American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Cross-Country Differences in Productivity: The Role of Allocation and Selection
American Economic Review
vol. 103,
no. 1, February 2013
(pp. 305–34)
Abstract
This paper investigates the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. Exploiting harmonized firm-level data for a number of countries, we show that there is substantial and systematic cross-country variation in the within-industry covariance between size and productivity. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and distortions. The model can be readily calibrated so that variations in the distribution of distortions allow matching the observed cross-country moments. We show that the differences in the distortions that account for the size-productivity covariance imply substantial differences in aggregate performance. (JEL D24, L25, O47)Citation
Bartelsman, Eric, John Haltiwanger, and Stefano Scarpetta. 2013. "Cross-Country Differences in Productivity: The Role of Allocation and Selection." American Economic Review, 103 (1): 305–34. DOI: 10.1257/aer.103.1.305Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L25 Firm Performance: Size, Diversification, and Scope
- O47 Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence