You can manage bookmarks using lists, please log in to your user account for this.
Media type:
E-Article
Title:
Misallocation or Mismeasurement? Evidence from Plant-Level
Data
Contributor:
Dong, Baiyu;
Hsieh, Yu-Wei
imprint:
GENES, 2021
Published in:Annals of Economics and Statistics
Language:
English
DOI:
10.15609/annaeconstat2009.142.0211
ISSN:
1968-3863;
2115-4430
Origination:
Footnote:
Description:
<p>When capital is mismeasured, two problems arise. First, the extent of capital
misallocation and the potential loss of Total Factor Productivity (TFP) are
overestimated. Second, the parameter estimates of the production function are
biased. To address these issues, we apply a novel Fourier-based method to
estimate a CES production function, controlling for both endogeneity and
measurement errors. Using Korean plant-level manufacturing data, we construct
two capital measures by considering embodied technological change and capital
utilization. We find that, on average, the signal-to-noise ratio of the capital
measures is around 4. The elasticity of substitution between capital and labor
is overestimated by 15%. The measured loss of aggregate TFP from capital
misallocation is overestimated by 10%.</p>
<p>
<italic>JEL Codes</italic>: D24, C29.</p>