Work

Resource Misallocation in European Firms: The Role of Constraints, Firm Characteristics, and Managerial Decisions

Year: 2026

Type: article

Abstract: Using a new survey, we document high dispersion of marginal revenue products across firms in the European Union. To interpret this dispersion, we develop a highly portable framework to quantify gains from better allocation of resources. We demonstrate that apart from direct measures of distortions, firm characteristics, such as demographics, quality of inputs, utilization of resources, and dynamic adjustment of inputs, are predictors of the marginal revenue products of capital and labor. We emphasize that some firm characteristics may reflect compensating differentials rather than constraints and the effect of constraints on the dispersion of marginal products may be smaller. (JEL D22, D24, D25, E23, G31, L25)

Source: American Economic Journal Macroeconomics

DOI: 10.1257/mac.20210220

Authors: Yuriy Gorodnichenko, Debora Revoltella, Jan Svejnar, Christoph T. Weiss

Institutions: Center for Economic and Policy Research, National Bureau of Economic Research, IZA - Institute of Labor Economics, University of California, Berkeley, European Investment Bank, Center for Economic Research and Graduate Education – Economics Institute, Columbia University

Language: English

Topic: Economic Growth and Productivity

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W3123894091

FWCI:

Cites:

Cited by: 1

Related to: 20