Faculty of Business Seminar Series / Orhun Sevinç

Date: Dec 26, 2019 - Thursday

Time: 10:00-11:30

Place: AB2, Meeting Room 345

Title: A Trade-Based Misallocation Index

Abstract: This paper, based on a model of trade in the presence of sectoral distortions, develops a one-dimensional
sectoral misallocation index. It estimates the index using product-level bilateral trade data at the sectorcountry-
year level since 1962. The geographical distribution of the misallocation index suggests substantial
within-region differences across countries and across time. Notably, a large and historical allocative
efficiency gap exists across the West and the East of Europe, while the latter shows remarkable progress
in catching up. On the other hand, the substantial gap between North and South America is highly
persistent. The paper then investigates the negative association of misallocation to economic performance
through multivariate regression analysis. The index of misallocation inversely and robustly predicts crosscountry
productivity differences, contains valuable information on top of factors of production, and
outperforms measures of diversification, product sophistication, and openness when time-invariant
country characteristics are accounted for.