Abstract
What are the implications of allocative inefficiency in an open economy? This paper shows how firm-level resource misallocation can affect the relative unit cost of producing a good across sectors, distorting the "natural" comparative advantage of a country. First, sectors with a larger extent of within-industry factor misallocation face larger productivity losses, which reduce their relative export capability. Second, misallocation of factors across industries can alter sectors' sizes and distort their average productivity through firms' selection effects, affecting their comparative advantage too. After presenting evidence on how metrics of intra- and inter-industry factor misallocation are related to the observed patterns of comparative advantage, this paper explores the general equilibrium effects of both types of misallocation in an open economy and their role in shaping industry export capabilities. For this, I use a model of international trade with endogenous selection of heterogeneous firms, in which the allocation of factors within and across industries is inefficient. I compute a counterfactual equilibrium in which misallocation in capital, skilled labor and unskilled labor is removed in one of the countries (Colombia). The reallocation of factors allows Colombia to specialize in industries with "natural" comparative advantage and generates a substantial change in its industrial composition, which leads to a rise in the ratio of exports to GDP by 18 p.p. This industrial composition effect is absent in the workhorse models of factor misallocation under closed economies.
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José Pulido es candidato a Doctor en Economía de University of British Columbia y Economista y Magister en Economía de la Universidad Nacional de Colombia. Su investigación se concentra en macroeconomía y comercio internacional. Actualmente estudia los efectos de la eficiencia de asignación en economías abiertas, centrándose en cómo la mala asignación de recursos distorsiona la ventaja comparativa natural de un país. También está llevando a cabo estudios sobre el origen de las brechas de ingresos en los países en desarrollo.