ADEMU WORKING PAPER SERIES Natural Resources and Global Misallocation Alexander Monge-Naranjo † Juan M. Sanchez ‡ Raul Santaeulalia-Llopis § July 2016 WP 2016/050 www.ademu-project.eu/publications/working-papers Abstract Are production factors allocated efficiently across countries? To differentiate misallocation from factor intensity differences, we construct a new dataset of estimates for the output shares of natural resources for a large panel of countries. We find a significant and persistent degree of misallocation of physical capital. We also find a remarkable movement toward efficiency during last 35 years, associated with the elimination of interventionist policies and driven by domestic accumulation. In contrast, we find a much larger and persistent misallocation of human capital. Interestingly, when both production factors can be reallocated, capital would often flow from poor to rich countries. JEL codes: O11, O16, O41. Keywords: factor shares, capital formation, human capital, international flows. †Federal Reserve Bank of St Louis and Washington University in St Louis ‡Federal Reserve Bank of St Louis and Washington University in St Louis §MOVE-UAB, Barcelona GSE and Universitat de Valencia. _________________________