On the Effi ciency of the World Capital Allocation

Transcription

1 On the Effi ciency of the World Capital Allocation Alexander Monge-Naranjo Juan M. Sanchez Raül Santaeulàlia-Llopis St. Louis Fed & Wash U July 2014

2 Disclaimer: Disclaimer. The views expressed here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of St. Louis or the Federal Reserve System

3 Introduction: Basic Question: How well are the factors of production allocated across countries? Implications: Global effi ciency loss Cross-country income differences Models and data to distinguish Mobile/reproducible vs. fixed/exogenous. Barriers/distortions vs. production function differences

4 Related Literature Dispersion in the marginal product of capital: Lucas Caselli and Freyer Cross-country reallocation of resources: e.g. Burstein and Monge-Naranjo Klein and Ventura Gourinchas and Jeanne. and many others...

5 Road Map 1. Our Model 2. Measured Factor Rents 3. Results: MPKs across countries & overtime 3.1 Decomposition. 3.2 Observable policies: Financial Development Openness. 4. Policy Counterfactuals 5. Conclusions

6 The Model Countries: j = 1,..., J; Time periods, t = 0, 1, 2,... Output Y j,t = A j,t F j,t [h j,t L j,t, T j,t,k j,t ] F [ ] HD1, where: exogenous: A j,t : TFP h j,t L j,t : Human capital corrected labor. T j,t : Fixed Capital (natural resources, land, etc.) endogenous: K j,t : Physical (reproducible & mobile) capital: K j,t+1 = K j,t (1 δ) + I j,t.

7 For counterfactuals: Output Y j,t = A j,t (K γ j,t j,t T 1 γ j,t j,t ) 1 θ j,t (h j,t L j,t ) θ j,t, mobile capital share : [1 θ j,t ] γ j,t. fixed factors : Z j,t A j,t T (1 γ j,t)(1 θ j,t ) j,t (h j,t L j,t ) θ j,t [ ] Preferences: u j,t = s t β (s t) (c L j,s ) 1 σ j,s. 1 σ

8 Marginal Product of Capital Physical or real: RMPK j,t = [1 θ j,t ] γ j,t Y j,t K j,t. Nominal or value MPK: Capital and output prices P Y j,t, PK j,t : [ P Y j,t Y j,t NMPK j,t = [1 θ j,t ] γ j,t Pj,t K K j,t ]. P Y j,t, PK j,t barriers, costs, frictions, etc. additional barriers/costs/frictions = dispersion in NMPK j,t.

9 Measuring Output Shares of Non-Produced Capital World Bank: Measurement of Wealth Stocks [ ] T q (G j,q ) N j,t = Rents j,t,q s nat. res. q s=0 (1 + r ) s, assumptions on PVs: G j,q, r, T q. Natural Capital Stocks q Energy resources Croplands Mineral resources Pasture lands Timber resources Protected areas. Non-timber forest resources Urban land *

10 Measuring Output Shares of Non-Produced Capital Caselli-Freyer: Same Rate of Return between K and N. [1 θ j,t ] γ j,t = Estimates for 1995/96. K j,t N j,t + K j,t [1 labor share j,t ] Monge-Sanchez-Santaeulàlia: [ [1 θ j,t ] γ j,t = 1 labor share j,t ] nat. res. q [Rents j,t,q ] Y j,t Based on the same World Bank rents No assumptions on PVs or rate of return of N and K For t = With or without urban land as fixed capital.

11 Results

12 RMPK Figure: RMPKs over time mean median 25% percentile 75 percentile Year

13 NMPK Figure: NMPKs over time mean median 25% percentile 75 percentile Year

14 cross section st.dev Figure: Evolution in the cross-section dispersion of MPKs st.dev, NMPK st.dev, RMPK Year

15 Decompositions

16 Observable Policies

17 Policy Regimes Openness: Sachs-Warner (and later refinements & extensions) {0, 1} indicator; 1 = open all of the following: low tariffs low non-tariff trade barriers low black-market premium no socialist (a la Kornai) no state monopoly of exports Financial repression: Financial intermediation. Year-by-year quartiles of active-pasive interest rates.

18 MPK across Policy Regimes: Overall averages, Policy Regimes RMPK NMPK Mean Median Mean Median Openness Open SW= Closed SW= Financial Repression Quartile Mean margin

19 0.45 RMPK mean RMPK,closed median RMPK,closed mean RMPK,open median RMPK,open Figure: Openness and RMPKs over time

20 NMPK mean NMPK,closed median NMPK,closed mean NMPK,open median NMPK,open Figure: Openness and NMPKs over time

21 0.25 RMPK 0.2 mean RMPK,q1 median RMPK,q1 mean RMPK,q4 median RMPK,q Figure: Financial Repression and RMPKs over time

22 0.35 NMPK mean NMPK, q1 median NMPK, q1 mean NMPK, q4 median NMPK, q Figure: Financial Repression and NMPKs over time

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24 In Sum: Averages: : Secular decline in MPKs increasing K Y > { declines in output labor shares initial decline in non-reprod. share Dispersion: : Large drop in cross-country MPK dispersion. Surge after 1996! Role of prices: Trends in P Y j,t and PK j,t do not seem key. Policy regimes: Significant differences across countries with different policy regimes.

25 Counterfactuals

26 Counterfactuals Removing all barriers: (including those driving P Y j,t, PK j,t ): J Y j,t j,t} j=1 max {K i.e. equalization of NMPK s. s.t.: J K J j,t = Kj,t. O j=1 j=1 Removing barriers to capital reallocation (keeping P Y j,t, PK j,t ): J Pj,tY Y j,t j,t} j=1 max {K i.e. equalization of NMPK s s.t.: J Pj,tK K J j,t = Pj,tK K j,t. O j=1 j=1

27 % gain in world output Figure: Policy Counterfactuals: Global Output Gains 7 6 counterfactual 1: RMPKs counterfactual 2: NMPKs year

28 Figure: Global Gains under different assumptions on Urban Land % gain in world output counterfactual 1: RMPKs counterfactual 2: NMPKs 1 with urban land reprod 2 with urban land reprod year

29 In Sum: Movement towards higher effi ciency since Yet, large degree of ineffi ciency: 4-10% global output. Role of prices: Pj,t Y and PK j,t do not seem the key factor.

30 Comparison with Caselli & Freyer

31 MPK = γ [1 θ]y/k Figure: MPKs, Caselli-Freyer vs. MSS, MPK, MSS MPK, CF Y/L per capita, relative to U.S.

32 Reproducible Capital Share Figure: Reproducible Capital Output Shares, γ*[1 θ], MSS γ*[1 θ], CF Y/L per capita, relative to U.S.

33 Capital/Output Ratio Figure: Capital-Output Ratios, K/Y, MSS K/Y, CF Y/L per capital, relative to U.S.

34 Labor Share PWT8, 1996 Figure: Labor Shares: PWT8 vs. Bernanke and Gurkaynak, Labor Share Bernanke Gurkaynak, 1996

35 Conclusions Changes in the effi ciency of the allocation of capital. Strong trend since 1970 towards higher effi ciency. Yet, significant effi ciency losses seem to remain: 4-10% global output. Ongoing work: Country level implications. Measured distortions/barriers, e.g. openness, financial development, etc. Dynamics.