The Sources of Capital Misallocation
By J. David, Venky Venkateswaran. The American Economic Review, 2019
216 citations recorded by the source corpus.
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)
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/f8e4bb48a73136fb12288f5c60a3d10330856007
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Citations in the corpus
- Heterogeneous Markups, Growth, and Endogenous Misallocation (2020, background): “Recent empirically oriented papers that analyze product-level data include De Loecker et al. (2016), Bernard et al.”
- A Theory of Falling Growth and Rising Rents (2019, background): “Letting S denote the aggregate fraction of lines operated by high-productivity 11See Hsieh and Klenow (2009) and David and Venkateswaran (2019) for evidence of persistent differences in revenue labor productivity across firms.”