New Economics Papers
on Efficiency and Productivity
Issue of 2005‒05‒07
eight papers chosen by

  1. Efficiency and Economies of Scale of Large Canadian Banks By Jason Allen; Ying Liu
  2. Retail productivity By Rachel Griffith; Heike Harmgart
  3. Measurement of environmental efficiency and productivity: A cross country analysis By Surender Kumar; Madhu Khanna
  4. Net Capital Flows and Productivty: Evidence from U.S. States By Sebnem Kalemli-Ozcan; Ariell Reshef; Bent Sorensen; Oved Yosha
  5. Land Fragmentation and its Implications for Productivity: Evidence from Southern India By Kompal Sinha
  6. Knowledge and Productivity in the World's Largest Manufacturing Corporations By Lionel Nesta
  7. Modelling and Measuring Scientific Production: Results for a Panel of OECD Countries By Gustavo Crespi; Aldo Geuna
  8. Technical Efficiency in the Iron and Steel Industry: A Stochastic Frontier Approach By Jung Woo Kim; Jeong Yeon Lee; Jae Yong Kim; Hoe Kyung Lee

  1. By: Jason Allen; Ying Liu
    Abstract: The authors measure the economies of scale of Canada's six largest banks and their cost-efficiency over time. Using a unique panel data set from 1983 to 2003, they estimate pooled translog cost functions and derive measures of relative efficiency and economies of scale. The disaggregation of the data allows the authors to model Canadian banks as producing multiple outputs, including non-traditional activities. Given the long time span of the data set, they also incorporate technological and regulatory changes in the banks' cost functions, as well as time-varying bank-specific effects. The authors' model leads them to reject constant returns to scale. These findings suggest that there are potential scale benefits in the Canadian banking industry. The authors also find that technological and regulatory changes have had significant positive effects on the banks' cost structure.
    Keywords: Financial institutions
    JEL: G21 D24 C33
    Date: 2005
  2. By: Rachel Griffith (Institute for Fiscal Studies); Heike Harmgart (Institute for Fiscal Studies and University College London)
    Abstract: Recent attention has focused on the UK’s productivity gap in the retail sector. Figure 1 shows an estimate of labour productivity in retail across countries, using output per hour worked. The UK lies well behind the US, France and Germany. Reynolds at al (2005) contribute to this debate by providing a discussion of the literature, along side interviews with several UK and US retail firms. The conclusions of their paper are that, while there are many measurement issues, most of the evidence points to the fact that, on average, productivity in this sector in the UK is low and has grown slowly over recent years when compared to the US. They rightly point out that a more thorough understanding of what drives productivity in the retail sector requires a better understanding of the 'complex mix of urban characteristics, consumer preferences and competitive rivalries'. In this article we discuss some of the main issues involved in the measurement of productivity in retail, how these problems can be tackled, and we consider the interpretation of these statistics. We then discuss new work using microdata on the UK supermarket industry and conclude with a short discussion of where future research needs to look to answer the important policy questions around why the UK’s productivity performance remains low in this important sector.
    Date: 2005–03
  3. By: Surender Kumar (National Institute of Public Finance and Policy); Madhu Khanna (University of Illinois)
    Abstract: This paper measures environmental efficiency (EE) and environmental productivity (EP) and analyses differences in these across countries. It explores the macroeconomic factors that could explain these differences and whether these differences can be explained by income levels and by the degree of openness in these countries. The EE index is found to be almost steady over the period 1971-92 for the annex-I countries, while its value is declining for non-annex-I countries over this period. The EP index increased over this period in both groups of countries. In the annex-I countries, EE exhibits an inverted `U' shape with respect to per capita income while it is `U' shaped for the non-annex-I countries. This study also finds that while the EP index increases with income in annex-I countries it is decreasing in the non-annex-I countries. The degree of openness has a significant negative impact on EE and EP in both groups of countries.
    Keywords: Environmental efficiency, Environmental productivity, Distance function, Per capita income, Openness
    Date: 2005–03
  4. By: Sebnem Kalemli-Ozcan; Ariell Reshef; Bent Sorensen; Oved Yosha
    Abstract: We study net capital flows between U.S. states. We present a simple neoclassical model in which total factor productivity (TFP) varies across states and over time and where capital freely moves across state borders. In this framework capital flows to states that experience a relative increase in TFP thus creating net cross-state capital ownership positions. Net ownership positions converge to zero over time in the absence of further TFP movements. While TFP can not be directly observed, we can identify states with high TFP growth as states with high output growth. By comparing the level of personal income to output, we construct indicators of net capital flows into a state. We then examine empirically if the level of net capital flows between states following relative movements in TFP corresponds to the predictions of the model and whether net ownership positions tend to converge to zero. Our empirical results imply large flows of capital between states; for example, we find that a state with annual per capita output growth 1 percent higher than the average state over 10 years would attract capital in the amount of $9,900 per capita over those 10 years. These magnitudes are in close agreement with the predictions of the model. We conclude that frictions associated with borders are likely to be the main explanation for "low" international capital flows.
    JEL: F21 F41
    Date: 2005–05
  5. By: Kompal Sinha
    Abstract: The present paper investigates the nutrition demand pattern for rural households in India. The non-parametric approach of quantile regression is applied to characterize the entire distribution of calorie consumption. This technique has an advantage over the traditional ordinary least square technique. It relaxes the assumption of a constant effect of the explanatory variables over the entire distribution of the dependent variable. These effects are allowed to vary over the entire distribution of dependent variable i.e., in this case the distribution of calorie consumption. The results show that indeed, the responsiveness of calorie consumption to various factors differs across different levels of calorie consumption. A comparison of the quantile regression results with OLS results suggests conclusions and policy suggestions based on OLS results are unlikely to be ideal. Some further light is also shed on the debate on calorie income elasticity as the magnitude is observed to be different for the undernourished and the over nourished households.
    Keywords: Length (pages): 55
    Date: 2005
  6. By: Lionel Nesta (SPRU, University of Sussex)
    Abstract: I examine the relationship between the characteristics of firm knowledge in terms of capital, diversity and relatedness, and productivity. Panel data regression models suggest that unlike knowledge diversity, knowledge capital and knowledge relatedness explain a substantial share of the variance of firm productivity. Activities based on a set of related technological knowledge are more productive than those based on unrelated knowledge because the cost of co-ordinating productive activities decreases as the knowledge used in these activities becomes integrated efficiently. The contribution of knowledge relatedness to productivity is significantly higher in high-technology sectors than in other sectors.
    Keywords: knowledge, productivity, large corporations, knowledge measurement, panel data
    JEL: O33
    Date: 2005–04–26
  7. By: Gustavo Crespi (SPRU, University of Sussex); Aldo Geuna (SPRU, University of Sussex)
    Abstract: This paper presents results from employing an econometric approach to examine the determinants of scientific production at cross-country level. The aim of this paper is not to provide accurate and robust estimates of investment elasticities (a doubtful task given the poor quality of the data sources and the modelling problems), but to develop and critically assess the validity of an empirical approach for characterising the production of science and its impact from a comparative perspective. We employ and discuss the limitations of a production function approach to relate investment inputs to scientific outputs using a sample of 14 countries for which we have information about Higher Education Research and Development (HERD). The outputs are taken from the Thomson ISI® National Science Indicators (2002) database on published papers and citations. The inputs and outputs for this sample of countries have been recorded for a period of 21 years (1981-2002). A thorough discussion of data shortcomings is presented in this paper. On the basis of this panel dataset we investigate the profile of the time lag between the investment in HERD and the research output and the returns to national investment in science. We devote particular attention to analysis of the presence of cross-country spillovers. We show their relevance and underline the international effect of the US system.
    Keywords: productivity of science, lag structure, returns to HERD investment, international spillovers
    JEL: L3 O3
    Date: 2005–04–19
  8. By: Jung Woo Kim (Samsung Economic Research Institute, Seoul, Korea); Jeong Yeon Lee (Graduate School of International Studies, Yonsei University); Jae Yong Kim (Korea Institute Public Finance, Seoul Korea); Hoe Kyung Lee (Korea Advanced Institute of Science of Science and Technology, Seoul, Korea)
    Abstract: In this paper we examine the technical efficiency of firms in the iron and steel industry and try to identify the factors contributing to the industry's efficiency growth, using a time-varying stochastic frontier model. Based on our findings, which pertain to 52 iron and steel firms over the period of 1978-1997, POSCO and Nippon Steel were the most efficient firms, with their production, on average, exceeding 95 percent of their potential output. Our findings also shed light on possible sources of efficiency growth in the industry. If a firm is government-owned, its privatization is likely to improve its technical efficiency to a great extent. A firm's technical efficiency also tends to be positively related to its production level as measured by a share of the total world production of crude steel. Another important source of efficiency growth identified by our empirical findings is adoption of new technologies and equipment. Our findings clearly indicate that continued efforts to update technologies and equipment are critical in pursuit of efficiency in the iron and steel industry.
    JEL: L61 C23 O33
    Date: 2005–04

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