Misallocation and Capital Market Integration: Evidence From India

• 成果类型: Article
• 署名作者: Bau, Natalie; Matray, Adrien
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; Centre for Economic Policy Research - UK; Princeton University; National Bureau of Economic Research
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA19039
• 发表日期: 2023
• 页码: 67-106
• 关键词: aggregate productivity; GROWTH; finance; inputs; allocation; TRADE; farms; entry

摘要

We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity for affected industries in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in firms' input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. Liberalization increases capital overall. For domestic firms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 23%, physical capital by 53%, wage bills by 28%, and reduces MRPK by 33% relative to low MRPK firms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that inefficiencies in that sector may cause misallocation. Finally, we propose an assumption under which a novel method exploiting natural experiments can be used to bound the effect of changes in misallocation on treated industries' aggregate productivity. These industries' Solow residual increases by 3-16%.