The implications of poor management in developing countries are becoming well known, but what drives these differences is less clear. Based on large new surveys in Mexico and the US, this column argues that misallocation is a key driver of these differences.

Frictions from low competition and weak rule of law appear to lie behind the difficulties even well-managed firms in Mexico have in growing, especially in the services sector. These results point to the importance of open and contestable markets, improving contract enforcement, and lowering crime and corruption as key mechanisms to improve firms' management and productivity

---

25 February 2022

---

VoxEU

---

https://voxeu.org/article/misallocation-explains-worse-management-among-mexican-firms

This Blog is published under the centre's Growth programme.