Working Paper: NBER ID: w13018
Authors: Diego Restuccia; Richard Rogerson
Abstract: We formulate a version of the growth model in which production is carried out by heterogeneous plants and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across heterogeneous plants may be an important factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured TFP in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.
Keywords: policy distortions; aggregate productivity; heterogeneous plants; total factor productivity
JEL Codes: E20; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Policy distortions (H31) | Resource allocation across plants (Q21) |
| Resource allocation across plants (Q21) | Productivity (O49) |
| Policy distortions (H31) | Output per capita (E23) |
| Policy distortions (H31) | Measured TFP (D24) |
| Policies inducing heterogeneity in prices (L11) | Resource allocation across plants (Q21) |