Natural Resources and Global Misallocation

Monge-Naranjo, Alexander; Sanchez, Juan M.; Santaeulalia-Llopis, Raul

doi:10.20955/wp.2015.036

Working Paper

Natural Resources and Global Misallocation

Abstract: Are production factors allocated efficiently across countries? To differentiate misallocation from factor intensity differences, we provide a new methodology to estimate output shares of natural resources based solely on current rent flows data. With this methodology, we construct a new dataset of estimates for the output shares of natural resources for a large panel of countries. In sharp contrast with Caselli and Feyrer (2007), we find a significant and persistent degree of misallocation of physical capital. We also find a remarkable movement toward efficiency during last 35 years, associated with the elimination of interventionist policies and driven by domestic accumulation. Interestingly, when both physical and human capital can be reallocated, capital would often flow from poor to rich countries.

Keywords: Factor Shares; Capital Formation; Human Capital; International Flows;

JEL Classification: O11; O16; O41;

https://doi.org/10.20955/wp.2015.036