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 GSE Working Paper 994