TY  - JOUR
AU  - David, Joel M
AU  - Venkateswaran, Venky
TI  - The Sources of Capital Misallocation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 23129
PY  - 2017
Y2  - February 2017
DO  - 10.3386/w23129
UR  - http://www.nber.org/papers/w23129
L1  - http://www.nber.org/papers/w23129.pdf
N1  - Author contact info:
Joel David
Federal Reserve Bank of Chicago
Economic Research
230 S. LaSalle St.
Chicago, IL 60604
E-Mail: jmdavid7@gmail.com

Venky Venkateswaran
Stern School of Business
New York University
7-81 44 West 4th Street
New York, NY 10012
Tel: 213/255-0784
E-Mail: vvenkate@stern.nyu.edu
AB  - We develop a methodology to disentangle sources of capital ‘misallocation’, i.e. dispersion in value-added/capital. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chinese manufacturing firms reveals that adjustment costs and uncertainty, while significant, explain only a modest fraction of the dispersion, which stems largely from other factors: a component correlated with productivity and a fixed effect. Adjustment costs are more salient for large US firms, though other factors still account for bulk of the dispersion. Technological/ markup heterogeneity explains a limited fraction in China, but a potentially large share in the US.
ER  -