Plant-Size Distribution and Cross-Country Income Differences
We investigate, using plant-level data for 79 developed and developing countries, whether differences in the allocation of resources across heterogeneous plants are a significant determinant of cross-country differences in income per worker. For this purpose, we use a standard version of the neoclassical growth model augmented to incorporate monopolistic competition among heterogeneous plants. For our preferred calibration, the model explains 58% of the log variance of income per worker. This figure should be compared to the 42% success rate of the usual model.
We thank Daron Acemoglu, Jeff Frankel, John Haltiwanger, Chang-Tai Hsieh, Pete Klenow, Julio Rotemberg, Kei-Mu Yi, and participants at the NBER Economic Fluctuations and Growth Meeting and NBER International Seminar on Macroeconomics (ISOM) for valuable comments and suggestions. We are grateful to Dennis Jacques for helping us with the D&B dataset, and HBS and LSE for financial support. We further thank Pamela Arellano for excellent research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Plant-Size Distribution and Cross-Country Income Differences, Laura Alfaro, Andrew Charlton, Fabio Kanczuk. in NBER International Seminar on Macroeconomics 2008, Frankel and Pissarides. 2009