Capital Allocation in Developing Countries

This paper investigates the sources of capital misallocation across a group of 11 developing and developed countries. The main findings are (i) technological frictions, namely, adjustment costs and uncertainty, account for only a modest share of ob...

Full description

Bibliographic Details
Main Authors:	David, Joel M., Venkateswaran, Venky, Cusolito, Ana Paula, Didier, Tatiana
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2019
Subjects:	CAPITAL MISALLOCATION CAPITAL FLOWS FIRM PRODUCTIVITY INVESTMENT DYNAMICS
Online Access:	http://documents.worldbank.org/curated/en/495981569952792642/Capital-Allocation-in-Developing-Countries http://hdl.handle.net/10986/32491

id	okr-10986-32491
recordtype	oai_dc
spelling	okr-10986-324912022-09-20T00:14:28Z Capital Allocation in Developing Countries David, Joel M. Venkateswaran, Venky Cusolito, Ana Paula Didier, Tatiana CAPITAL MISALLOCATION CAPITAL FLOWS FIRM PRODUCTIVITY INVESTMENT DYNAMICS This paper investigates the sources of capital misallocation across a group of 11 developing and developed countries. The main findings are (i) technological frictions, namely, adjustment costs and uncertainty, account for only a modest share of observed misallocation, leaving ample scope for other factors; (ii) heterogeneity in firm-level technologies potentially explains between one-quarter and one-half; but (iii) dispersion in markups is much smaller; and (iv) after accounting for these factors, on average, at least 50 percent of misallocation within each of these countries remains unexplained, suggesting a large role for additional, potentially distortionary factors. These factors are largely attributable to a component that is correlated with firm size/productivity and one that is essentially permanent to the firm. The paper reports a broad set of moments describing firm-level investment dynamics and detailed parameter estimates on a country-by-country basis, with an eye toward future work in this area. 2019-10-04T19:13:22Z 2019-10-04T19:13:22Z 2019-10 Working Paper http://documents.worldbank.org/curated/en/495981569952792642/Capital-Allocation-in-Developing-Countries http://hdl.handle.net/10986/32491 English Policy Research Working Paper;No. 9031 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
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	CAPITAL MISALLOCATION CAPITAL FLOWS FIRM PRODUCTIVITY INVESTMENT DYNAMICS
spellingShingle	CAPITAL MISALLOCATION CAPITAL FLOWS FIRM PRODUCTIVITY INVESTMENT DYNAMICS David, Joel M. Venkateswaran, Venky Cusolito, Ana Paula Didier, Tatiana Capital Allocation in Developing Countries
relation	Policy Research Working Paper;No. 9031
description	This paper investigates the sources of capital misallocation across a group of 11 developing and developed countries. The main findings are (i) technological frictions, namely, adjustment costs and uncertainty, account for only a modest share of observed misallocation, leaving ample scope for other factors; (ii) heterogeneity in firm-level technologies potentially explains between one-quarter and one-half; but (iii) dispersion in markups is much smaller; and (iv) after accounting for these factors, on average, at least 50 percent of misallocation within each of these countries remains unexplained, suggesting a large role for additional, potentially distortionary factors. These factors are largely attributable to a component that is correlated with firm size/productivity and one that is essentially permanent to the firm. The paper reports a broad set of moments describing firm-level investment dynamics and detailed parameter estimates on a country-by-country basis, with an eye toward future work in this area.
format	Working Paper
author	David, Joel M. Venkateswaran, Venky Cusolito, Ana Paula Didier, Tatiana
author_facet	David, Joel M. Venkateswaran, Venky Cusolito, Ana Paula Didier, Tatiana
author_sort	David, Joel M.
title	Capital Allocation in Developing Countries
title_short	Capital Allocation in Developing Countries
title_full	Capital Allocation in Developing Countries
title_fullStr	Capital Allocation in Developing Countries
title_full_unstemmed	Capital Allocation in Developing Countries
title_sort	capital allocation in developing countries
publisher	World Bank, Washington, DC
publishDate	2019
url	http://documents.worldbank.org/curated/en/495981569952792642/Capital-Allocation-in-Developing-Countries http://hdl.handle.net/10986/32491
_version_	1764476651015503872

Capital Allocation in Developing Countries

Similar Items