Dynamic inputs and resource (Mis)allocation

Published

Journal Article

© 2014 by The University of Chicago. All rights reserved. We investigate the role of dynamic production inputs and their associated adjustment costs in shaping the dispersion of static measures of capital misallocation within industries (and countries). Across nine data sets spanning 40 countries, we find that industries exhibiting greater time-series volatility of productivity have greater cross-sectional dispersion of the marginal revenue product of capital. We use a standard investment model with adjustment costs to show that variation in the volatility of productivity across these industries and economies can explain a large share (80-90 percent) of the cross-industry (and cross-country) variation in the dispersion of the marginal revenue product of capital.

Full Text

Duke Authors

Cited Authors

  • Asker, J; Collard-Wexler, A; Loecker, JD

Published Date

  • January 1, 2014

Published In

Volume / Issue

  • 122 / 5

Start / End Page

  • 1013 - 1063

Electronic International Standard Serial Number (EISSN)

  • 1537-534X

International Standard Serial Number (ISSN)

  • 0022-3808

Digital Object Identifier (DOI)

  • 10.1086/677072

Citation Source

  • Scopus