Productivity is one of the important determinants of the per capita income of a nation in the long run. While productivity gap across nations arises due to technology differentials, the recent literature on misallocation provides empirical evidence that aggregate productivity may also depend on how efficiently the resources are allocated across the producers. In the presence of market distortions and inefficient institutions, resource allocation is inefficient, which may lower aggregate productivity. This constitutes the misallocation problem. With misallocation as the central theme, this thesis attempts to propose three essays on misallocation of production factors in the context of developing countries. Using unbalanced panel dataset of around 45,000 firm-year observations of Indian manufacturing from CMIE (PROWESS) during 2005-2015, the first essay provides empirical evidence on misallocation of labour and capital post-Global Financial Crisis (GFC). Further, this study tries to relate this misallocation to the slowdown in investment and labour productivity observed post-crisis period in the manufacturing sector. As to the probable causes for the misallocation of capital and labour, our finding suggests role of credit distortions and financial constraints. In the second essay, we examine the relationship between firm management practices and firm-level distortion (both capital and labour) in the context of 63 developing countries using data from World Bank Enterprise Survey (WBES) for the time period 2009-2016. We find that although more productive firms face higher distortions, firms engaging in certain management practices on an average face lower distortion. This indicates role of firm management practices in mitigating firm-level distortions. In the third essay, we seek to examine the role of markup heterogeneity and its relationship with misallocation and Total Factor Productivity (TFP). This study seeks to examine the role of markup heterogeneity in the context of the slowdown in investment and labour productivity observed post-GFC in the manufacturing sector.​