The capital allocation process is a fundamental, organizational capability that drives value creation. The bulk of extant empirical research, as well as evidence from prominent field studies, concludes that the capital allocation process is a significant capability weakness: managers appear to...

This paper studies a dynamic production economy with financial intermediation. It is assumed that claims held on intermediaries cannot be fully enforced such that intermediation is subject to intermediary equity requirements. It is shown that competitive equilibria are not constrained efficient...

This paper quantifies the impact of effective corporate tax rates on aggregate total factor productivity (TFP). Using Chilean manufacturing data, we document a large dispersion in the effective tax rate faced by firms and a mass of firms facing a 0 percent tax rate. We incorporate these findings...

A social planner allocates heterogeneous capital, which determines agents' cost of providing local public goods. Given a capital allocation, agents choose equilibrium efforts. Using a first-order approximation, we uncover a tradeoff between allocating productive capital to central and periphery...

We use a natural experiment and matched bank/firm data to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms invest more and maintain higher rates of sales growth. Moreover, firms produce less productively. Firms also...

This paper provides an analytical discussion of several interconnected resource allocation problems from under-pricing of electricity used by farmers for groundwater extraction. In these situations, groundwater extraction is inefficiently high even without electricity under-pricing. Moreover,...

Are efficiency considerations important for understanding differences in the development of institutions? We model institutional quality as the degree to which obligations associated with exchanging capital can be enforced. Establishing a positive level of enforcement requires an aggregate...