"Large differences in output per worker between rich and poor countries have been attributed, in no small part, to differences in Total Factor Productivity (TFP). The natural question then is: what are the underlying causes of these large TFP differences? [...] A recent paper by Restuccia and Rogerson (2008) takes a different approach. Instead of focusing on the efficiency of a representative firm, they suggest that misallocation of resources across firms can have important effects on aggregate TFP. Our goal in this paper is to provide quantitative evidence on the potential impact of resource misallocation on aggregate TFP. [...] We find that moving to “U.S. efficiency” would increase TFP by 30-50% in China and 40-60% in India."