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I develop a highly tractable general equilibrium model in which heterogeneous producers face collateral constraints, and study the effect of financial frictions on capital misallocation and aggregate productivity. My economy is isomorphic to a Solow model but with time-varying TFP. I argue that the persistence of idiosyncratic productivity shocks determines(More)
We study a model of establishment dynamics in which entrepreneurs face a financing constraint. We ask: does the model, when parameterized to match salient features of plant-level data, predict large aggregate TFP losses from misallocation? Our answer is: No. We estimate financing frictions that are fairly large: in our economy half of the establishments(More)
In this paper we use micro data on both trade and production for a sample of large Chi-nese manufacturing …rms in the footwear industry from 2002-2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of …rm-level demand, cost, and export market pro…tabil-ity. The(More)
We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of crosscountry comparative advantage in individual sectors. We find strong(More)
Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded offi cial Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not(More)
a r t i c l e i n f o a b s t r a c t JEL classification: O11 O47 O53 Keywords: Factor markets Distortions Total factor productivity China In this paper, we measure TFP losses in China's non-agricultural economy associated with labour and capital misallocation across provinces and sectors between 1985 and 2007. We also decompose the overall loss into factor(More)
We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the(More)