Misallocation and Productivity in the Lead Up to the Eurozone Crisis
By Daniel A. Dias, C. R. Marques, C. Richmond. 2016
126 citations recorded by the source corpus.
We use Portuguese firm-level data to investigate whether changes in resource misallocation may have contributed to the poor economic performance of some southern and peripheral European countries leading up to the Eurozone crisis. We extend Hsieh and Klenow's (2009) methodology to include intermediate inputs and consider all sectors of the economy (agriculture, manufacturing, and services). We find that within-industry misallocation almost doubled between 1996 and 2011. Equalizing total factor revenue productivity across firms within an industry could have boosted valued-added 48 percent and 79 percent above actual levels in 1996 and 2011, respectively. This implies that deteriorating allocative efficiency may have shaved around 1.3 percentage points off the annual GDP growth during the 1996-2011 period. Allocative efficiency deterioration, despite being a widespread phenomenon, is significantly higher in the service sector, with 5 industries accounting for 72 percent of the total variation. Capital distortions are the most important source of potential value-added efficiency gains, especially in the service sector, with a relative contribution increasing over time.
Subfields: Economics and Econometrics, Finance, Political Science and International Relations
View Paper: https://www.semanticscholar.org/paper/e2fa15919e28cd4670db862a86c3e66039725516
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Citations in the corpus
- Gone with the Headwinds: Global Productivity (2017, background): “…manufacturing sector in Gopinath and others (2015), who link the increased misallocation of capital in Southern Europe to the sharp rise in poorly intermediated capital inflows following the inception of the euro (see also Reis 2013; Borio and others 2016; and Dias, Marques, and Richmond 2016).”