Natural resources and global misallocation

Authors: Alexander Monge-Naranjo, Juan M. Sánchez and Raül Santaeulàlia-Llopis

American Economic Journal: Macroeconomics, Vol. 11, No 2, 79-126, April, 2019

Are production factors allocated efficiently across countries? To differentiate misallocation from factor intensity differences, we provide a new methodology to estimate output shares of natural resources based solely on current rent flows data. With this methodology, we construct a new dataset of estimates for the output shares of natural resources for a large panel of countries. In sharp contrast with Caselli and Feyrer (2007 ), we find a significant and persistent degree of misallocation of physical capital. We also find a remarkable movement toward efficiency during last 35 years, associated with the elimination of interventionist policies and driven by domestic accumulation.

This paper originally appeared as Barcelona School of Economics Working Paper 994