How resources are allocated across plants is crucial for understanding cross-country output and productivity differences. This thesis contributes to the growing literature on resource misallocation by studying the particular channels through which misallocation can arise. In Chapter 1, I examine extortion at the plant-level, its effects on individual incentives to become an entrepreneur, and how production is affected by the presence of extortion. I show that extortion is especially burdensome on moderate-ability entrepreneurs forcing them to either forgo entry into entrepreneurship or produce at an inefficiently small scale. When property rights are weak, the frequency of extortion is higher producing a society where much of it's entrepreneurial talent is heavily under-utilized. In Chapter 2, I study plant-level distortions and it's effects on incentives to improve productivity. I build a model where plant innovation improves future productivity so that productivity dynamics are endogenous. Distortions that are tied to productivity are introduced to the model to examine how plant innovation is affected. All plants lower innovation resulting in a distribution over productivity that is right-skewed and a distribution over plant size that is left-skewed, consistent with empirical findings in developing countries. The final Chapter is closely related to Chapter 1 but is more empirically focused. I study the role of theft as a means to explaining the abundance of small plants in developing countries and estimate the causal effect of theft on plant capital demand. I find that plant capital would be significantly higher if theft is eliminated.
| Identifer | oai:union.ndltd.org:TORONTO/oai:tspace.library.utoronto.ca:1807/35189 |
| Date | 20 March 2013 |
| Creators | Ranasinghe, Ashantha |
| Contributors | Restuccia, Diego |
| Source Sets | University of Toronto |
| Language | en_ca |
| Detected Language | English |
| Type | Thesis |
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