Market Distortions, Factor Allocation and Productivity Dynamics in Developing Countries
06 / 2011 - 06 / 2015
Economists have long sought to explain economic growth by focusing on factor accumulation, with technology as a residual. Recent studies though emphasize that the way resources are allocated across heterogeneous firms is also a very important determinant of economic performance. This proposal will examine how market distortions affect resource allocation and productivity in developing countries. Employing novel theoretical models that account for imperfect competition, we propose to investigate how resource misallocation affects productivity differences across countries, sectors and firms. The research will be based on a unique international firm-level dataset and a longitudinal dataset of Ethiopian manufacturing establishments.