Abstract: A large portion of differences in output per capita across countries is explained by differences in total factor productivity (TFP). In this article, we summarize a recent literature - and the articles in this special issue on misallocation and productivity - that focus on the reallocation of factors across heterogeneous production units as an important source of measured TFP differences across countries.
Keywords: misallocation, productivity, heterogeneous establishments, distortions.
JEL Classification: O47; O43; O41: O11; E1.