New Economics Papers
on Efficiency and Productivity
Issue of 2005‒10‒22
23 papers chosen by

  1. Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia By Mary Amiti; Jozef Konings
  2. Explaining Efficiency Differences Among Large German and Austrian Banks By David Hauner
  3. Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants By Marcela Eslava; John Haltiwanger; Adriana Kugler; Maurice Kugler
  4. The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine By J. David Brown; John S. Earle; Almos Telegdy
  5. Competition and Efficiency in Banking: Behavioral Evidence from Ghana By Johan Mathisen; Thierry D. Buchs
  6. Utveckling och spridning av forskning: fallet effektivitetsforskning By Försund, Finn R; Sarafoglou, Nikias
  7. Relating the Knowledge Production Function to Total Factor productivity: An Endogenous Growth Puzzle By Y. Abdih; Frederick Joutz
  8. German Works Councils and Productivity: First Evidence from a Nonparametric Test By Joachim Wagner
  9. Trade Liberalization and Firm Productivity: The Case of India By Petia Topalova
  11. Growth and Convergence in WAEMU Countries By Abdoul Aziz Wane
  12. Labor Productivity and Inter-Sectoral Reallocation of Labor in Singapore (1965-2002) By K. Ali Akkemik
  13. Oriented stochastic data envelopment models: Ranking comparison to stochastic frontier approach By Frantisek Brazdik
  14. Why is Productivity Growth in the Euro Area So Sluggish? By Marcello M. Estevão
  15. New Estimates of Government Net Capital Stocks for 22 OECD Countries 1960-2001 By Christophe Kamps
  16. Analysis of Recent Growth in Low-Income CIS Countries By Elena Loukoianova; Anna Unigovskaya
  17. Relative Centrality or Peripheriality and the Growth Effects of Relative Centrality or Peripheriality and the Growth Effects of Economic Integration within the European Union By Tomasz Brodzicki
  18. Sources of Growth in the Democratic Republic of the Congo: A Cointegration Approach By Matthias Cinyabuguma; Bernardin Akitoby
  19. Economic Structure, Technology Diffusion and Convergence: The Case of the Italian Regions By Matteo Lanzafame
  20. From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition By Dani Rodrik; Arvind Subramanian
  21. Economic Integration, Business Cycle, and Productivity in North America By M. Ayhan Kose; Roberto Cardarelli
  22. Bank Consolidation and Performance: The Argentine Experience By Pablo Druck; Raul Susmel; Ritu Basu; David Marston
  23. A Three Factor Agricultural Production Function: The Case of Canada By Cristina Echevarria

  1. By: Mary Amiti; Jozef Konings
    Abstract: This paper estimates the effects of trade liberalization on plant productivity. In contrast to previous studies, we distinguish between productivity gains arising from lower tariffs on final goods relative to lower tariffs on intermediate inputs. Lower output tariffs can produce productivity gains by inducing tougher import competition whereas cheaper imported inputs can raise productivity via learning, variety, or quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which includes plant-level information on imported inputs. The results show that the largest gains arise from reducing input tariffs. A 10 percentage point fall in output tariffs increases productivity by about 1 percent, whereas an equivalent fall in input tariffs leads to a 3 percent productivity gain for all firms and an 11 percent productivity gain for importing firms.
    Keywords: Tariffs , Indonesia , Trade liberalization , Productivity , Economic models ,
    Date: 2005–08–08
  2. By: David Hauner
    Abstract: Cost-efficiency, scale efficiency, and productivity change are estimated by data envelopment analysis; and cost-efficiency is regressed on explanatory variables. No evidence is found for average productivity responding to deregulation over the period studied. State-owned banks are found to be more cost-efficient (likely owing to cheaper funds) and cooperative banks to be about as cost-efficient as private banks. Increasing economies of scale but decreasing economies of scope provide rationale for M&As among banks with similar product portfolios. Interbank and capital market funding is found to be more cost-efficient than deposits when the cost of retail networks is controlled for.
    Keywords: Banks , Germany , Austria , Productivity , Economic models ,
    Date: 2004–08–13
  3. By: Marcela Eslava (CEDE, Universidad de los Andes); John Haltiwanger (University of Maryland, NBER and IZA Bonn); Adriana Kugler (University of Houston, NBER, CEPR and IZA Bonn); Maurice Kugler (University of Southampton)
    Abstract: In this paper, we analyze employment and capital adjustments using a panel of plants from Colombia. We allow for nonlinear adjustment of employment to reflect not only adjustment costs of labor but also adjustment costs of capital, and vice-versa. Using data from the Annual Manufacturing Survey, which include plant-level prices, we generate measures of plant-level productivity, demand shocks, and cost shocks, and use them to measure desired factor levels. We then estimate adjustment functions for capital and labor as a function of the gap between desired and actual factor levels. As in other countries, we find non-linear adjustments in employment and capital in response to market fundamentals. In addition, we find that employment and capital adjustments reinforce each other, in that capital shortages reduce hiring and labor shortages reduce investment. Moreover, we find that the market oriented reforms introduced in Colombia after 1990 increased employment adjustments, especially on the job destruction margin, while reducing capital adjustments. Finally, we find that while completely eliminating frictions from factor adjustments would yield a dramatic increase in aggregate productivity through improved allocative efficiency, the reforms introduced in Colombia generated only modest improvements.
    Keywords: joint factor adjustment, irreversibilities, adjustment costs, input reallocation, deregulation
    JEL: E22 E24 O11 C14 J63
    Date: 2005–09
  4. By: J. David Brown (Heriot-Watt University and CEU Labor Project); John S. Earle (W.E. Upjohn Institute for Employment Research and Central European University); Almos Telegdy (Central European University and Institute of Economics of the Hungarian Academy of Sciences)
    Abstract: This paper estimates the effect of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. We exploit the key longitudinal feature of our data to measure and control for pre-privatization selection bias and to estimate long-run impacts. We find that the magnitudes of our estimates are robust to alternative functional forms, but sensitive to how we control for selection. Our preferred random growth models imply that majority privatization raises MFP about 15% in Romania, 8% in Hungary, and 2% in Ukraine, while in Russia it lowers it 3%. Privatization to foreign rather than domestic investors has a larger impact, 18-35%, in all countries. Positive domestic effects appear within a year in Hungary, Romania, and Ukraine and continue growing thereafter, but take 5 years after privatization to emerge in Russia.
    Keywords: privatization, productivity, foreign ownership, random growth model, transition, Hungary, Romania, Russia, Ukraine
    JEL: D24 G34 L33 P31
    Date: 2005–10
  5. By: Johan Mathisen; Thierry D. Buchs
    Abstract: This paper assesses the degree of bank competition and discusses efficiency with regard to banks' financial intermediation in Ghana. By applying panel data to variables derived from a theoretical model, we find evidence for a noncompetitive market structure in the Ghanaian banking system, which may be hampering financial intermediation. We argue that the structure, as well as the other market characteristics, constitutes an indirect barrier to entry thereby shielding the large profits in the Ghanaian banking system.
    Keywords: Competition , Banking , Ghana , Economic models ,
    Date: 2005–02–03
  6. By: Försund, Finn R (Department of Economics, University of Oslo); Sarafoglou, Nikias (Inst för Samhällsvetenskap, Mittuniversitetet)
    Abstract: Recent availability of electronically accessible database of journal articles makes studies of the diffusion of papers through citations possible. Citation peaks have been found to be typically five to seven years, with a long tailing off. A seminal paper on theoretical and applied efficiency analysis followed quite another diffusion pattern. <p>
    Keywords: bibliometric methods; Farrell efficiency measures; DEA
    JEL: B21 D24
    Date: 2005–10–13
  7. By: Y. Abdih; Frederick Joutz
    Abstract: The knowledge production function is central to R&D-based growth models. This paper empirically investigates the knowledge production function and intertemporal spillover effects using cointegration techniques. Time-series evidence suggests there are two long-run cointegrating relationships. The first captures a long-run knowledge production function; the second captures a long-run positive relationship between TFP and the knowledge stock. The results indicate the presence of strong intertemporal knowledge spillovers and that the long-run impact of the knowledge stock on TFP is small. This evidence is interpreted in light of existing theoretical and empirical evidence on endogenous growth.
    Keywords: Production , Productivity , Economic growth , Economic models ,
    Date: 2005–04–21
  8. By: Joachim Wagner (University of Lueneburg and IZA Bonn)
    Abstract: This paper presents the first nonparametric test whether German works councils go hand in hand with higher labor productivity or not. It distinguishes between establishments that are covered by collective bargaining or not. Results from a Kolmogorov-Smirnov test for first order stochastic dominance tend to indicate that pro-productive effects are found in firms with collective bargaining only. However, the significance level of the test statistic is higher than a usually applied critical level. This somewhat weak evidence casts doubts on the validity of results from recent parametric approaches using a regression framework that point to high positive effects of works councils on productivity.
    Keywords: works councils, productivity, stochastic dominance
    JEL: J50
    Date: 2005–09
  9. By: Petia Topalova
    Abstract: Using a panel of firm-level data, this paper examines the effects of India's trade reforms in the early 1990s on firm productivity in the manufacturing sector, focusing on the interaction between this policy shock and firm and environment characteristics. The rapid and comprehensive tariff reductions-part of an IMF-supported adjustment program with India in 1991-allow us to establish a causal link between variations in inter-industry and intertemporal tariffs and consistently estimated firm productivity. Specifically, reductions in trade protectionism lead to higher levels and growth of firm productivity, with this effect strongest for private companies. Interestingly, state-level characteristics, such as labor regulations, investment climate, and financial development, do not appear to influence the effect of trade liberalization on firm productivity.
    Keywords: Trade liberalization , India , Productivity ,
    Date: 2004–03–02
  10. By: Maria Rosaria Alfano (University of Salerno); Giovanni D'Orio (University of Calabria)
    Abstract: The massive interests of economic literature about the privatisation gave a notable impulse to the discussion about this theme in the pre and post privatisation firms performance. Basically in every case after privatisation the level of profit increases. Does this mean that privatisation is certainly able to increase efficiency? In this field a large part of the literature leave out the complex problem that public firms usually are subject to objectives and constraints that differently from private firms can affect the overall economic efficiency. Unfortunately many authors ignore the effects of taxation during the process of privatisation, but in real term there are significant tax issues that must be considered by public and private decision maker. In this paper we concentrate the attention on the efficiency measures with the purpose to identify and measure sources of successful performance that can be used in policy planning and allocation of resources. Several techniques to calculate these frontier functions have been used, some of them parametric, others non-parametric to empirically investigate the relationship between taxation on firm’s income and efficiency in the period pre and post-privatisation. In this work we use both econometric and mathematical programming approaches for measuring efficiency. The econometric tool provide maximum likelihood estimates of a stochastic production and cost functions to distinguish noise from inefficiency. Instead, the mathematical programming approaches are nonstochastic and they do not make strict assumptions on the functional form of production and the statistical properties of the data. The general results obtained from the 3 different tools (Stochastic Frontier, Data Envelopment Analysis and Neural Network) are consistent. In fact, we see that privatization enhanced efficiency in three out of four sample firms.
    Keywords: Privatization, Fiscal policy, Data Envelopment Analysis, Stochastic Frontier, Neural Network
    JEL: D6 D7 H
    Date: 2005–10–17
  11. By: Abdoul Aziz Wane
    Abstract: This paper investigates convergence and dynamic effects of human and physical capital on growth, in WAEMU countries. Using recently developed models for panel data and a growth accounting model, the study finds that growth is largely explained by changes in literacy rates and factor accumulation, but not by growth of total factor productivity (TFP). Nevertheless, the panel estimation identifies aid, government spending, credit to the private sector, and openness as positive determinants of TFP growth, and government deficits as a negative determinant. The study also finds that per capita income in lower-income WAEMU countries converge to per capita income in higher-income ones when economic policies are similar. These results suggest opportunities for policymakers to enhance growth and convergence.
    Keywords: Economic growth , West African Economic and Monetary Union , Economic models ,
    Date: 2004–10–26
  12. By: K. Ali Akkemik (Nagoya University Graduate School of International Development, Nagoya, Japan)
    Abstract: This paper investigates the impact of the shifts of labor across sectors on aggregate productivity growth through a decomposition of aggregate productivity growth in Singapore over the period 1965-2002. The static shift-share analysis is utilized to for this purpose. The results show that the shifts of labor paid off well in terms of their contribution to labor productivity especially for manufacturing in the 1985 era which was characterized by interventionist labor market policies of the government. On the other hand, the impact of labor shifts is negative in the post-1985 era which is characterized by a more liberalized labor market.
    Keywords: shift-share analysis, Singapore, labor productivity
    JEL: C6 D5 D9
    Date: 2005–10–17
  13. By: Frantisek Brazdik
    Abstract: Results of data envelopment analysis sensitively respond to stochastic noise in the data. In this paper, by introduction of output augmentation and input reduction I extend additive models for stochastic data envelopment analysis (SDEA), which were developed by Li (1998) to handle the noise in the data. Applying the linearization procedure by Li (1998) the linearized versions of models are derived. In the empirical part of this work, the effi- ciency scores of Indonesian rice farms are computed. The computed scores are compared to the stochastic frontier approach scores by Druska and Horrace (2004) and weak ranking consistency with results of stochastic frontier method is observed.
    Keywords: Stochastic data envelopment analysis, linear programming, efficiency, rice farm.
    JEL: C14 C61 L23 Q12
    Date: 2005–08
  14. By: Marcello M. Estevão
    Abstract: Slow productivity growth has plagued the euro area since the mid-1990s. That is particularly striking in view of the large productivity gains in the United States during the same period. This paper shows that the deceleration in labor productivity in the euro area was caused by structural changes in wage formation that have affected the relative price of labor, increased the labor intensity of growth and, thus, reduced the rate of capital deepening. Technological shocks seem to have played a minor role in explaining slower productivity growth in the euro area. In addition, a surge in capital deepening and, mainly, TFP growth in key service industries in the United States explain a large part of the productivity growth gap between the two regions in the second half of the 1990s.
    Keywords: Economic growth , Euro Area , Productivity , Labor markets ,
    Date: 2004–11–01
  15. By: Christophe Kamps
    Abstract: The issue of whether government capital is productive has received a great deal of recent attention. Yet empirical analyses of public capital productivity have generally been limited to the official capital stock estimates available in a small sample of countries. Alternatively, many researchers have investigated the output effects of public investment-recognizing that investment may be a poor proxy for the corresponding capital stock. This paper attempts to overcome the data shortage by providing internationally comparable capital stock estimates for 22 Organization for Economic Cooperation and Development (OECD) countries.
    Keywords: Capital goods , OECD , Public investment , Productivity ,
    Date: 2004–05–11
  16. By: Elena Loukoianova; Anna Unigovskaya
    Abstract: This paper analyzes factors that determine recent economic growth in the low-income countries of the Commonwealth of Independent States.2 The main findings are as follows: (1) productivity gains in export-oriented sectors and expansion of exports may have become the main sources of growth in five of the seven CIS-7 countries, while in the early years of transition the output recovery was mainly driven by consumption; (2) economic growth has concentrated in agriculture and the raw material sectors, and, thus, is vulnerable to changes in external conditions; and (3) structural reforms matter for growth, which is consistent with previous research on growth in transition countries.
    Keywords: Economic growth , Armenia , Azerbaijan , Georgia , Kyrgyz Republic , Moldova , Tajikistan , Uzbekistan , Transition economies , Economic recovery ,
    Date: 2004–08–27
  17. By: Tomasz Brodzicki (University of Gdansk, Faculty of Economics)
    Abstract: In the paper we construct two novel indices of relative centrality – peripheriality in order to test whether location has an impact on medium and long-run gains related to economic integration within the European Union. We utilize two popular econometric approaches – standard cross- sectional growth regressions as well as dynamic panel data models. The study is undertaken for a data panel consisting of 27 developed economies (15 EU Member States and 12 non-member states) within a period 1960 and 1999. Our results indicate at least to some extent that in accordance with the new economic geography models (NEG) relative location within large regional integration arrangement such as the European Union could affect growth effects associated with economic integration. Furthermore, the benefits are found to be asymmetrical between the core and peripheral regions. This results, however, need further empirical investigation as they are found to be sensitive.
    Keywords: economic growth, European economic integration, dynamic panel data models, system GMM estimator, new economic geography
    JEL: F15 O53 C23
    Date: 2005–10–18
  18. By: Matthias Cinyabuguma; Bernardin Akitoby
    Abstract: The paper investigates the sources of growth in the Democratic Republic of the Congo since 1960 and evaluates the relative importance of total factor productivity growth and factor accumulation, using a cointegration method and a growth accounting framework. The main findings confirm that poor economic policies and bad governance (through their effects on total factor productivity and capital accumulation) contributed to the country's economic decline during the 40-year period, 1960-2000. Looking forward, the paper finds that the right policies are being put in place to pave the way for a restoration of economic growth.
    Keywords: Economic growth , Congo, Democratic Republic of the , Industrial production ,
    Date: 2004–07–20
  19. By: Matteo Lanzafame
    Abstract: Taking Italy as a case study, this paper investigates the link between economies' structural similarities and convergence. Specifically, treating technology as sector-specific and modelling technological spillovers as a positive function of the degree of similarity between economies' sectoral features, we propose a modified version of the Solow model and derive an "extended" convergence equation. The latter is then estimated by means of Panel Data procedures and data on the Italian regions over the 1970-1995 period. The results bring empirical support to our approach.
    Keywords: Convergence; Technology Diffusion; Regional Growth; Italy
    JEL: O40 R11
    Date: 2005–10
  20. By: Dani Rodrik; Arvind Subramanian
    Abstract: This paper explores the causes of India's productivity surge around 1980, more than a decade before serious economic reforms were initiated. Trade liberalization, expansionary demand, a favorable external environment, and improved agricultural performance did not play a role. We find evidence that the trigger may have been an attitudinal shift by the government in the early 1980s that unlike the reforms of the 1990s, was probusiness rather than promarket in character, favoring the interests of existing businesses rather than new entrants or consumers. A relatively small shift elicited a large productivity response, because India was far away from its income-possibility frontier. Registered manufacturing, which had been built up in previous decades, played an important role in determining which states took advantage of the changed environment.
    Keywords: Productivity , India , Economic growth , Trade liberalization , Demand , Public investment , Agricultural production , Manufacturing ,
    Date: 2004–05–20
  21. By: M. Ayhan Kose; Roberto Cardarelli
    Abstract: This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade flows. Although common factors have played a larger role in explaining business cycles in Canada and the United States since the early 1980s, country-specific and idiosyncratic factors remain important for Canada. At the same time, while increased trade integration seems to have positively contributed to total factor productivity of Canadian industries, the persistence of structural differences between the two countries has prevented convergence of aggregate labor productivity. While these findings seem to weigh against moving toward a monetary union, they also suggest that substantial benefits could be reaped from further reducing remaining barriers to trade.
    Keywords: Business cycles , Canada , United States , Productivity , Trade , International trade agreements ,
    Date: 2004–08–11
  22. By: Pablo Druck; Raul Susmel; Ritu Basu; David Marston
    Abstract: We examine a large panel of more than 100 banks from Argentina to study the effects of bank consolidation on performance between December 1995 and December 2000, a period of heavy bank consolidation and relative calm. Overall, we find a positive and significant effect of bank consolidation on bank performance. Bank returns increase with consolidation, and insolvency risk is reduced. Additionally, the study suggests that mergers and privatizations have a beneficial effect on bank returns. The effects of a bank acquisition on return on equity is, however, negative. Acquisitions do not seem to have any effect on risk-adjusted returns. The study also finds that a bank's insolvency risk is reduced significantly through mergers and privatization and is unrelated to bank acquisitions.
    Keywords: Banking , Argentina , Emerging markets , Bank restructuring , Financial crisis , Privatization , Economic models ,
    Date: 2004–08–24
  23. By: Cristina Echevarria (University of Saskatchewan)
    Abstract: This paper estimates a constant returns to scale agricultural production function of the three basic factors of production. Such a function is a useful tool for macroeconomic, growth, and development studies. It uses the shares approach that Solow used in 1957 and very disaggregated Canadian data. The main results of this paper are that first, in Canada, agriculture is less labour intensive than both services and industry, but capital intensity is similar in the three sectors. Second, the share of land in value added is estimated to be 16%. Third, total factor productivity growth in Canada has been roughly the same--0.3%--in agriculture and manufactures over the period 1971-91.
    Keywords: agricultural economics, agriculture production function, macroeconomics
    JEL: D1 D2 D3 D4
    Date: 2005–10–20

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