Miscalling Mismeasurement as Misallocation

There is a vast line of research in misallocation like hsieh and klenow (2009), which see its roots in policy distortions. however, papers like bill, klenow, and ruane(2020) argued differences in measured average products might reflect misspecification instead of actual marginal products. by focusing on the indian and chinese manufacturing sectors, this paper shows that these results are sensitive to the parameters of the factor accumulation and the production function. in doing so, we estimate the model employed by h.k. to measure misallocation using the moments reported in h.k. for china and india. then, we produce simulated data using the estimated model and redo the calculation of h.k. by different parameters.notably, the optimal dispersion depends on the parametrization, so one can't address the misallocation without a country-specific calibration of the model, we observe that the hsieh and klenow (2009) results are highly dependent on the measurement of the elasticity of substitution and capital share in production. therefore, the assumption of the same parameters for all three countries could misguide us to a wrong measurement of the actual effects of misallocation. the findings of this paper call for the proper estimation of parameters when studying the impact of misallocation on aggregate tfp.