Misallocation and Intersectoral Linkages
Replication codes
Sophie Osotimehin and Latchezar Popov
2022


The codes allow replicating all the tables and figures of the paper. The codes are
separated in two folders: “markups” and “model”. The markups code must be run before
running the model code.

Software used: Matlab 2021a, Stata/IC 15.1

Operating system: Windows 10

Time to run: the code that produces the baseline results takes 40 min to run (section 1 of
main_io_frictions.m)

A. Markups

The code in the “markups” folder generates the data used to calibrate the model.
To generate the data, first create two subfolders named “output” and ‘figures” in the
“markups” folder. Then, run the main file: main_markups.do (Stata)

Description of auxiliary files


make_deprate_BEA.do   Computes US industry depreciation rates from BEA data
make_deprate_KLEMS.do Computes country-industry depreciation rate from KLEMS data
make_pcm_wiod.do      Computes price cost margins using WIOD data
make_pmr.do           Imports product market regulation data
statdes_pcm_wiod.do   Produces Figure 2, C1, C2, C3, C4, C6 and C7

B. Model

The code in the “model” folder solves the model and computes the TFP gain of removing
markups and labor distortions.

To generate the results, first create two subfolders named “output” and “figures” in the
“model” folder. Note that the “model” folder and the “markups” folder must be in the
same folder. Then, run sequentially the main files:
1. Main_iofrictions.m (Matlab)
2. Main_figures_tables.do (Stata)

Description of the auxiliary files

1. Auxiliary files for Main_iofrictions

tfpgain.m                  Produces results of Table 1,Table C6, C7, C9
tfpgain_labor.m            Produces results of Table 2, Table C8
tfpgain_contrib.m          Produces results of Table 3
tfpgain_sector.m           Produces results of Figure 4
tfpgain_norecalib_approx.m Produces results of Figure 5, 6 and 7
tfpgain_jones.m            Produces results of Table C3
tfpgain_simul.m            Produces results of Table C2
tfpgain_chi.m              Produces results of Table C10
tfpgain_chi_labor.m        Produces results of Table C11
tfpgain_highel.m           Produces results of Figure 3.c
tfpgain_highel_rho.m       Produces results of Figure 3.d
tfpgain_ruane.m            Produces results of Table C6
spec_baseline, spec_chi, etc. Selects dataset & options, and sets filenames
compute_tfpgain.m,
compute_tfpgain_labor.m,   Subfiles of the corresponding tfpgain.m
etc.
save_tfpgain.m, etc.       Subfiles of the corresponding tfpgain.m
calibration_markups.m      Function that calibrates the model with markups;
                            used in compute_tfpgain.m
approx_gap.m               Function that computes the ratio of the
                            approximated to exact TFP gain for a given mean
                            distortion, used in tfpgain_norecalib_approx.m
datawork_med.m             Function that imports WIOD data and computes the
                            final use and intermediate input shares of each
                            sector; used in compute_tfpgain.m
eqbm.m                     Function that computes the equilibrium for arbitrary
                            distortions; used in compute_tfpgain_labor.m
eqbm_markups.m.            Function that computes the equilibrium for all-input
                            distortions (markups); used in compute_tfpgain.m
eqbm_jones.m               Subfile of tfpgain_jones.m
importdata_med.m           Subfile of tfpgain.m

2. Auxiliary files for main_figures_tables

These code files rearrange the results produced by the matlab code.

display_param.do       Program that produces Figure C5 and display results of Table C4 and C5
display_results.do     Program that produces Figures 3a and 3b and
                        display results of Table 1, Table C6, C7, C8, and C9
make_fig_highel.do     Script that produces Figures 3c & 3d
make_fig_sector.do     Script that produces Figure 4
make_tab_ruane.do      Program that displays results of the last column of
                        Table C6
display_results_chi.do Program that displays results of Table C10 and C11