productivity directly, by reallocating resources towards more productive uses, but also indirectly through the effects of increased …

We consider a tractable model of heterogeneous production units that features endogenous entry and productivity … standard factor misallocation framework, policy distortions featuring a positive productivity elasticity of distortions imply … larger reductions in output through smaller investments in establishment productivity. A calibrated version of the model …

corroborated in the data, as potential exit is not predicated on the size of firms, their age, or their productivity …