Banerjee, Abhijit V. and Moll, Benjamin 
ORCID: 0009-0003-6067-359X
(2010)
Why does misallocation persist?
American Economic Journal: Macroeconomics, 2 (1).
189 - 206.
ISSN 1945-7707
Abstract
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.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.aeaweb.org/journals/mac |
| Additional Information: | © 2010 The Authors |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment (including Inventories); Capacity G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure |
| Date Deposited: | 05 Nov 2019 15:24 |
| Last Modified: | 12 Dec 2024 01:57 |
| URI: | http://eprints.lse.ac.uk/id/eprint/102383 |
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