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Returns to Scale, Productivity Measurement, and Trends in U.S. Manufacturing Misallocation

April 19, 2018

DECRG Kuala Lumpur Seminar Series

  • Aggregate productivity suffers when workers and machines are not matched with their most productive uses. This paper builds a model that features industry-specific markups, industry-specific returns to scale, and establishment-specific distortions, and uses it to measure the extent of this misallocation in the economy. Applying the model to restricted U.S. census microdata on the manufacturing sector suggests that misallocation declined by 13% between 1982 and 2007. The jointly estimated markup and returns to scale parameters vary substantially across industries. Furthermore, while the average markup has been relatively constant, the average returns to scale declined over this period. The finding of declining misallocation starkly contrasts the 29% increase implied by the widely used Hsieh and Klenow (2009) model, which assumes that all establishments charge the same markup and have constant returns to scale. Accounting for the variation in markups and returns to scale leads to the divergence of misallocation estimates in this paper from those implied by the Hsieh-Klenow model.

    Download the paper

    Watch and join us: Seminar will be live-streamed, allowing for online audience participation (only available during the seminar) 

  • Ho Sui-Jade

    Senior Economist

    Ho Sui-Jade is a Senior Economist at the Monetary Policy Department, Bank Negara Malaysia. Her research interests are in the areas of firm dynamics, international trade and macroeconomics. She read Economics as an undergraduate at the University of Cambridge, UK and completed her graduate studies at Harvard University (MPA-ID) and the University of Michigan - Ann Arbor (Ph.D. in Economics).

Event Details

  • WHEN: Thursday, April 19, 2018; 12:30-2:00PM
  • WHERE: World Bank Malaysia Office, Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn
  • RSVP: Kindly RSVP by Wednesday, April 18, 2018