Misallocation in the Brazilian Manufacturing Sector

Authors

  • Rafael da Silva Vasconcelos Brazilian Confederation of Industry (CNI)

DOI:

https://doi.org/10.12660/bre.v37n22017.61801

Keywords:

Resource misallocation, TFP, Firm-level data

Abstract

This work investigates the existence of resource misallocation in the Brazilian manufacturing sector and measures possible distortions in it. Using a similar method of measurement to the one developed by Hsieh and Klenow (2009) and firm-level data for 1996-2011 we find evidence of misallocation in the manufacturing sector during the observed period. Moreover, our results show that misallocation has been growing since 2005. We find that the Brazilian manufacturing sector operates at about 50% of its efficient product. We also find that the economic crisis did not have a substantial effect on the total productivity factor or on the sector's misallocation. However, small firms in particular seem to be strongly affected in a global crisis. Furthermore, the effects described would be attenuated if we consider network effects. Despite Brazil's well-known high tax burden, there is not evidence that this is the main source of resource misallocation.

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Published

2017-11-28

Issue

Section

Articles