Productivity and Misallocation in General Equilibrium

@article{Baqaee2017ProductivityAM,
  title={Productivity and Misallocation in General Equilibrium},
  author={David Rezza Baqaee and Emmanuel Farhi},
  journal={CEPR Discussion Paper Series},
  year={2017}
}
We provide a general non-parametric formula for aggregating microeconomic shocks in general equilibrium economies with distortions such as taxes, markups, frictions to resource reallocation, and nominal rigidities. We show that the macroeconomic impact of a shock can be boiled down into two components: its “pure” technology effect; and its effect on allocative efficiency arising from the associated reallocation of resources, which can be measured via changes in factor income shares. We also… 
Productivity and Misallocation in General Equilibrium*
This paper develops a general theory of aggregation in inefficient economies. We provide nonparametric formulas for aggregating microeconomic shocks in economies with distortions such as taxes,
Entry vs. Rents: Aggregation with Economies of Scale
We show that the tension between entry and rents lies at the core of a general theory of aggregation with scale effects. We characterize the responses of macro aggregates to micro shocks in
WORKING PAPER SERIES WELFARE AND OUTPUT WITH INCOME EFFECTS AND DEMAND INSTABILITY
We provide a general non-parametric characterization of how welfare responds to changes in budget and production possibility sets when preferences are non-homothetic or subject to shocks, in both
Markups and misallocation with evidence from exchange rate shocks
Welfare and Output with Income Effects and Taste Shocks
We provide a non-parametric characterization of how welfare responds to changes in budget and production possibility sets when preferences are non-homothetic or subject to shocks, in both partial and
The Darwinian Returns to Scale
How does an increase in the size of the market due to fertility, immigration, or trade integration, affect welfare and real GDP? We study this question using a model with heterogeneous firms, fixed
Growth Accounting with Demand Instability and Income Effects
We study how welfare responds to changes in budget and production possibility sets when preferences are unstable or non-homothetic. We characterize the gap between welfare and standard measures of
The Supply-Side Effects of Monetary Policy
We propose a supply-side channel for the transmission of monetary policy. We show that if, as is consistent with the empirical evidence, bigger firms have higher markups and lower pass-throughs than
The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem
We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced‐form nonparametric elasticities for efficient economies. We also show how
Barriers to Global Capital Allocation-20pt
Observed patterns of international investment are difficult to reconcile with frictionless capital markets. In this paper, we provide a quantitative theory of international capital allocation: a
...
...

References

SHOWING 1-10 OF 128 REFERENCES
Productivity and Misallocation in General Equilibrium*
This paper develops a general theory of aggregation in inefficient economies. We provide nonparametric formulas for aggregating microeconomic shocks in economies with distortions such as taxes,
Growth Accounting with Misallocation: Or, Doing Less with More in Singapore
We derive aggregate growth-accounting implications for a two-sector economy with heterogeneous capital subsidies and monopoly power. In this economy, measures of total factor productivity (TFP)
Why is Productivity Procyclical? Why Do We Care?
Productivity rises in booms and falls in recessions. There are four main explanations for this procyclical productivity: (i) procyclical technology shocks, (ii) widespread imperfect competition and
The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem
We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced‐form nonparametric elasticities for efficient economies. We also show how
Misallocation and Intersectoral Linkages
We study the effects of distortions in the use of primary and intermediate inputs on aggregate productivity. We show analytically how the aggregate productivity loss from distortions depends on the
Trade, Markup Heterogeneity and Misallocations
Markups vary widely across industries and countries, their heterogeneity has increased overtime and asymmetric exposure to international trade seems partly responsible for this phenomenon. In this
Finance and Misallocation: Evidence from Plant-Level Data
We study a model of industry dynamics in which idiosyncratic risk is uninsurable and establishments are subject to a financing constraint. We ask: does the model, when parameterized to match salient
A Sufficient Statistics Approach for Aggregating Firm-Level Experiments
We consider a dynamic economy populated by heterogeneous firms subject to generic capital frictions: adjustment costs, taxes and financing constraints. A random subset of firms in this economy
Growth Theory Through the Lens of Development Economics
Growth theory has traditionally assumed the existence of an aggregate production function, whose existence and properties are closely tied to the assumption of optimal resource allocation within each
...
...