We argue that greater misallocation is a key driver of the worse management practices in Mexico compared to the US … greater misallocation in Mexico is the weaker size-management relationship compared to the US, particularly in the highly …

investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed … both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment … year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be …