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- Title
The Sources of Capital Misallocation.
- Authors
David, Joel M.; Venkateswaran, Venky
- Abstract
We develop a methodology to disentangle sources of capital "mis-allocation," i.e., dispersion in value-added/capital. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chinese manufacturing firms reveals that adjustment costs and uncertainty, while significant, explain only a modest fraction of the dispersion, which stems largely from other factors: a component correlated with productivity and a fixed effect. Adjustment costs are more salient for large US firms, though other factors still account for the bulk of the dispersion. Technological/markup heterogeneity explains a limited fraction in China, but a potentially large share in the United States. (JEL D22, D24, D25, E22, G31, L60, O11, O14, O47, P31)
- Subjects
UNITED States; CAPITAL; PRODUCTION (Economic theory); INDUSTRIAL productivity; BIG business; INDUSTRIAL costs
- Publication
American Economic Review, 2019, Vol 109, Issue 7, p2531
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.20180336