Official websites use .gov
A .gov website belongs to an official government organization in the United States.
Secure .gov websites use HTTPS
A lock (
) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.
Topics
Data & Maps
Surveys & Programs
Resource Library
Good Dispersion, Bad Dispersion
Good Dispersion, Bad Dispersion
Working Paper Number: CES-24-13
Abstract
We document that most dispersion in marginal revenue products of inputs occurs across plants within firms rather than between firms. This is commonly thought to reflect misallocation: dispersion is “bad.” However, we show that eliminating frictions hampering internal capital markets in a multi-plant firm model may in fact increase productivity dispersion and raise output: dispersion can be “good.” This arises as firms optimally stagger investment activity across their plants over time to avoid raising costly external finance, instead relying on reallocating internal funds. The staggering in turn generates dispersion in marginal revenue products. We use U.S. Census data on multi-plant manufacturing firms to provide empirical evidence for the model mechanism and show a quantitatively important role for good dispersion. Since there is less scope for good dispersion in emerging economies, the difference in the degree of misallocation between emerging and developed economies looks more pronounced than previously thought.
Others in Series
Working Paper
High-Growth Firms in the United States: Key Trends and New Data Opportunities
We introduce new public-use BDS statistics capturing the stock and flows of employment, firms, and establishments along the firm growth rate distribution.
Working Paper
Neighborhood Revitalization and Residential Sorting
The HOPE VI revitalization program reduced neighborhood poverty rates experienced by subsidized renters.
Working Paper
Examining Racial Identity Responses Among People with Middle Eastern and North African Ancestry in the American Community Survey
We examine unedited race responses for people of Middle Eastern and North African (MENA) ancestry on the American Community Survey between 2005-2019.
Page Last Revised - November 1, 2024
✕
Is this page helpful?
Yes
No
Yes
No✕
NO THANKS
255 characters maximum
255 characters maximum reached
255 characters maximum reached
✕
Thank you for your feedback.
Comments or suggestions?
Comments or suggestions?
