Policy Distortions and Aggregate Productivity with Heterogeneous Plants

Diego Restuccia and Richard Rogerson

Working Papers from University of Toronto, Department of Economics

Abstract: We formulate a version of the growth model in which production is carried out by heterogeneous plants and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across heterogeneous plants may be an important factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured TFP in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.

Keywords: Plant heterogeneity; productivity; policy (search for similar items in EconPapers)
JEL-codes: O1 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2007-03-29
New Economics Papers: this item is included in nep-dge and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Journal Article: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2008)
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2007)
Working Paper: Policy Distortions and Aggregate Productivity with Heterogeneous Plants (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-283

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