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Capital Specificity, the Distribution of Marginal Products and Aggregate Productivity

This paper studies the role of capital specificity and investment irreversibility on the distribution of marginal products of capital and aggregate TFP. We use a methodology new to the misallocation literature, based on the study of “mobility” across quantiles of a distribution. In a panel of Peruvian firms, we show that persistent dispersion in marginal products is explained to an important extent by the persistence of low marginal products. That is, by unproductive firms that take a long time to downsize. Using a quantitative general-equilibrium model of firm dynamics with idiosyncratic shocks, calibrated to match key features of our data, we argue that the persistence of low marginal products suggests that irreversibility frictions are large. Moreover, it is inconsistent with theories of misallocation based only on financing constraints.

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Economía | Investigación socioeconómica | Productividad

País / Región

Perú

URI

https://scioteca.caf.com/handle/123456789/1107

Date

2017-05-08

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6.1 Documentos de trabajo en investigación socioeconómica

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CC-BY-NC
Except where otherwised noted, this item's license is described as CC-BY-NC
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Capital_Specificity,_the_Distribution_of_Marginal_Products_and_Aggregate_Productivity.pdf (569.28 KB)

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CAF

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