The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Factor Misallocation and Development

  • Diego Restuccia
Reference work entry


The large differences in income per capita across countries are mostly explained by differences in total factor productivity (TFP). This article summarises the evidence on the importance of resource allocation across productive units in explaining the observed differences in TFP across countries.


Distortions Heterogeneous establishments Misallocation Productivity 

JEL Classification

D4 D10 O1 
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I thank Tasso Adamopoulos and Margarida Duarte for helpful comments. All errors and omissions are my own.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Diego Restuccia
    • 1
  1. 1.