The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis
Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective - factor usage does not decline as much as output, resulting in large falls...
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2014
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| Acceso en línea: | https://bibliotecadigital.exactas.uba.ar/collection/paper/document/paper_03470520_v116_n1_p87_Sandleris http://hdl.handle.net/20.500.12110/paper_03470520_v116_n1_p87_Sandleris |
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paper:paper_03470520_v116_n1_p87_Sandleris2023-06-08T15:34:35Z The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis Argentina Financial crisis Productivity Resource misallocation Welfare financial crisis public spending resource allocation total factor productivity welfare economics Argentina Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective - factor usage does not decline as much as output, resulting in large falls in measured productivity - and from a theoretical perspective. With the aim of resolving this puzzle, we present a framework that allows us to do the following. First, we account for changes in a country's measured productivity during a financial crisis as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors, driven both by reallocation amongst existing plants and by entry and exit. Second, we measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level dataset and we find that more than half of the, roughly, 10 percent decline in measured total factor productivity can be accounted for by deteriorations in the allocation of resources both across and within sectors. We measure the decline in welfare to be of the order of one-quarter of one year's gross domestic product. © The editors of The Scandinavian Journal of Economics 2013. 2014 https://bibliotecadigital.exactas.uba.ar/collection/paper/document/paper_03470520_v116_n1_p87_Sandleris http://hdl.handle.net/20.500.12110/paper_03470520_v116_n1_p87_Sandleris |
| institution |
Universidad de Buenos Aires |
| institution_str |
I-28 |
| repository_str |
R-134 |
| collection |
Biblioteca Digital - Facultad de Ciencias Exactas y Naturales (UBA) |
| topic |
Argentina Financial crisis Productivity Resource misallocation Welfare financial crisis public spending resource allocation total factor productivity welfare economics Argentina |
| spellingShingle |
Argentina Financial crisis Productivity Resource misallocation Welfare financial crisis public spending resource allocation total factor productivity welfare economics Argentina The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| topic_facet |
Argentina Financial crisis Productivity Resource misallocation Welfare financial crisis public spending resource allocation total factor productivity welfare economics Argentina |
| description |
Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective - factor usage does not decline as much as output, resulting in large falls in measured productivity - and from a theoretical perspective. With the aim of resolving this puzzle, we present a framework that allows us to do the following. First, we account for changes in a country's measured productivity during a financial crisis as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors, driven both by reallocation amongst existing plants and by entry and exit. Second, we measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level dataset and we find that more than half of the, roughly, 10 percent decline in measured total factor productivity can be accounted for by deteriorations in the allocation of resources both across and within sectors. We measure the decline in welfare to be of the order of one-quarter of one year's gross domestic product. © The editors of The Scandinavian Journal of Economics 2013. |
| title |
The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| title_short |
The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| title_full |
The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| title_fullStr |
The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| title_full_unstemmed |
The costs of financial crises: Resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| title_sort |
costs of financial crises: resource misallocation, productivity, and welfare in the 2001 argentine crisis |
| publishDate |
2014 |
| url |
https://bibliotecadigital.exactas.uba.ar/collection/paper/document/paper_03470520_v116_n1_p87_Sandleris http://hdl.handle.net/20.500.12110/paper_03470520_v116_n1_p87_Sandleris |
| _version_ |
1768543085877264384 |