Date: 21 February 2025, Friday
Time: 13.30 – 14.30
Place: MA-330
“Managing Resource (Mis)allocation”
by
Rui Silva
Nova SBE
Abstract
Prior work has shown that the misallocation of capital and labor substantially lowers aggregate productivity. In this paper, we use Census microdata at the plant level to decompose how much aggregate productivity is lost due to misallocation across firms, and how much is lost because of misallocation within firms. When capital and labor are hypothetically reallocated to equalize marginal products across all plants, we find an increase in aggregate productivity of 42%, out of which 30% is due to misallocation within firms. Managerial quality explains a large part of the efficiency of internal capital and labor markets. In a counterfactual where all multi-unit companies are assigned the highest management score, aggregate productivity increases by 13% due to improvements in the allocation of internal resources. To ensure that our results are not driven by mismeasurement, we exploit the introduction of new airline routes that reduce the travel time between headquarters’ZIP code and the plant’s ZIP code. We further document that companies that misallocate resources internally have lower profits and lower value.
Bio
Rui Silva is a Finance faculty at Nova School of Business and Economics in his home town of Lisbon. Before joining Nova he was an Assistant Professor of Finance at London Business School. He has taught numerous courses in Economics and Finance at Nova, The University Chicago, and The London Business School. His research focuses on corporate finance, corporate governance, entrepreneurial finance and innovation, and interactions between labor economics and financial and organizational economics. Rui Silva earned a B.A. in Economics from Universidade Nova de Lisboa and a M.A. and PhD in Economics from The University of Chicago.