Description

Economic distortions—such as market power, taxes, credit constraints, etc.— are fundamental in understanding the difference between developing and developed economies. Recent work has documented the pervasive extent of economic distortions and how they lead to substantial misallocation, or aggregate productivity loss. Far less well understood is how these phenomena affect members of society differently. In this paper we combine unique datasets from Chile, linking workers and owners to firms, firms to each other, firms to consumers, and firms and consumers to the government, in order to quantify the full incidence of distortions for the first time.