Tel. +34 93 542 2685
Available for interviews at
European Job Market for Economists (EEA), December 18-19, Rotterdam, The Netherlands
Allied Social Science Associations (ASSA), January 3-5, San Diego, US
Macro Finance. Growth. Monetary. Bubbles. Misallocation
"Misallocation Decomposition, the Case of China” (Job Market Paper)
I introduce uncertainty and inter group TFP measurement to analyze the intra-sector misallocation problem in China. Such misallocation is usually believed to be a result of distortions, measured by the wedge between factor price and marginal revenue productivity across firms. The traditional framework is silent on uncertainty and weak in decomposition. Based on China's Industrial Survey data, my model suggests that uncertainty could explain around 26% of TFP loss. Above uncertainty we also find ownership difference contributes 15% to the loss while regional difference accounts for 14%. For the rest, 45% part of TFP loss comes from pure within group distortions. Yet in all cases, TFP loss induced by labor market frictions dominates the loss induced by capital market frictions. My work emphasizes the importance on labor market distortions and call for more attention in the future research. Finally, I show that all results are robust to dynamic settings with adjustment cost and inter-temporal problems.