Abstract
Using firm-level panel data we analyze the misallocation of capital and labor for the Netherlands in the period 2001–2017. We use the dispersion in marginal revenue products of capital and labor to measure the extent of misallocation. Compared to a counterfactual efficient allocation we find that misallocation has had a sizable negative impact on aggregate productivity of around 14 percentage points in the period 2001–2017. Especially capital misallocation has increased over time. Exploiting a panel data error components model we find that capital misallocation has a much more permanent character than labor misallocation. Moreover, it is the permanent component of capital misallocation that has increased over time. Finally, we show that in our sample the measurement of misallocation is largely insensitive to capital adjustment costs and alternative specifications of the production function. The contribution of heterogeneous markups to observed misallocation, however, is non-negligible.
| Original language | English |
|---|---|
| Pages (from-to) | 93-113 |
| Number of pages | 21 |
| Journal | Journal of Productivity Analysis |
| Volume | 57 |
| Issue number | 1 |
| Early online date | 13 Jan 2022 |
| DOIs | |
| Publication status | Published - Feb 2022 |
Bibliographical note
Funding Information:The opinions expressed in this paper are the authors? personal views and do not necessarily reflect the position of De Nederlandsche Bank. This research has been funded by De Nederlandsche Bank. We are grateful to two anonymous referees, Job Swank, Peter van Els and discussants and participants at the International Industrial Organization Conference 2019 and research seminars at the Joint Research Center of the European Commission, Statistics Netherlands (CBS), CPB Netherlands Bureau for Economic Policy Analysis (CPB), and De Nederlandsche Bank for their valuable comments and stimulating suggestions.
Funding Information:
The opinions expressed in this paper are the authors’ personal views and do not necessarily reflect the position of De Nederlandsche Bank. This research has been funded by De Nederlandsche Bank. We are grateful to two anonymous referees, Job Swank, Peter van Els and discussants and participants at the International Industrial Organization Conference 2019 and research seminars at the Joint Research Center of the European Commission, Statistics Netherlands (CBS), CPB Netherlands Bureau for Economic Policy Analysis (CPB), and De Nederlandsche Bank for their valuable comments and stimulating suggestions.
Publisher Copyright:
© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.
Keywords
- C23
- D24
- Error components
- Misallocation
- O47
- Panel data
- Productivity
