Working Paper: NBER ID: w14060
Authors: Laura Alfaro; Andrew Charlton; Fabio Kanczuk
Abstract: We investigate, using plant-level data for 79 developed and developing countries, whether differences in the allocation of resources across heterogeneous plants are a significant determinant of cross-country differences in income per worker. For this purpose, we use a standard version of the neoclassical growth model augmented to incorporate monopolistic competition among heterogeneous plants. For our preferred calibration, the model explains 58% of the log variance of income per worker. This figure should be compared to the 42% success rate of the usual model.
Keywords: plant size distribution; income differences; resource allocation; neoclassical growth model
JEL Codes: O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| misallocation of resources across plants (D24) | income per worker (J31) |
| policies leading to distortions (H31) | misallocation of resources across plants (D24) |
| misallocation of resources across plants (D24) | productivity (O49) |
| misallocation of resources across plants (D24) | income levels (J31) |
| misallocation model (D61) | cross-country income dispersion (D31) |