TY - JOUR
T1 - Estimating lost output from allocative inefficiency, with an application to chile and firing costs
AU - Petrin, Amil
AU - Sivadasan, Jagadeesh
N1 - Copyright:
Copyright 2013 Elsevier B.V., All rights reserved.
PY - 2013
Y1 - 2013
N2 - We propose a new measure of allocative efficiency based on unrealized increases in aggregate productivity growth. We show that the difference in the value of the marginal product of an input and its marginal cost at any plant-the plant-input gap-is exactly equal to the change in aggregate output that would occur if that plant changed that input's use by one unit. We show how to estimate this gap using plant-level data for 1982 to 1994 from Chilean manufacturing. We find the gaps for blue- and white-collar labor are quite large in absolute value, and these gaps (unlike for materials and electricity) are increasing over time. The timing of the sharpest increases in the labor gaps suggests that they may be related to increases in severance pay.
AB - We propose a new measure of allocative efficiency based on unrealized increases in aggregate productivity growth. We show that the difference in the value of the marginal product of an input and its marginal cost at any plant-the plant-input gap-is exactly equal to the change in aggregate output that would occur if that plant changed that input's use by one unit. We show how to estimate this gap using plant-level data for 1982 to 1994 from Chilean manufacturing. We find the gaps for blue- and white-collar labor are quite large in absolute value, and these gaps (unlike for materials and electricity) are increasing over time. The timing of the sharpest increases in the labor gaps suggests that they may be related to increases in severance pay.
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U2 - 10.1162/REST_a_00238
DO - 10.1162/REST_a_00238
M3 - Article
AN - SCOPUS:84886057305
SN - 0034-6535
VL - 95
SP - 286
EP - 301
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 1
ER -