource misallocation is quantitatively large and explains more than 20% of the differences in the aggregate productivity among developed countries. JEL Codes: E23, O11, O41, O47
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