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Capital Allocation in Developing Countries / David, Joel M.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications")- Format:
- Book
- Government document
- Author/Creator:
- David, Joel M.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Capital Flows.
- Capital Markets and Capital Flows.
- Capital Misallocation.
- Finance and Financial Sector Development.
- Firm Productivity.
- Foreign Direct Investment.
- International Economics and Trade.
- Investment Dynamics.
- Private Sector Development.
- Private Sector Economics.
- Local Subjects:
- Capital Flows.
- Capital Markets and Capital Flows.
- Capital Misallocation.
- Finance and Financial Sector Development.
- Firm Productivity.
- Foreign Direct Investment.
- International Economics and Trade.
- Investment Dynamics.
- Private Sector Development.
- Private Sector Economics.
- Physical Description:
- 1 online resource (31 pages)
- Place of Publication:
- Washington, D.C. : The World Bank, 2019.
- System Details:
- data file
- Summary:
- This paper investigates the sources of capital misallocation across a group of 11 developing and developed countries. The main findings are (i) technological frictions, namely, adjustment costs and uncertainty, account for only a modest share of observed misallocation, leaving ample scope for other factors; (ii) heterogeneity in firm-level technologies potentially explains between one-quarter and one-half; but (iii) dispersion in markups is much smaller; and (iv) after accounting for these factors, on average, at least 50 percent of misallocation within each of these countries remains unexplained, suggesting a large role for additional, potentially distortionary factors. These factors are largely attributable to a component that is correlated with firm size/productivity and one that is essentially permanent to the firm. The paper reports a broad set of moments describing firm-level investment dynamics and detailed parameter estimates on a country-by-country basis, with an eye toward future work in this area.
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