IMF RESEARCH perspectives | IMF.org/researchbulletin 09
Resource misallocation—which occurs when economic
resources are not put to their best use—can arise for many
reasons, including market failures (e.g. monopolies cur tailing
production) or policy failures (e.g. India’s complex licensing
system, China’s support of state-owned enterprises, France’s
strict labor regulations).1 Structural reforms are often motivated
by the hope that shifting capital and labor to “better use”
in more productive rms will give a large boost to aggregate
productivity and GDP.
1 Misallocation is generally an unintended consequence of these policies.
Is Misallocation Really
When Models Meet the Micro Data