IESET.
Hypotheses·regulatory·price_signal_distortion_capital_misallocation

Across a broad panel of developing and emerging-market economies 1980-2020, price controls and directed input subsidies predict higher capital misallocation — measured by the dispersion of the marginal product of capital across firms or sectors — and lower long-run total-factor-productivity growth.

The pre-registered claim is that a one-standard-deviation increase in a composite price-distortion index is associated with at least a 5% increase in the standard deviation of log-MPK and at least a 0.2-percentage-point reduction in annual TFP growth, after controlling for initial income, financial development, and state-capacity proxies.

PARTIALengine/runs/price_signal_distortion_capital_misallocation

PARTIAL — coef=+0.008607, p=0.542 (above α=0.05); direction inconclusive

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The evidence is suggestive but not decisive. coef=+0.008607, p=0.542 (above α=0.05); direction inconclusive

why it matters

This matters because regulatory claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 28 country or place units from 1980 to 2020, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Price distortion index
  • Fraser price controls subindex
What we checked
  • Capital misallocation sd log mpk
  • Productivity growth 10yr
  • Sectoral labour productivity dispersion
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

0 input datasets, 0 unresolved missing series, provenance status: no input vintages recorded.

Results

engine/runs/price_signal_distortion_capital_misallocation
1007550250198020002020CHNINDIDNBRAMEXARGCOL
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show capital_misallocation_sd_log_mpk across 28 sampled countries over 1980–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for price_signal_distortion_capital_misallocation. Published chart will be generated from engine/runs/price_signal_distortion_capital_misallocation/chart_data.json.

Who has skin in the game — schools predicting on this

7 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Degrowth / Ecological Macroeconomicswins if MIXEDpartial/no-callStructuralist / Developmentalistwins if MIXEDpartial/no-callNew Institutional Economicswins if MIXEDpartial/no-callMarket Socialism (Lange-Lerner tradition)wins if MIXEDpartial/no-callMarxian Political Economywins if MIXEDpartial/no-callModern Monetary Theorywins if MIXEDpartial/no-callSocial Democraticwins if MIXEDpartial/no-call

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z
run generated · 2026-06-29T17:54:33Z

Across a broad panel of developing and emerging-market economies 1980-2020, price controls and directed input subsidies predict higher capital misallocation — measured by the dispersion of the marginal product of capital across firms or sectors — and lower long-run total-factor-productivity growth. The pre-registered claim is that a one-standard-deviation increase in a composite price-distortion index is associated with at least a 5% increase in the standard deviation of log-MPK and at least a 0.2-percentage-point reduction in annual TFP growth, after controlling for initial income, financial development, and state-capacity proxies.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the panel-FE coefficient on price-distortion index is not positive and significant at p<0.05 on MPK dispersion, OR (b) the coefficient is not negative and significant at p<0.05 on TFP growth, OR (c) the implied effect of a one-SD increase in price distortion on MPK dispersion is below 2.5%. A developmentalist / infant-industry reading wins if price controls are negatively associated with MPK dispersion (suggesting that controls correct market failures and improve allocation) or positively associated with TFP growth.

formal test & threshold
test:      panel_fe_price_distortion_on_misallocation_and_tfp
threshold: panel_FE_beta(price_distortion → sd_log_mpk) > 0 at p<0.05 AND panel_FE_beta(price_distortion → tfp_growth_10yr) < 0 at p<0.05 AND implied_effect_per_1sd_price_distortion_on_mpk_dispersion >= 2.5%

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
28 countries · 1980 – 2020
Evidence type
associational

Panel FE with 10-year forward-differenced TFP and contemporaneous misallocation measures on lagged price-distortion index. Robustness: cross-sectional long-difference using transition- economy price-liberalisation episodes (China 1978-1992, Vietnam Doi Moi, ex-USSR 1991-1995) as natural-experiment validation. Alternative misallocation measure: Hsieh-Klenow dispersion.

Data

VariableSourceTransform
capital_misallocation_sd_log_mpk
outcome
constructed:std_dev_log_mpk_from_industrial_censustier 5
level
tfp_growth_10yr
outcome
pwt:rtfpnatier 3
log_diff_10yr
sectoral_labour_productivity_dispersion
outcome
constructed:cv_log_va_per_workertier 5
level
price_distortion_index
treatment
constructed:0.5×price_controls + 0.3×input_subsidies + 0.2×directed_credit_sharetier 5
level
fraser_price_controls_subindex
treatment
fraser_efw:price_controlstier 4
level
fuel_subsidy_share_gdp
treatment
world_bank_wdi:NY.GDP.MINR.RT.ZStier 2
level
log_initial_gdp_pc
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
private_credit_share_gdp
control
world_bank_wdi:FS.AST.PRVT.GD.ZStier 2
level
government_effectiveness
control
wgi:GE.ESTtier 4
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
human_capital_index
control
pwt:hctier 3
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — price_signal_distortion_capital_misallocation

Verdict: PARTIAL — coef=+0.008607, p=0.542 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: Across a broad panel of developing and emerging-market economies 1980-2020, price controls and directed input subsidies predict higher capital misallocation — measured by the dispersion of the marginal product of capital across firms or sectors — and lower long-run total-factor-productivity growth. The pre-registered claim is that a one-standard-deviation increase in a composite price-distortion index is associated with at least a 5% increase in the standard deviation of log-MPK and at least a 0.2-percentage-point reduction in annual TFP growth, after controlling for initial income, financial development, and state-capacity proxies.
  • Falsification rule: Not supported if (a) the panel-FE coefficient on price-distortion index is not positive and significant at p<0.05 on MPK dispersion, OR (b) the coefficient is not negative and significant at p<0.05 on TFP growth, OR (c) the implied effect of a one-SD increase in price distortion on MPK dispersion is below 2.5%. A developmentalist / infant-industry reading wins if price controls are negatively associated with MPK dispersion (suggesting that controls correct market failures and improve allocation) or positively associated with TFP growth.
  • Falsification test: panel_fe_price_distortion_on_misallocation_and_tfp

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): +0.008607
  • Std error: 0.0141
  • p-value: 0.542
  • Observations: 346, countries: 20
  • Within R²: 0.535
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • pwt:rtfpna → tfp_growth_10yr (outcome, publisher=pwt, n=6407)
  • fraser_efw:price_controls → fraser_price_controls_subindex (treatment, publisher=fraser_efw, n=4718)
  • world_bank_wdi:NY.GDP.MINR.RT.ZS → fuel_subsidy_share_gdp (treatment, publisher=world_bank_wdi, n=11536)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_initial_gdp_pc (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:FS.AST.PRVT.GD.ZS → private_credit_share_gdp (controls, publisher=world_bank_wdi, n=9562)
  • wgi:GE.EST → government_effectiveness (controls, publisher=wgi, n=5168)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • pwt:hc → human_capital_index (controls, publisher=pwt, n=8637)

Variables missing data

  • constructed: std_dev_log_mpk_from_industrial_census (outcome, name=capital_misallocation_sd_log_mpk) — vintage not on disk
  • constructed: cv_log_va_per_worker (outcome, name=sectoral_labour_productivity_dispersion) — vintage not on disk
  • constructed: 0.5×price_controls + 0.3×input_subsidies + 0.2×directed_credit_share (treatment, name=price_distortion_index) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:54:33+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

MPK dispersion data is scarce and patchy. Primary source is WB Enterprise Surveys (cross-sectional, not panel). Sectoral productivity dispersion from UNIDO INDSTAT is a lower-quality alternative. This is the main data dependency flagged for this hypothesis.

Authored framework. Read the transparency note.