A large literature emphasizes that distortions misallocate resources across firms and are a key source of productivity losses. This paper examines the dynamic effects of distortions when they affect not only the allocation of resources but also firm-level incentives to improve productivity. I...

How do institutions affect resource misallocation? This paper focuses on a particular class of institutions, namely property rights, and their relation to extortion. Motivated by empirical evidence that there are differences in extortion rates across establishments, both within and across...