Publication Date:
2019-07-01
Description:
We develop a methodology to disentangle sources of capital “mis-allocation,” i.e., dispersion in value-added/capital. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chinese manufacturing firms reveals that adjustment costs and uncertainty, while significant, explain only a modest fraction of the dispersion, which stems largely from other factors: a component correlated with productivity and a fixed effect. Adjustment costs are more salient for large US firms, though other factors still account for the bulk of the dispersion. Technological/markup heterogeneity explains a limited fraction in China, but a potentially large share in the United States. (JEL D22, D24, D25, E22, G31, L60, O11, O14, O47, P31)
Print ISSN:
0002-8282
Electronic ISSN:
1944-7981
Topics:
Economics
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