Working Paper: NBER ID: w29717
Authors: Nicholas Bloom; Leonardo Iacovone; Mariana Pereira-Lopez; John Van Reenen
Abstract: We argue that greater misallocation is a key driver of the worse management practices in Mexico compared to the US. These management practices are strongly associated with higher productivity, growth, trade, and innovation. One indicator of greater misallocation in Mexico is the weaker size-management relationship compared to the US, particularly in the highly distorted Mexican service sector. Second, the size-management relationship is weaker in smaller markets, measured by distance to the US for manufacturing firms and population density for service firms. Third, municipalities with weaker institutions, measured by contract enforcement, crime, and corruption, have a weaker size-management relation. These results are consistent with frictions lowering aggregate management quality and productivity.
Keywords: No keywords provided
JEL Codes: J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| misallocation (D61) | management quality (L15) |
| management practices (M54) | productivity growth (O49) |
| management scores (M54) | firm size (manufacturing) (L25) |
| management scores (M54) | firm size (services) (L84) |
| institutional frictions (D02) | management quality (L15) |
| proximity to US border (F55) | size-management relationship (manufacturing) (L23) |
| institutional frictions (D02) | reallocation (J62) |