The drivers and consequences of resource misallocation: exploiting variation across Mexican industries and states

Misch, Florian and Saborowski, Christian (2020) The drivers and consequences of resource misallocation: exploiting variation across Mexican industries and states. Economía, 20 (2). 61 - 96. ISSN 1529-7470

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Abstract

This paper explores the role of specific structural distortions in explaining Mexico’s weak productivity growth through the misallocation of resources across firms. The paper makes two contributions. First, we show that there is a close correlation between the level of resource misallocation and per capita income across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states, together with unusually rich data at the establishment, local, and industry levels, to shed light on its determinants. We identify several well-defined and observable distortions that have a statistically and economically meaningful effect on productivity via resource misallocation. In particular, we find that misallocation rises with the prevalence of labor informality, crime, corruption, and market concentration and with weaker access to financial and telecommunications services.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2020 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Date Deposited:	03 Jul 2024 15:15
Last Modified:	12 Dec 2024 04:14
URI:	http://eprints.lse.ac.uk/id/eprint/123325

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