Factor market distortions across time,space and sectors in China

In this paper, we measure TFP losses in China?s non-agricultural economy associated with labour and capital misallocation across provinces and sectors between 1985 and 2007. We also decompose the overall loss into factor market distortions within provinces (between state and non-state sectors) and distortions between provinces (within sectors). Over the entire period, misallocation lowers aggregate non-agricultural TFP by an average of twenty percent. However, after initially declining, these losses increased appreciably beginning in the mid-1990s. This reversal can be attributed almost exclusively to increasing misallocation of capital between state and non-state sectors within provinces, while losses from between province misallocation remained fairly constant. We argue that the recent increase in capital market distortions is related to government policies that encourage investments in the state sector at the expense of investments in the more productive non-state sector.     

要素市场扭曲、资源错置与生产率

要素市场政策扭曲会降低全要素生产率。本文在一个随机动态一般均衡模型框架下,定量考察我国偏向国有企业政策的效率损失。理论模型引入了垄断竞争的中间产品生产企业与内生化的进入退出选择,用不同的全要素生产率增长随机过程,刻画了要素市场面临政策扭曲的国有与私有企业。为了全面反映产业特征,本文用制造业企业微观数据,来校准企业全要素生产率随机增长。通过校准,定量模型表明,源于政策扭曲的资源错置,导致了非常高昂的效率损失。     

Entry costs, industry structure, and cross-country income and TFP differences

Entry costs vary dramatically across countries. To assess their impact on cross-country differences in output and TFP, we construct a model with endogenous entry and operation decisions by firms. We calibrate the model to match the U.S. distribution of employment and firms by size. Higher entry costs lead to greater misallocation of productive factors and lower TFP and output. In the model, countries in the lowest decile of the entry costs distribution have 1.32 to 1.45 times higher TFP and 1.52 to 1.75 times higher output per worker than countries in the highest decile. As in the data, higher entry costs are associated with lower entry rates and business density.     

A quantitative explanation of the low productivity in South–Eastern European economies: the role of misallocations

It is well known that southeast Europe is the least developed area in Europe. Using a methodology based on the idea of heterogeneous firms, this paper studies the degree to which firm heterogeneity and resource misallocation can explain the lower TFP in southeast Europe. The results show a significant degree of heterogeneity and resource misallocation, although the results are sensitive to the calibration used. There is evidence that firm-level productivity depends on firm size, while taxation negatively influences it. There is also some evidence that foreign-owned firms are more competitive, as are exporting firms. Results are generally robust across the various specifications used, but less so relative to the measure of productivity used. Additional evidence suggests that infrastructure-related obstacles as well as institutional instability drive the output distortion, while no factor is underlined as a significant driver of capital distortions, suggesting the need for better data sources for the latter.     

Productivity and misallocation of energy resources: Evidence from Korea’s manufacturing Sector

This paper analyzes the role of allocative efficiency of energy resources with respect to total factor productivity (TFP) in the Korean manufacturing sector. Using firm-level data for Korea, we extend the framework of Hsieh and Klenow (2009) to measure allocative inefficiency of energy markets as a function of energy price distortions. Our results indicate that between the years 2000 and 2014, intra-industry misallocation has increased. With respect to energy resources, this is truer in the low-oil-price periods than in other periods. An improvement in allocative efficiency could be attained by equalizing total factor revenue productivity across firms within an industry. In reallocating capital, labor, and energy resources, hypothetical TFP increases of 51.3 % and 71.7 % above actual levels in 2000 and 2014, respectively, could have been achieved. The evolution of firm productivity has been shaped by energy (electricity and fuel) market distortion and capital market distortion. Our evidence suggests that government (energy) price intervention is likely to have played an important role in productivity loss and in allocative inefficiency observed in energy markets.     

Global sourcing and credit constraints

This paper incorporates credit constraints into a model of global sourcing and heterogeneous firms. Following Antràs and Helpman ( 2004 ), heterogeneous firms decide whether to outsource or integrate input suppliers. Financing of fixed organizational costs requires borrowing with credit constraints and collateral based on tangible assets. The party that controls intermediate inputs is responsible for these financing costs. Sectors differ in their reliance on external finance and countries vary in their financial development. The model predicts that increased financial development decreases the share of integration relative to outsourcing in a country. The effect is more pronounced in sectors with a high reliance on external finance. However, this effect is mitigated by higher productivity (TFP) and headquarter intensity. Empirical examination confirms the predictions of the model. An improvement in financial development from the 25th to the 75th percentile in industries at the 75th percentile in finance dependence relative to those at the 25th percentile is associated with a 16.8% decrease in the median share of US intra‐firm imports. An increase in TFP from the 25th to the 75th percentile in the TFP triple interactions increase the share of US intra‐firm imports at the median by 3.2%. An increase in headquarter intensity from the 25th to the 75th percentile in the headquarter intensity triple interactions increase the share of US intra‐firm imports at the median by 21%.     

Tax collection,the informal sector,and productivity

An important determinant of informality in a country is its tax enforcement capacity, which some authors argue further distorts the decisions of firms and creates inefficiency. In this paper, I assess the quantitative effect of incomplete tax enforcement on aggregate output and productivity using a dynamic general equilibrium framework. I calibrate the model using data for Mexico, where the informal sector is large. I then investigate the effects of improving enforcement. I find that under complete enforcement, Mexico's labor productivity and output would be 19% higher under perfect competition and 34% higher under monopolistic competition. The source of this gain is the removal of the distortions induced by incomplete enforcement of taxes. These distortions affect the economy in three ways: by reducing the capital–labor ratios of informal establishments; by allowing low-productive entrepreneurs to enter; and by misallocating resources towards low-productive establishments. As a result, TFP and capital accumulation are reduced, and hence output. I decompose the gains following the guidelines of five leading papers in the literature of resource misallocation across plants. I isolate the effects of pure factor misallocation, distorted occupational choices, capital accumulation, and complementarities. I also study marginal improvements in enforcement and find that there is an inverted-U relationship between the size of the informal sector and output. This reflects the fact that improving enforcement entails a tradeoff: more taxes vs. fewer distortions.     

价格扭曲、要素错配和效率损失:理论和应用

本文把关于资源错配和效率损失的讨论纳入到传统的增长核算框架中,提出了测度要素价格扭曲引起的资源错配对于TFP以及产出变动影响的方法。应用这个分析框架,本文分析了我国制造业资源错配的影响。我们发现目前中国制造业内部各子行业间的资源错配大约造成了实际产出和潜在产出之间15%的缺口,并且在这些年中,扭曲没有得到显著的纠正。     

Misallocation and productivity

A large portion of differences in output per capita across countries is explained by differences in total factor productivity (TFP). In this article, we summarize a recent literature — and the articles in this special issue on misallocation and productivity — that focus on the reallocation of factors across heterogeneous production units as an important source of measured TFP differences across countries.     

Financial frictions and total factor productivity: Accounting for the real effects of financial crises

Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working capital constraint on the purchase of intermediate goods. The model is calibrated to Mexico before the 1995 crisis and subjected to an unexpected shock to interest rates. The financial friction generates an endogenous fall in TFP and output and can explain more than half of the fall in TFP and 74 percent of the fall in GDP per worker.     

Firm‐Specific Learning and the Investment Behavior of Large and Small Firms*

We examine a model of size distribution and growth of firms where firms learn about idiosyncratic productivity parameters through their production experience. Aggregate shocks, by adding noise to learning at the firm level, can produce different responses across firms. In particular, young firms, which are smaller on average than older firms and more uncertain about their productivity, can “overreact” to aggregate shocks. Such differences across firm sizes and ages, which arise here in a model with perfect financial markets, are often attributed to financial frictions that hit small and large firms differently.     

Productivity and misallocation during a crisis: Evidence from the Chilean crisis of 1982

Measured total factor productivity often declines sharply during financial crises. In 1982, the Chilean manufacturing sector suffered a severe contraction in output, most of which can be accounted for by a falling Solow residual. This paper uses establishment data from the Chilean manufacturing census to examine the decline in measured TFP. To quantify the contribution of resource misallocation, I develop a measure of allocational efficiency along the lines of Hsieh and Klenow (2009) and derive the appropriate measure of aggregate productivity to which it should be compared. Across specifications, within-industry allocational efficiency either remained constant or improved in 1982, while a decline in between-industry allocational efficiency accounts for about one-third of the reduction in TFP. Industries more sensitive to domestic demand – durables and industries with low exports – experienced larger declines in measured TFP. This finding is consistent with large adjustment costs and underutilization of inputs. Reduced capital utilization played a substantial role, accounting for 25–50 percent of the decline in measured TFP.     

Distortions,efficiency and the size distribution of firms

We develop a model of firms’ growth in which the tax and credit environments act as selection mechanisms. Such a model, parametrized and validated using a variety of data restrictions, can rationalize observations about input choices and size patterns typical of many developing countries. Using counterfactual experiments, we show that firms’ optimal responses to the tax environment are effective in reducing efficiency losses. As a consequence, tax distortions only account for 13% of the gap in output per worker between an undistorted economy and the benchmark. Credit constraints account for 44% of this gap. However, the interaction between the cost of capital and credit constraints appears to be the most important source of misallocation and can explain up to 85% of the difference in output per worker between the benchmark and first-best.     

R&D contribution in TFP growth of Greek industry: A limited information likelihood approach

We provide a novel panel model to decompose total factor productivity (TFP) growth in the Greek industry at the firm level while we tackle the contribution of R&D. We, therefore, opt for parametric methodology that provides statistical inference and would validate the results. Our modeling departs from prior strong assumptions such as error terms across firms being independent. In fact, we provide a novel limited information maximum likelihood (LIML) estimation method that adequately deals with the issue of endogeneity and model misspecification. We demonstrate that our model detects variability in terms of TFP growth components across industries and firms. Our results show that R&D would enhance TFP of Greek firms, albeit the crisis has had a detrimental impact. Financial ratios such as liquidity and solvency ratios also affect TFP as we demonstrate that both would enhance TFP. The solvency ratio is important as it provides an estimate of whether the firm can cope with debt. We also note variability across small versus medium and large firms and report that small firms are more productive and spend more of their revenues on R&D. In terms of policy, our evidence warrants higher R&D spending to enhance TFP growth, though R&D funding is a concern.     

要素配置扭曲与农业全要素生产率

要素市场扭曲会导致农户个体对资本、劳动等生产要素配置扭曲,最终降低农业的总量全要素生产率(TFP)。本文运用2003-2007年全国农村固定跟踪观察农户数据,实证分析了中国东、中、西部以及东北地区农户家庭生产的要素配置扭曲程度及其与总量TFP的关系,发现不同地区农户要素配置的扭曲存在显著的差异:从扭曲水平和发散程度来看,东部和西部地区的资源配置扭曲较为严重,中部、东北地区的配置效率较高。即使不考虑技术因素,如果有效消除资本和劳动配置的扭曲,农户的农业TFP有望再增长20%以上,其中东部和西部地区的改进空间超过30%。要素配置的扭曲程度主要取决于农村非农就业机会、金融市场和土地规模。促进社会转型是提高农业生产率的主要途径。     

Financial Development and Inequality in the Global Economy

We build a heterogeneous firms model with firm‐specific wages and credit frictions to study the role of financial development for inequality in the global economy. If there are many small (non‐exporting) firms, better access to external funds reduces wage and profit inequality as well as unemployment. In contrast, if there are many large (exporting) firms, financial development might have opposite effects – especially if trade costs are low. In summary, the implications of financial development for inequality depend on the size distribution of firms and on the costs of exporting. Trade liberalization, however, raises inequality unambiguously.     

Firm heterogeneity in TFP,sectoral innovation and location. Evidence from Italy

Sectoral and territorial specificities affect a firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of these effects has been lacking. To this end, we combine a data-set of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004–2006 and have three aspects. First, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that the sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.     

What determines the productivity growth? Evidence from Chinese renewable energy firms by using Bayesian stochastic frontier approach

This paper examines the determinants of the total factor productivity (TFP) growth of Chinese renewable energy firms from 2011 to 2016, using a Bayesian stochastic frontier approach. Employing the “Bauer–Kumbhakar” decomposition method, the TFP growth is decomposed into the technology part and the market part. The empirical results reveal that the TFP improvement of Chinese renewable energy firms is mainly due to technical progress, followed by technical efficiency change. With regard to the market part, the misallocation of production factors has hindered the TFP growth. Our findings also indicate that only for large firms, the TFP growth can benefit from the scale economy effect. Compared with non‐state‐owned firms, state‐owned firms suffer much lower allocative efficiency.     

Misallocation and productivity in the lead up to the Eurozone crisis

We use Portuguese firm-level data to investigate whether changes in resource misallocation may have contributed to the poor economic performance of some southern and peripheral European countries leading up to the Eurozone crisis. We extend Hsieh and Klenow’s (2009) methodology to include intermediate inputs and consider all sectors of the economy (agriculture, manufacturing, and services). We find that within-industry misallocation almost doubled between 1996 and 2011. Equalizing total factor revenue productivity across firms within an industry could have boosted valued-added 48% and 79% above actual levels in 1996 and 2011, respectively. This implies that deteriorating allocative efficiency may have shaved around 1.3 percentage points off the annual GDP growth during the 1996–2011 period. Allocative efficiency deterioration, despite being a widespread phenomenon, is significantly higher in the service sector, with 5 industries accounting for 72% of the total variation. Capital distortions are the most important source of potential value-added efficiency gains, especially in the service sector, with a relative contribution increasing over time.     

Capital structure and institutional setting: a decompositional and international analysis

The legal and institutional setting is more and more influential in firms’ financial decisions. Our article analyses firms’ capital structure in an international framework in order to assess the different level of debt use across countries and to identify both common and differential explanatory factors. Although the level of financial leverage is quite different, the factors that have traditionally driven capital structure decisions have much in common in all the legal and institutional settings. The performance and size of the firm, the assets tangibility and the growth opportunities have a relevant but differential effect across the different institutional systems. Consequently, our results suggest that the legal and institutional system of each country does not only affect firms’ capital structure but also creates the conditions to explain a differential effect of the common determinants of firms’ financial choices.