Open AccessMisallocation and Manufacturing TFP in China and India
Author(s) -
Chang-Tai Hsieh,
Peter J. Klenow
Publication year - 2007
Language(s) - English
Resource type - Reports
DOI - 10.3386/w13290
Subject(s) - economics , total factor productivity , china , macroeconomics , productivity , geography , archaeology
Resource misallocation can lower aggregate total factor productivity (TFP).Weuse microdata on manufacturing establishments to quantify the potential extentof misallocation in China and India versus the United States. We measure sizablegaps in marginal products of labor and capital across plants within narrowlydefined industries in China and India compared with the United States. Whencapital and labor are hypothetically reallocated to equalize marginal products tothe extent observed in the United States, we calculate manufacturing TFP gainsof 30%–50% in China and 40%–60% in India.