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UID:59bbab4969bc5539afee64adec77239a
DTSTAMP:20240502T135107Z
SUMMARY:Dr. John Haltiwanger\, University of Maryland
DESCRIPTION: \n\nABSTRACT. A large literature on misallocation and producti
 vity has\narisen in recent years\, with Hsieh and Klenow (2009\; hereafter
  HK) as\nits standard empirical framework. The framework’s usefulness an
 d\ntheoretical founding make it a valuable starting point for analyzing\nm
 isallocations. However\, we show that the empirical lynchpin of this\nappr
 oach can be very sensitive to model misspecification. The\ncondition in th
 e HK model that maps from observed production behaviors\nto the misallocat
 ive wedges/distortions holds in a single theoretical\ncase\, with strict a
 ssumptions required on both the demand and supply\nsides. We demonstrate t
 hat applying the HK methodology when there is\nany deviation from these as
 sumptions will mean that the\n“distortions” recovered from the data ma
 y not be signs of\ninefficiency. Rather\, they may simply reflect demand s
 hifts or\nmovements of the firm along its marginal cost curve\, quite poss
 ibly in\ndirections related to higher profits for the business. The framew
 ork\nmay then not just spuriously identify inefficiencies\; it might be mo
 re\nlikely to do so precisely for businesses better in some fundamental\nw
 ay than their competitors. Empirical tests in our data\, which allow\nus t
 o separate price and quantity and as such directly test the\nmodel’s ass
 umptions\, suggest the framework’s necessary conditions\ndo not hold. We
  empirically investigate two of the possible sources of\ndepartures from t
 he HK assumptions and implications and find support\nfor both. We also fin
 d that measures of distortions that emerge from\nthis approach are in fact
  strongly positively related with survival\,\nsuggesting they embody favor
 able profit conditions for the business.\nAt the same time\, however\, onc
 e we condition on demand and supply\nfundamentals\, the distortion measure
  becomes inversely related with\nsurvival. This suggests the measure may c
 ontain a distortionary\ncomponent\, but it is empirically swamped by other
  factors.\n 
DTSTART:20171208T190000Z
DTEND:20171208T203000Z
LOCATION:Gerri C. LeBow Hall\, 3220 Market Street\, 406\, Philadelphia\, PA
  19104
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