Resource misallocation in Mexico

Abstract

I apply and adapt the framework by Hsieh and Klenow (2009a) to study misallocation in Mexico. I analyze the Mexican Economic Censuses of 1993, 1998, 2003, 2008 and 2013. I find that misallocation was stable until 2003 but increased in 2008 and 2013. The increase in misallocation is related to the growth over time of the shares of value added, capital stock net of depreciation and employment corresponding to informal establishments. It also stems from the increase in the dispersion of distortions on the ratio of remuneration over capital costs at the establishment level.