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Misallocating capital and labour across firms: Trends and determinants in selected Eurozone economies

Gamberoni, Elisa, Giordano, Claire, Lopez-Garcia, Paloma, (2016), “Misallocating capital and labour across firms: Trends and determinants in selected Eurozone economies”, VoxEu, 13 December

An efficient allocation of inputs across firms is a necessary condition to boost TFP growth. This column presents evidence that in large Eurozone economies, capital misallocation trended upwards in the period 2002-2012 while labour misallocation dynamics were flatter. Uncertainty and credit market frictions were strongly associated with the observed developments in capital misallocation, whereas the overall deregulation in the product and labour markets contributed to dampening input misallocation dynamics.

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