Factor Misallocation and Development
The large differences in income per capita across countries are mostly explained by differences in total factor productivity (TFP). This article summarises the evidence on the importance of resource allocation across productive units in explaining the observed differences in TFP across countries.
KeywordsDistortions Heterogeneous establishments Misallocation Productivity
I thank Tasso Adamopoulos and Margarida Duarte for helpful comments. All errors and omissions are my own.
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