Market failures and misallocation

Arbeitspapier

I develop a method to measure and separate the production misallocation caused by failures in factor markets versus financial markets. When I apply the method to rice farming villages in Thailand I find surprisingly little misallocation. Optimal reallocation would increase output in most villages by less than 15 percent. By 2006 most misallocation comes from factor market failures. I derive a decomposition of aggregate growth that accounts for misallocation. Declining misallocation contributes little to growth compared to factor accumulation and rising farm productivity. I use a government credit intervention to test my measures. I confirm that credit causes a statistically significant decrease in only financial market misallocation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 724

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; General Aggregative Models: Neoclassical
• Subject: misallocation ; market failure ; Thailand ; agriculture ; financial markets ; factor markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Shenoy, Ajay
• Event: Veröffentlichung
• (who): University of California, Economics Department
• (where): Santa Cruz, CA
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/125547
• Last update: 10.03.2025, 11:44 AM CET