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- Title
Sectoral Productivity Gaps and Aggregate Productivity.
- Authors
Sinha, Rishabh
- Abstract
The paper examines the aggregate impact of misallocation measured using gaps in labor productivity across sectors. A simple model of resource allocation is used to quantify the effect in which the gaps arise due to distortions in the form of asymmetrical taxes on hiring labor across sectors. From a development accounting approach, the gains from eliminating distortions are meager and are not consequential in accounting for cross-country variation in incomes. Nevertheless, the gains for some countries rival the growth that they have accumulated over several years. Of the 87 countries in the sample, the changes in distortions over time exert a net negative impact in 45 countries instead of providing tailwinds to growth. Changes in distortions account for just under 5.6% of the total growth when aiding growth. In turn, the output drag represents 3.4% of the actual growth on average for the sub-sample in which distortions yield a net negative effect. The move towards allocative efficiency bears a positive association with the quality of institutions.
- Subjects
LABOR productivity; RESOURCE allocation; AGRICULTURAL productivity
- Publication
B.E. Journal of Macroeconomics, 2021, Vol 21, Issue 1, p37
- ISSN
2194-6116
- Publication type
Article
- DOI
10.1515/bejm-2019-0176