Research
Working Paper
Working Paper
Resource Misallocation in India: The Role of Cross-State Labor Market Reform (with Adil Mohommad and Sodsriwiboon Piyaporn)
Resource Misallocation in India: The Role of Cross-State Labor Market Reform (with Adil Mohommad and Sodsriwiboon Piyaporn)
February 2021
February 2021
At the macro level, productivity is driven by technology and the efficiency of resource allocation, as outcomes of firms’ decision making. The relatively high level of resource misallocation in India’s formal manufacturing sector is well documented. We build on this research to further investigate the drivers of misallocation, exploiting micro-level variation across Indian states. We find that states with less rigid labor markets have lesser misallocation. We also examine the interaction of labor market rigidities with informality which is a key feature of India’s labor markets. Our results suggest that reWork in progress
At the macro level, productivity is driven by technology and the efficiency of resource allocation, as outcomes of firms’ decision making. The relatively high level of resource misallocation in India’s formal manufacturing sector is well documented. We build on this research to further investigate the drivers of misallocation, exploiting micro-level variation across Indian states. We find that states with less rigid labor markets have lesser misallocation. We also examine the interaction of labor market rigidities with informality which is a key feature of India’s labor markets. Our results suggest that reWork in progress
Trade, Productivity and (Mis)allocation (with Antoine Berthou, Jong Hyun Chung and Kalina Manova)
Trade, Productivity and (Mis)allocation (with Antoine Berthou, Jong Hyun Chung and Kalina Manova)
August 2020
August 2020
We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.
We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.
Labour productivity in Europe: allocative efficiency of labour or performance of firms? (2014), with A. Berthou, Banque de France Quarterly Selection of Articles, n°34
Labour productivity in Europe: allocative efficiency of labour or performance of firms? (2014), with A. Berthou, Banque de France Quarterly Selection of Articles, n°34
Micro-based evidence of EU competitiveness: The CompNet database (2014), with CompNet Task Force, ECB Working Paper, n° 1634.
Micro-based evidence of EU competitiveness: The CompNet database (2014), with CompNet Task Force, ECB Working Paper, n° 1634.
Work in Progress
Work in Progress
September 2018
September 2018
I study the impact of firm outsourcing strategy abroad on French aggregate TFP growth. I show theoretically and empirically that decreasing marginal cost of imported intermediate inputs foster aggregate productivity growth in presence of price distortions and fixed entry costs for importing foreign varieties. In a monopolistic competition model with heterogeneous firms, firm-level market share depends on two elements: (i) its productivity and its ability to pay the fixed cost to import varieties with the best price-quality ratio, (ii) exogenous distortions on the prices of inputs. After a trade liberalization, declining marginal cost of foreign inputs allow more firms in the mid-to-top productivity distribution to outsource new varieties at lower cost. It reduces their marginal cost of production and fosters sector-level allocative efficiency of resources and TFP growth if they are initially constraint by market frictions. Using a comprehensive data set of French firms between 1995 and 2012, I then implement a new TFP decomposition and quantify gains in France from trade liberalization in China in early 2000s. I find that increasing sourcing of intermediate goods in China, and more precisely the rising number of firms sourcing goods in that country significantly increase French TFP growth. The gains are fully explained by higher allocative efficiency of market shares across firms.
I study the impact of firm outsourcing strategy abroad on French aggregate TFP growth. I show theoretically and empirically that decreasing marginal cost of imported intermediate inputs foster aggregate productivity growth in presence of price distortions and fixed entry costs for importing foreign varieties. In a monopolistic competition model with heterogeneous firms, firm-level market share depends on two elements: (i) its productivity and its ability to pay the fixed cost to import varieties with the best price-quality ratio, (ii) exogenous distortions on the prices of inputs. After a trade liberalization, declining marginal cost of foreign inputs allow more firms in the mid-to-top productivity distribution to outsource new varieties at lower cost. It reduces their marginal cost of production and fosters sector-level allocative efficiency of resources and TFP growth if they are initially constraint by market frictions. Using a comprehensive data set of French firms between 1995 and 2012, I then implement a new TFP decomposition and quantify gains in France from trade liberalization in China in early 2000s. I find that increasing sourcing of intermediate goods in China, and more precisely the rising number of firms sourcing goods in that country significantly increase French TFP growth. The gains are fully explained by higher allocative efficiency of market shares across firms.