The Misallocation of Land and Other Factors of Production in India

Working Paper
Published on 1 March 2015


This paper by Kerr, Duranton, Grover and Ghandi (2015) quantifies the misallocation of manufacturing output and factors of production between establishments across Indian districts during 1989–2010. It first distills a number of stylized facts about misallocation in India, and demonstrates the validity of misallocation metrics by connecting them to regulatory changes in India that affected real property. With this background, the study next quantifies the implications and determinants of factor and output misallocation. Although more-productive establishments in India tend to produce more output, factors of production are grossly misallocated. A better allocation of output and factors of production is associated with greater output per worker. Misallocation of land plays a particularly important role in these challenges.


Gilles Duranton

University of Pennsylvania

Ejaz Ghani

World Bank

Arti Grover Goswami

World Bank

William Kerr

Massachusetts Institute of Technology