Resource information
This paper complements the results of
earlier work on factor misallocation. The paper first
expands the methodology and provides two important
decompositions for the main indices. The main result is that
factor and output misallocation across districts is at least
as important as misallocation within districts. Second, the
paper provides an exploration of the service sector that
complements earlier work on manufacturing. The analysis
shows that labor plays a fundamental role for misallocation
in services, whereas land is the determining factor in
manufacturing. Third, the paper expands our earlier work on
the effects of policies on misallocation by looking at a
much broader range of policies, and find strong evidence of
their effects on misallocation. Finally, the paper take
steps towards the identification of the causal effect of
misallocation on output per worker by developing a novel
instrumental variable approach and a simulation approach
that allows for checking the consistency of the empirical results.
