The paper by Chang-Tai Hsieh and Peter J. Klenow examines the impact of resource misallocation on Total Factor Productivity (TFP) in China and India compared to the United States. They use micro data on manufacturing establishments to quantify the potential extent of misallocation in these countries. The authors find significant gaps in the marginal products of labor and capital across plants within narrowly-defined industries in China and India, relative to the U.S. They calculate that hypothetical reallocation of capital and labor to equalize marginal products could increase manufacturing TFP by 30-50% in China and 40-60% in India. The paper also discusses the implications of these findings for policy and provides robustness checks to ensure the reliability of the results.The paper by Chang-Tai Hsieh and Peter J. Klenow examines the impact of resource misallocation on Total Factor Productivity (TFP) in China and India compared to the United States. They use micro data on manufacturing establishments to quantify the potential extent of misallocation in these countries. The authors find significant gaps in the marginal products of labor and capital across plants within narrowly-defined industries in China and India, relative to the U.S. They calculate that hypothetical reallocation of capital and labor to equalize marginal products could increase manufacturing TFP by 30-50% in China and 40-60% in India. The paper also discusses the implications of these findings for policy and provides robustness checks to ensure the reliability of the results.