Rich countries are 30 times wealthier than some poor countries. Moreover, there seems to be no sign of decline in income differences across countries. The consensus among people who study economic growth and development is that about a half of the differences results from differences in the aggregate endowment in observed resources, e.g. physical and human capital. We name the other half, which is not explained by the observed, as total factor productivity (TFP). In this sense, TFP is a residual “measure of our ignorance”. Since then, there have been various attempts to account for cross-country variation in TFP. One attempt, which recently gains popularity, is to account for the TFP variation by resource allocation across producers within a country.