American Economic Review· 2013Q1
Cross-Country Differences in Productivity: The Role of Allocation and Selection
- 1,058citations
- Q1SCImago
- 2013year
Short summary
Firm-level policy distortions explain substantial cross-country differences in aggregate productivity by affecting the within-industry covariance between firm size and productivity.
AI-generated from the title and abstract; the full text is not read.
Key points
- Substantial and systematic cross-country variation exists in the within-industry covariance between firm size and productivity.
- Firm-level policy distortions, alongside adjustment frictions (overhead labor, quasi-fixed capital), are modeled as key determinants.
- Differences in distortions can account for observed cross-country size-productivity covariance patterns.
- These distortion-driven differences in covariance imply significant variations in aggregate productivity performance.
AI-generated from the title and abstract; the full text is not read.
Abstract
This paper investigates the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. Exploiting harmonized firm-level data for a number of countries, we show that there is substantial and systematic cross-country variation in the within-industry covariance between size and productivity. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and distortions. The model can be readily calibrated so that variations in the distribution of distortions allow matching the observed cross-country moments. We show that the differences in the distortions that account for the size-productivity covariance imply substantial differences in aggregate performance. (JEL D24, L25, O47)
The authors' abstract, as published at the source. American Economic Review, 2013 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance