Is Misallocation Higher in France than in the United States

Abstract

In this paper, we apply the Hsieh and Klenow (2009) methodology to French microdata on manufacturing firms to quantify the potential extent of intra-industry misallocation in France versus the United States. In contrast to what has been found for developing countries, such as China, India and some countries in Latin America, we do not find any sizeable ”efficiency gap” between France and the U.S. in the manufacturing industry. This new evidence is robust to a series of tests addressing both measurement and specification issues. In light of recent advances in the fields of productivity and misallocation, and in particular Bartelsman et al. (2013), we also discuss to what extent our new empirical findings challenge the established view on which continental European economies have higher input and output distortions than the American economy.

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