Misallocation and manufacturing TFP in China and India

Chang, Tai Hsieh and Peter, J- Klenow (2007): Misallocation and manufacturing TFP in China and India. Published in: The Quaterly Journal Of Economics , Vol. 1, No. 1 (30 June 2007): pp. 1403-1447.

Abstract

Resource misallocation can lower aggregate total factor productivity (TFP).We use microdata on manufacturing establishments to quantify the potential extent of misallocation in China and India versus the United States. We measure sizable gaps in marginal products of labor and capital across plants within narrowly defined industries in China and India compared with the United States. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the United States, we calculate manufacturing TFP gains of 30%–50% in China and 40%–60% in India.

• Item Type: MPRA Paper
• Language: English
• Keywords: India,China, Economy
• Subjects: D - Microeconomics > D2 - Production and Organizations; C - Mathematical and Quantitative Methods > C0 - General; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A20 - General; D - Microeconomics > D3 - Distribution; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; D - Microeconomics > D1 - Household Behavior and Family Economics; A - General Economics and Teaching > A1 - General Economics > A10 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics; D - Microeconomics > D0 - General; A - General Economics and Teaching > A3 - Collective Works > A30 - General; A - General Economics and Teaching > A3 - Collective Works; F - International Economics > F1 - Trade

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