“…As in Chari, Kehoe and McGrattan (2007), Hsieh andKlenow (2009), Lagos (2006), and Restuccia and Rogerson (2008), distortions at the micro (here sectoral) level can aggregate up to provide differences in TFP. For simplicity, we model these distortions as sector-specific reductions in revenue, denoted τ i .…”