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Analyzing the Sources of Misallocation in Indian Manufacturing: A Gross-Output Approach

Analyzing the Sources of Misallocation in Indian Manufacturing: A Gross-Output Approach It is well established that misallocation of factor resources lowers productivity. In this paper, I use data from both formal and informal firms to study distortions in input and output markets as sources of misallocation in the Indian manufacturing sector. My work extends the seminal work of Hsieh and Klenow (2009). I consider output, capital, raw material, energy, and service sector distortions in a monopolistically competitive framework to measure the aggregate dispersion in total factor revenue productivity (TFPR). I also decompose the variance in TFPR and show that raw material and output distortions play a major role in defining aggregate misallocation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asian Development Review MIT Press

Analyzing the Sources of Misallocation in Indian Manufacturing: A Gross-Output Approach

Kabiraj, Sujana
Asian Development Review , Volume 37 (2): 33 – Sep 1, 2020
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Publisher
MIT Press
Copyright
Copyright © MIT Press
ISSN
0116-1105
eISSN
1996-7241
DOI
10.1162/adev_a_00152
Publisher site
See Article on Publisher Site

Abstract

It is well established that misallocation of factor resources lowers productivity. In this paper, I use data from both formal and informal firms to study distortions in input and output markets as sources of misallocation in the Indian manufacturing sector. My work extends the seminal work of Hsieh and Klenow (2009). I consider output, capital, raw material, energy, and service sector distortions in a monopolistically competitive framework to measure the aggregate dispersion in total factor revenue productivity (TFPR). I also decompose the variance in TFPR and show that raw material and output distortions play a major role in defining aggregate misallocation.

Journal

Asian Development Review – MIT Press

Published: Sep 1, 2020

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