Entry and Exit, Multi-Product Firms, and Allocative Distortions

This paper proposes a multi-product model of firm dynamics to understand the implications of allocative distortions for the decisions of firms to enter, exit, and supply products to the market. These margins of adjustment have been largely neglecte...

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Main Author:	Fattal Jaef, Roberto N.
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	MISALLOCATION FIRM DYNAMICS TRANSITIONAL DYNAMICS DISTORTION FACTOR ALLOCATION
Online Access:	http://documents.worldbank.org/curated/en/622581491318574397/Entry-and-exit-multi-product-firms-and-allocative-distortions http://hdl.handle.net/10986/26369

id	okr-10986-26369
recordtype	oai_dc
spelling	okr-10986-263692021-06-08T14:42:48Z Entry and Exit, Multi-Product Firms, and Allocative Distortions Fattal Jaef, Roberto N. MISALLOCATION FIRM DYNAMICS TRANSITIONAL DYNAMICS DISTORTION FACTOR ALLOCATION This paper proposes a multi-product model of firm dynamics to understand the implications of allocative distortions for the decisions of firms to enter, exit, and supply products to the market. These margins of adjustment have been largely neglected in the literature yet have direct contributions to welfare and productivity. The paper finds that when the analysis accounts for these channels, the traditional focus on long-run gains in Total Factor Productivity from reversing misallocation strongly underestimates the welfare gains that accrue when accounting for transitional dynamics. Calibrating the distortions to China in 1998, the analysis finds a welfare gain of 32 percent and a steady-state gain of 10 percent. 2017-04-13T20:12:38Z 2017-04-13T20:12:38Z 2017-04 Working Paper http://documents.worldbank.org/curated/en/622581491318574397/Entry-and-exit-multi-product-firms-and-allocative-distortions http://hdl.handle.net/10986/26369 English en_US Policy Research Working Paper;No. 8023 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific China
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	MISALLOCATION FIRM DYNAMICS TRANSITIONAL DYNAMICS DISTORTION FACTOR ALLOCATION
spellingShingle	MISALLOCATION FIRM DYNAMICS TRANSITIONAL DYNAMICS DISTORTION FACTOR ALLOCATION Fattal Jaef, Roberto N. Entry and Exit, Multi-Product Firms, and Allocative Distortions
geographic_facet	East Asia and Pacific China
relation	Policy Research Working Paper;No. 8023
description	This paper proposes a multi-product model of firm dynamics to understand the implications of allocative distortions for the decisions of firms to enter, exit, and supply products to the market. These margins of adjustment have been largely neglected in the literature yet have direct contributions to welfare and productivity. The paper finds that when the analysis accounts for these channels, the traditional focus on long-run gains in Total Factor Productivity from reversing misallocation strongly underestimates the welfare gains that accrue when accounting for transitional dynamics. Calibrating the distortions to China in 1998, the analysis finds a welfare gain of 32 percent and a steady-state gain of 10 percent.
format	Working Paper
author	Fattal Jaef, Roberto N.
author_facet	Fattal Jaef, Roberto N.
author_sort	Fattal Jaef, Roberto N.
title	Entry and Exit, Multi-Product Firms, and Allocative Distortions
title_short	Entry and Exit, Multi-Product Firms, and Allocative Distortions
title_full	Entry and Exit, Multi-Product Firms, and Allocative Distortions
title_fullStr	Entry and Exit, Multi-Product Firms, and Allocative Distortions
title_full_unstemmed	Entry and Exit, Multi-Product Firms, and Allocative Distortions
title_sort	entry and exit, multi-product firms, and allocative distortions
publisher	World Bank, Washington, DC
publishDate	2017
url	http://documents.worldbank.org/curated/en/622581491318574397/Entry-and-exit-multi-product-firms-and-allocative-distortions http://hdl.handle.net/10986/26369
_version_	1764461812751794176

Entry and Exit, Multi-Product Firms, and Allocative Distortions

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