In this seminar, Anpeng develops a growth model with heterogeneous firms to study the allocative inefficiency in emerging economies. The model economy learns new technology from the world frontier, and reallocates resources to fit the technological change. When a firm starts to catch up the frontier, it faces the uncertainty of future technical progress, and delays the adjustment of production factors as a response. The delayed adjustment generates allocative inefficiency in the early stage of development. Then, technological achievement narrows the gap to the frontier, reduces the future uncertainty, and improves the efficiency. Finally, the economy reaches a more efficient distribution again in the new steady state. The model developed by Anpeng suggests that the cross-country difference in allocative efficiency can be a by-product of the different stages of development.

Anpeng Li is a fourth year PhD candidate in the Research School of Economics of ANU. His research interest is firm dynamics and productivity in emerging economies. He is particularly interested in Chinese issues.

_The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work. _