Identifying Capital Misallocation ∗ Zheng (

@inproceedings{Song2015IdentifyingCM,
  title={Identifying Capital Misallocation ∗ Zheng (},
  author={Michael Song and Guiying Laura Wu},
  year={2015}
}
Resource misallocation lowers aggregate productive effi ciency. The existing literature often infers the magnitude of misallocation from the dispersion of average revenue products. However, the methodology is subject to several identification issues. In particular, the estimator would be upward biased by the presence of unobserved heterogeneities in output and demand elasticities; adjustment costs; and measurement errors in the data. This paper develops a new method of identifying capital… CONTINUE READING

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