New Economics Papers
on Efficiency and Productivity
Issue of 2005‒02‒13
nine papers chosen by

  1. Spatial Determinants of Productivity: Analysis for the Regions of Great Britain By Rice, Patricia; Venables, Anthony J.
  2. The Effects of Structural Reforms on Productivity- and Profitability-Enhancing Reallocation: Evidence from Colombia By Eslava, Marcela; Haltiwanger Jr, John C; Kugler, Adriana; Kugler, Maurice
  3. Cities, Matching and the Productivity Gains of Agglomeration By Andersson, Fredrik; Burgess, Simon; Lane, Julia
  4. Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab By Griffith, Rachel; Redding, Stephen; Simpson, Helen
  5. Distance to the Efficiency Frontier and FDI Spillovers By Sabirianova Peter, Klara Z; Svejnar, Jan; Terrell, Katherine
  6. "It pays to be green" - a premature conclusion? By Kjetil Telle, Iulie Aslaksen and Terje Synnestvedt
  7. Heterogeneity, productivity and selection: an empirical study of Norwegian manufacturing firms By Tor Jakob Klette and Arvid Raknerud
  8. Reforms and Infrastructure Efficiency in Spain’s Container Ports By Maria Manuela Gonzalez Serrano; Lourdes Trujillo
  9. Nonparametric Tests of Optimizing Behavior in Public Service Provision: Methodology and an Application to Local Public Safety By Laurens Cherchye; Bruno De Borger; Tom Van Puyenbroeck

  1. By: Rice, Patricia; Venables, Anthony J.
    Abstract: This Paper uses NUTS3 sub-regional data for Great Britain to analyse the determinants of spatial variations in income and productivity. We decompose the spatial variation of earnings into a productivity effect and an occupational composition effect. For the former (but not the latter) we find a robust relationship with proximity to economic mass, suggesting that doubling the population of working age proximate to an area is associated with a 3.5% increase in productivity in the area. We measure proximity by travel time, and show that effects decline steeply with time, ceasing to be important beyond approximately 80 minutes.
    Keywords: clustering; productivity; regional disparities
    JEL: O40 R10
    Date: 2004–08
  2. By: Eslava, Marcela; Haltiwanger Jr, John C; Kugler, Adriana; Kugler, Maurice
    Abstract: Estimates for the US suggest that at least in some sectors productivity-enhancing reallocation is the dominant factor in accounting for productivity growth. An open question, particularly relevant for developing countries, is whether reallocation is always productivity enhancing. It may be that imperfect competition or other barriers to competitive environments imply that the reallocation process is not fully efficient in these countries. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-98, we explore these issues by examining the interaction between market allocation, and productivity and profitability. Moreover, given the important trade, labour and financial market reforms in Colombia during the early 1990s, we explore whether and how the contribution of reallocation changed over the period of study. Our data permit measurement of plant-level quantities and prices. Taking advantage of the rich structure of our price data, we propose a sequential methodology to estimate productivity and demand shocks at the plant level. First, we estimate total factor productivity (TFP) with plant-level physical output data, where we use downstream demand to instrument inputs. We then turn to estimating demand shocks and mark-ups with plant-level price data, using TFP to instrument for output in the inverse demand equation. We examine the evolution of the distributions of TFP and demand shocks in response to the market reforms in the 1990s. We find that market reforms are associated with rising overall productivity that is largely driven by reallocation away from low- and towards high-productivity businesses. In addition, we find that the allocation of activity across businesses is less driven by demand factors after reforms. We find that the increase in aggregate productivity post-reform is entirely accounted for by the improved allocation of activity.
    Keywords: productivity and demand decompositions; structural reforms; TFP measurement
    JEL: F43 L16 O14 O40
    Date: 2004–08
  3. By: Andersson, Fredrik; Burgess, Simon; Lane, Julia
    Abstract: The striking geographical concentration of economic activities suggests that there are substantial benefits to agglomeration. The nature of those benefits remains unclear, however. In this Paper we take advantage of a new dataset to quantify the role of one of the main contenders: the matching of workers and jobs. Using individual level data for two large US states we show that thicker urban labour markets are associated with more assortative matching between workers and firms. Another critical condition is required for this to generate higher productivity: complementarity of worker and firm quality in the production function. Using establishment level productivity regressions, we show that such complementarity is found in our data. Putting together the production and matching relationships, we show that production complementarity and assortative matching is an important source of the urban productivity premium.
    Keywords: agglomeration; matching; urban productivity
    JEL: J24 R12 R23
    Date: 2004–09
  4. By: Griffith, Rachel; Redding, Stephen; Simpson, Helen
    Abstract: This Paper examines the relationship between foreign ownership and productivity, paying particular attention to two issues neglected in the existing literature – the role of multinationals in service sectors and the importance of R&D activity conducted by foreign multinationals. We review existing theoretical and empirical work, which largely focuses on manufacturing, before presenting new evidence using establishment-level data on production, service and R&D activity for the United Kingdom. We find that multinationals play an important role in service sectors and that entry of foreign multinationals by takeover is more prevalent than greenfield investment. We find that British multinationals have lower levels of labour productivity than foreign multinationals, but the difference is less stark in the service sector than in the production sector, and that British multinationals have lower levels of investment and intermediate use per employee. We also find that foreign-owned multinationals conduct a substantial amount of UK R&D. We discuss the implications of these and other findings for the policy debate on incentives to influence multinational firms’ location choices.
    Keywords: foreign investment; knowledge spillovers; productivity
    JEL: F23 L60 L80 O47
    Date: 2004–10
  5. By: Sabirianova Peter, Klara Z; Svejnar, Jan; Terrell, Katherine
    Abstract: We establish that domestically owned firms in two alternative models of emerging market economies, the Czech Republic and Russia, have not been converging to the technological frontier set by foreign owned firms. In both countries, the distance of domestic firms to the frontier grew (in all parts of the distribution) from 1992-94 to 1995-97 and did not change from 1995-97 to 1998-2000. The distance to the frontier is, however, orders of magnitude greater in Russia than in the Czech Republic throughout 1992-2000. We also find in both countries that domestic firms in industries with a greater share of foreign firms are falling behind more than domestic firms in industries with a smaller foreign presence. In the Czech Republic, however, this ‘negative spillover’ effect is diminished over time, whereas in Russia it continues to cause domestic firms to fall further behind. On the other hand, we find in both countries that foreign firms experience positive spillovers from other foreign firms operating in the same product market. This evidence on the dynamics of efficiency is consistent with the view that economies (firms) need to be more technologically advanced and open to competition in order to be able to gain from foreign presence.
    Keywords: convergence; Czech Republic; foreign direct investment; frontier; knowledge spillovers; productivity; Russia
    JEL: C33 D20 F23 G32 L20 O33
    Date: 2004–11
  6. By: Kjetil Telle, Iulie Aslaksen and Terje Synnestvedt (Statistics Norway)
    Abstract: It has been claimed that good environmental performance can improve firms’ economic performance. However, because of e.g. data limitations, the methods applied in most previous quantitative empirical studies of the relationship between environmental and economic performance of firms suffer from several shortcomings. We discuss these shortcomings and conclude that previously applied methods are unsatisfactory as support for a conclusion that it pays for firms to be green. Then we illustrate the effects of these shortcomings by performing several regression analyses of the relationship between environmental and economic performance using a panel data set of Norwegian plants. A simple correlation analysis confirms the positive association between our measures of environmental and economic performance. The result prevails when we control for firm characteristics like e.g. size or sub-industry in a pooled regression. However, the result could still be biased by omitted unobserved variables like management or technology. When we control for unobserved plant specific characteristics in a panel regression, the effect is no longer statistically significant. Hence, greener plants perform economically better, but the analysis provides no support for the claim that it is because they are greener. These empirical findings further indicate that a conclusion that it pays to be green is premature.
    Keywords: Economic performance; environmental performance; environmental regulations; pays to be green
    JEL: Q25 Q28 K23
    Date: 2004–11
  7. By: Tor Jakob Klette and Arvid Raknerud (Statistics Norway)
    Abstract: How do firms differ, and why do they differ even within narrowly defined industries? Using evidence from a new panel data set for four high-tech, manufacturing industries covering a 10-year period, we show how differences in sales, materials, labor costs and capital across firms can be summarized by firm-specific, dynamic factors, which we interpret in view of a structural model. The model contains the complete system of supply and factor demand equations. Our results show that a firm's efficiency is strongly linked to profitability and firm size, but only weakly related to labor productivity. Our second task is to understand the origin and evolution of the differences in efficiency. Among the firms established within the 10-year period that we consider permanent differences in efficiency dominate over differences generated by firm-specific, cumulated innovations.
    Keywords: efficiency; firm heterogeneity; labor productivity; permanent differences; firm-specific innovations; attrition; maximum likelihood
    JEL: C33 C51 D21
    Date: 2005–01
  8. By: Maria Manuela Gonzalez Serrano; Lourdes Trujillo
    Abstract: Serrano and Trujillo quantify the evolution of technical efficiency in port infrastructure service provision in the major Spanish port authorities involved in container traffic. They also analyze the extent to which port reforms that took place in the 1990s had an impact on the efficiency of the Spanish container ports. Because of the multi-output nature of port activities, the authors have estimated a distance function, which is a novel methodology in the study of the port industry. Their results show that the reforms resulted in significant improvements in technological change, but that technical efficiency has in fact changed little on average. But there is a significant movement of the efficiency within ports over time as a result of these reforms. This paper—a product of the Office of the Vice President, Infrastructure Network—is part of a larger effort in the network to document the impact of regulatory reform.
    Keywords: Governance; Infrastructure; Private Sector Development; Public Sector Management
    Date: 2005–02–08
  9. By: Laurens Cherchye; Bruno De Borger; Tom Van Puyenbroeck
    Abstract: We develop a positive non-parametric model of public sector production that allows us to test whether an implicit procedure of cost minimization at shadow prices can rationalize the outcomes of public sector activities. The basic model focuses on multiple C-outputs and does not imply any explicit or implicit assumption regarding the trade-offs between the different inputs (in terms of relative shadow prices) or outputs (in terms of relative valuation). The proposed methodology is applied to a cross-section sample of 546 Belgian municipal police forces. Drawing on detailed task-allocation data and controlling, among others, for the presence of state police forces, the cost minimization hypothesis is found to provide a good fit of the data. Imposing additional structure on output valuation, derived from available ordinal information, yields equally convincing goodness-of-fit results. By contrast, we find that aggregating the labor input over task specializations, a common practice in efficiency assessments of police departments, entails a significantly worse fit of the data.
    Keywords: Public agencies, optimizing behavior, nonparametric production, local police departments
    JEL: C14 C61 D21 D24
    Date: 2004

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