nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2005‒11‒19
eleven papers chosen by
Angelo Zago
Universitá degli Studi di Veroa

  1. Firm Heterogeneity and Endogenous Regional Disparities By Carlo Altomonte; Italo Colantone
  2. Growth Effects of Age-related Productivity Differentials in an Ageing Society. A Simulation Study for Austria By Hofer, Helmut; Url, Thomas
  3. Management characteristics, collaboration and innovative efficiency: evidence from UK survey data By Andy Cosh; Xiaolan Fu; Alan Hughes
  4. Testing Substitution Bias of the Solow-Residual Measure of Total Factor Productivity Using CES-Class Production Functions By Peter A. Zadrozny; Baoline Chen
  5. Shifts and Twists in the Relative Productivity of Skilled Labor By Dupuy,Arnaud; Marey,Philip
  6. Performance of Exporters: Scale Effects or Continuous Productivity Improvements By Crt Kostevc
  7. How Does Information Technology Really Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement and Worker Skills By Ann P. Bartel; Casey Ichniowski; Kathryn L. Shaw
  8. Diffusion of Scale Effects between European Regions By Juergen Antony
  9. Estimating the potential output of the euro area with a semi-structural multivariate Hodrick-Prescott filter By Matthieu LEMOINE; Odile CHAGNY
  10. Statistical Moments Analysis of Production and Profits in Multi-Product Cournot Oligopoly By Hennessy, David A.; Lapan, Harvey E.
  11. The Complementary Role of Exports and R&D Investments as Sources of Productivity Growth By Bee Yan Aw; Mark J. Roberts; Tor Winston

  1. By: Carlo Altomonte; Italo Colantone
    Abstract: We exploit the census of Romanian firms to provide a microfounded analysis of the sources of regional disparities in the country. To this extent, we adapt to the regional case a decomposition of firm-level output dynamics based on semi-parametric productivity estimates. The methodology, robust to different techniques of TFP estimation, allows us to analyze the sources of regional disparities controlling for the heterogeneity in firms’ characteristics. In particular, we measure various compositional effects of multinational enterprises (MNEs)on regional growth, finding that regional disparities are to a large extent endogenous to the interaction between firm-level dynamics and initial market conditions.
    Keywords: regional convergence, multinational firms, productivity, transition economies.
    JEL: F12 F23 L10 P20
  2. By: Hofer, Helmut (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Url, Thomas (Austrian Institute of Economic Research)
    Abstract: We integrate age specific productivity differentials into a long-run neoclassical growth model for the Austrian economy with a highly disaggregated labor supply structure. We assume two life time productivity profiles reflecting either small or large hump-shaped productivity differentials and compute an average labor productivity index using three different aggregation functions: linear, Cobb-Douglas, and a nested Constant Elasticity of Substitution (CES). Model simulations with age specific productivity differentials are compared to a base scenario with uniform productivity over age groups. Depending on the aggregation function, the simulation results show only negligible or small negative effects on output and other macroeconomic key variables.
    Keywords: Age specific productivity, Demographic change, Model simulation
    JEL: O41 J11 E17
    Date: 2005–11
  3. By: Andy Cosh; Xiaolan Fu; Alan Hughes
    Abstract: This paper explores the impact of management characteristics and patterns of collaboration on a firmÕs innovation performance in transforming innovation resources into commercially successful outputs. These questions are investigated using a recent firm level survey database for 465 innovative British small and medium enterprises (SMEs) over the years 1998-2001. Both Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) are employed to benchmark a firmÕs innovative efficiency against best practice. Quality and the variety of innovations are taken into account by combining Principal Component Analysis (PCA) with DEA. We find evidence suggesting that the innovative efficiency of SMEs is significantly affected by their management characteristics and collaboration behaviour. Collaboration, organisational flexibility, formality in management systems and incentive schemes are found to contribute significantly to a firmÕs innovative efficiency. Managerial share-ownership also shows some positive effect. The importance of these effects, however, varies across different sectors. WE find that innovative efficiency in high-tech SMEs is significantly enhanced by collaboration, formal management structure and training; and that in medium- and low-tech SMEs is significantly associated with managerial ownership, incentive schemes and organisational flexibility.
    Keywords: management characteristics, collaboration, innovative efficiency
    JEL: D24 O30 O32 L20 M11
  4. By: Peter A. Zadrozny; Baoline Chen (Office of Directors Bureau of Economic Analysis)
    Abstract: Total factor productivity (TFP) computed as Solow-residuals could be subject to input-substitution bias for two reasons. First, the Cobb-Douglas (CD) production function restricts all input substitutions to one. Second, observed inputs generally differ from optimal inputs, so that inputs observed in a sample tend to move not just due to substitution effects but for other reasons as well. In this paper, we describe using the multi-step perturbation method (MSP) to compute and evaluate total factor productivity (TFP) based on any k+1 times differentiable production function, and we illustrate the method for a CES-class production functions. We test the possible input-substitution bias of the Solow-residual measure of TFP in capital, labor, energy, materials, and services (KLEMS) inputs data obtained from the Bureau of Labor Statistics for U.S. manufacturing from 1949 to 2001. We proceed in three steps: (1) We combine the MSP method with maximum likelihood estimation to determine a best 4th-order approximation of a CES-class production function. The CES class includes not only the standard CES production functions but also the so called tiered CES production functions (TCES), in which the prespecified groups of inputs can have their own input-substitution elasticities and input-cost shares are parameterized (i) tightly as constants, (ii) moderately as smooth functions, and (iii) loosely as successive averages. (2) Based on the best estimated production function, we compute the implied best TFP evaluated at the computed optimal inputs. (3) For the data, we compute Solow-residual TFP and compare it with the best TFP. The preliminary results show that the MSP method can produce almost double precision accuracy, and the results reject a single constant elasticity of substitution among all inputs. For this data, the Solow-residual TFP is on average .1% lower, with a .6% standard error, than the best TFP and, hence, is very slightly downward biased, although the sampling-error uncertainty dominates this conclusion. In further work, we shall attempt to reduce this uncertainty with further testing based on more general CES-class production functions, in which each input has its own elasticity of substitution, and we shall use more finely estimated parameters
    Keywords: Taylor-series approximation, model selection, numercial solution, tiered CES production function
    JEL: C32 C43 C63
    Date: 2005–11–11
  5. By: Dupuy,Arnaud; Marey,Philip (ROA rm)
    Abstract: Skill-biased technical change is usually interpreted in terms of the efficiency parameters of skilled and unskilled labor. This implies that the relative productivity of skilled workers changes proportionally in all tasks. In contrast, we argue that technical changes also affect the curvature of the distribution of relative productivity. Building on Rosen''s (1978) tasks assignment model, this implies that not only the efficiency parameters of skilled and unskilled workers change, but also the elasticity of substitution between skill-types of labor. Using data for the United States between 1963 and 2002, we find significant empirical support for a decrease in the elasticity of substitution at the end of the 70s followed by an increase at the beginning of the 90s. This pattern of the elasticity of substitution has contributed to the labor productivity slowdown in the mid 70s through the 80s and to a speedup in the 90s.
    Keywords: education, training and the labour market;
    Date: 2005
  6. By: Crt Kostevc
    Abstract: Following along the lines of a growing literature on the causal link between exporting and productivity this paper analyzes the existence of 'learning-by-exporting'in Slovenian manufacturing between 1994 and 2002. This paper asks whether in addition to good firms self-selecting into exports and multinational production exporting (multinational production) further improves their performance compared with non-exporters. I develop a simple model of trade and international production with heterogeneous firms that generates learning effects through competition in the export markets. The estimations performed on the Slovenian sample indicate that more productive firms tend to self-select into more competitive markets, while there is no conclusive evidence of learning-by-exporting. Namely, although new exporters experienced a surge in productivity in the initial year of exports the effect dissipates in the following years. This leads me to conclude that the perceived learning effects are in fact only a consequence of more efficient utilization of available production capacity brought forth by the opening of an additional market.
    Keywords: Firm heterogeneity, exports, multinational firm, learning-by-exporting, difference-in-differences, martching
    JEL: D24 F12 F14
  7. By: Ann P. Bartel; Casey Ichniowski; Kathryn L. Shaw
    Abstract: This study presents new empirical evidence on the relationship between investments in new computer-based information technology (IT) and productivity by investigating several plant-level mechanisms through which IT could promote productivity growth. We have assembled a data set on plants with a common production technology in a narrowly defined industry - valve manufacturing - to study the effects of new IT on product innovation, production process improvements, employee skills and work practices. The homogeneity of the plants' production processes within this narrowly defined industry together with the estimation of longitudinal models eliminate many sources of unmeasured heterogeneity that could confound productivity comparisons in more aggregate data and in broader samples. The three main results of this study highlight how the adoption of new IT-enhanced machinery involves much more than just the installation of new equipment on the factory floor. We find that adoption of new IT-enhanced equipment (1)alters business strategies, moving valve manufacturers away from commodity production based on long production runs to customized production in smaller batches; (2)improves the efficiency of all stages of the production process with reductions in setup times supporting the change in business strategy and (3)increases the skill requirements of workers while promoting the adoption of new human resource practices.
    JEL: O33 J24 L25
    Date: 2005–11
  8. By: Juergen Antony (University of Augsburg, Department of Economics)
    Abstract: This paper develops a multi regional growth model of the second generation type with horizontal and vertical innovations. Technology goods are tradable between regions, creating a regional analogy of the weak scale effect introduced by Jones (2004). Per capita production in one region is a function of the weighted population sizes of trading partner regions. Thus the scale of partner regions diffuses between them. This result is empirically tested using data on the NUTS regions of the EU 15. A highly significant relationship is found between per capita GDP and an interregional scale variable, defined as a weighted sum of the populations of all EU 15 regions.
    Keywords: regional growth, scale effects, international trade
    JEL: R12 O33 O52
    Date: 2005–10
  9. By: Matthieu LEMOINE; Odile CHAGNY
    Abstract: In this paper, we develop an analytical framework for the estimation of potential output and output gaps for the euro area combining multivariate filtering techniques with the production function approach. The advantage of this methodology lies in the fact that it combines a model based approach to explicit statistical assumptions concerning the estimation of the potential values of the components of the production function. We discuss the production function approach and the main issues raised by this approach. We then present the main empirical studies which have estimated production function based output gaps with multivariate filtering techniques. The production function approach will be implemented with Multivariate Hodrick-Prescott filters (HPMV). The advantage of the multivariate production function approach will also be assessed through using a variety of statistical criteria
    Keywords: potential output, output gap, production function, multivariate filters, unobserved components models.
    JEL: C32 E23 E32
    Date: 2005–11–11
  10. By: Hennessy, David A.; Lapan, Harvey E.
    Abstract: Our context involves firms producing products at constant marginal costs, and behaving as Cournot oligopolists. When preferences are quasi-linear, we study the relationships between second moments of unit costs and second moments of firm-level production. Larger variance in unit costs of a product increases own output variance and variance of any other output. We also investigate how second moments of unit costs affect the first and second moments of profit across firms. Larger variance in unit costs can reduce profit variance, even for a single product oligopoly.
    Keywords: Complementarity; Covariance matrix; Separability
    JEL: C72 C8 C9 C6 C7 D0 D1 D2 D3 D4 D43
    Date: 2005–11–08
  11. By: Bee Yan Aw; Mark J. Roberts; Tor Winston
    Abstract: This paper examines two potential channels of knowledge acquisition that underlie firm productivity growth in the Taiwanese electronics industry: participation in the export market and investments in R&D and/or worker training. We focus on the argument that a firm's own investments in R&D are necessary for the firm to assimilate knowledge or expertise gained from foreign contacts and thus are an important component of the process of learning-by-exporting. Firm-level panel data from 1986, 1991, and 1996 is used to investigate a firm's decision to invest in these two activities and to assess the effects of these investments on the firm's future total factor productivity. The empirical model consists of four equations. The firm's decisions to export and invest in R&D and/or worker training are modeled with a bivariate probit model that recognizes the interdependence of the decisions. We then estimate how participation in these investment activities alters the firm's future productivity trajectory while controlling for the potential selection bias introduced by endogenous firm exit. The primary empirical findings are that, on average, firms that export but do not invest in R&D and/or worker training have significantly higher future productivity than firms that do not participate in either activity. In addition, firms that export and invest in R&D and/or worker training have significantly higher future productivity than firms that only export. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.
    JEL: F14 O12 D42
    Date: 2005–11

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