New Economics Papers
on Efficiency and Productivity
Issue of 2005‒12‒09
ten papers chosen by

  1. Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants By Eslava, Marcela; Haltiwanger Jr, John C; Kugler, Adriana D.; Kugler, Maurice
  2. Eco-Efficiency Analysis of Consumer Durables Using Absolute Shadow Prices By Mika Kortelainen; Timo Kuosmanen
  3. Market Reforms and Efficiency Gains in Chile By Raphael Bergoeing; Andrés Hernando; Andrea Repetto
  4. The Evolution of International Output Differences (1960-2000): From Factors to Productivity By Pedro Cavalcanti Ferreira; Samuel de Abreu Pessôa; Fernando A. Veloso
  5. Total Factor Productivity: An Unobserved Components Approach By Raul Crespo
  6. What Determines Differences in Foreign Bank Efficiency? Australian Evidence By Jan-Egbert Sturm; Barry Williams
  7. The Effects of Entry on Incumbent Innovation and Productivity By Aghion, Philippe; Blundell, Richard William; Griffith, Rachel; Howitt, Peter; Prantl, Susanne
  8. Skills, human capital and the plant productivity gap: UK evidence from matched plant, worker and workforce data By Haskel, Jonathan; Hawkes, Denise; Pereira, Sonia
  9. Regulation and Economic Performance: Product Market Reforms and Productivity in the OECD By G. Nicoletti; Stefano Scarpetta
  10. Property Crime and Law Enforcement in Italy. A Regional Panel Analysis 1980-95 By Guido Travaglini

  1. By: Eslava, Marcela; Haltiwanger Jr, John C; Kugler, Adriana D.; Kugler, Maurice
    Abstract: In this paper, we analyse 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 labour 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 labour 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 labour 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: adjustment costs; deregulation; input reallocation; irreversibilities; joint factor adjustment
    JEL: C14 E22 E24 J63 O11
    Date: 2005–10
  2. By: Mika Kortelainen (University of Joensuu, Department of Business & Economics); Timo Kuosmanen (Wageningen University, Environmental Economics & Natural Resources Group)
    Abstract: We develop a method for eco-efficiency analysis of consumer durables by utilizing Data Envelopment Analysis (DEA). In contrast to previous product efficiency studies, we consider the measurement problem from the perspective of a policy maker. The novel innovation of the paper is to measure efficiency in terms of absolute shadow prices that are optimized endogenously within the model to maximize efficiency of the good. Thus, the efficiency measure has a direct economic interpretation as a monetary loss due to inefficiency, expressed in some currency unit. The advantages as well as technical differences between the proposed approach and the traditional production-side methods are discussed in detail. We illustrate the approach by an application to eco-efficiency evaluation of Sport Utility Vehicles.
    Keywords: Activity Analysis, Data Envelopment Analysis (DEA), Environmental efficiency, Product evaluation, Sport Utility Vehicles (SUVs)
    JEL: C14 C61 D61 D62
    Date: 2005–11–29
  3. By: Raphael Bergoeing; Andrés Hernando; Andrea Repetto
    Abstract: Starting in the mid 1970s, Chile implemented a deep and comprehensive set of structural market reforms. In spite of the wide agreement there is with respect to the expected benefits these reforms should have on growth, little evidence has been provided to empirically establish and to quantify this connection. Using plant-level data on Chilean manufacturing firms for the 1980-2001 period, we provide such evidence. In particular, we estimate disaggregate total factor productivity (TFP) and decompose its dynamics into production reallocation and within plant efficiency changes to study aggregate efficiency, a fundamental source of aggregate growth. We find that during the 1990s, when most reforms had already been fully implemented, both the level and dispersion of TFP grew steadily. These efficiency gains were explained in equal proportions by within plant changes and by the net entry of new and more productive economic units. The reallocation among incumbent plants did not contribute significantly to the enhancement of efficiency, however. Finally, we also show that within-plant efficiency gains were the largest among firms producing traded goods, and among firms that were more likely to face binding liquidity constraints. Thus, in Chile, the adoption of better technologies and production processes, fostered by broader foreign exposure and a superior access to external finance, seem to have accounted for the observed improvement in manufacturing performance.
    Date: 2005
  4. By: Pedro Cavalcanti Ferreira (EPGE/FGV); Samuel de Abreu Pessôa (EPGE/FGV); Fernando A. Veloso (IBMEC Business School - Rio de Janeiro)
    Abstract: This article presents a group of exercises of level and growth decomposition of output per worker using cross-country data from 1960 to 2000. It is shown that at least until 1975 factors of production (capital and education) were the main source of output dispersion across economies and that productivity variance was considerably smaller than in later years. Only after this date did the prominence of productivity start to show up in the data, as the majority of the literature has found. The growth decomposition exercises showed that the reversal of relative importance of productivity vis-a-vis factors is explained by the very good (bad) performance of productivity of fast- (slow-) growing economies. Although growth in the period, is on average, is mostly due to factor accumulation, its variance is explained by productivity.
    Keywords: Cross-Country Income Inequality, Development, Total Factor Productivity, Aggregate Production Function, Growth Decomposition
    JEL: O11 O47
    Date: 2005–11–30
  5. By: Raul Crespo
    Abstract: This work examines the presence of unobserved components in the time series of Total Factor Productivity, which is an idea central to modern Macroeconomics. The main approaches in both the study of economic growth and the study of business cycles rely on certain properties of the different components of the time series of Total Factor Productivity. In the study of economic growth, the Neoclassical growth model explains growth in terms of technical progress as measured by the secular component of Total Factor Productivity. While in the study of business cycles, the Real Business Cycle approach explains short-run fluctuations in the economy as determined by temporary movements in the production function, which are reflected by the cyclical component of the time series of the same variable. The econometric methodology employed in the estimation of these different components is the structural time series approach developed by Harvey (1989), Harvey and Shephard (1993), and others. An application to the time series of Total Factor Productivity for the 1948-2002 U.S. private non-farm business sector is presented. The pattern described by technical progress in this economy is characterised by important growth for the period immediately after War World II, which reaches its peak at the beginning of the 1960s to decline until the earliest 1980s where it shows a modest rebound. On the other hand, the cyclical component of the series seems to be better described by two cycles with periodicity of six and twelve years, respectively.
    Keywords: Productivity, Business Cycles, Structural Time Series Models, Unobserved Components.
    JEL: E23 E32 C22
    Date: 2005–12
  6. By: Jan-Egbert Sturm; Barry Williams
    Abstract: This study applies parametric distance functions to estimate the efficiency of foreign banks in Australia, and subsequently employs extreme bounds analysis to establish the determinants of foreign bank efficiency that are robust to model specification. The limited global advantage hypothesis of Berger et al (2000) is supported. Following clients is found to reduce the efficiency of the profit-creation process. The market share of the incumbent banks acts as a barrier to entry to efficiency in the retail market, with acquisition of a domestic bank reducing this effect. Internet-based bank product delivery reduces the efficiency of profit creation in the initial phases of operation, and parent profits do not improve efficiency in the host market.
    Keywords: foreign bank efficiency, distance functions, extreme bounds analysis, barriers to entry, following clients
    JEL: C15 C52 G15 G21
    Date: 2005
  7. By: Aghion, Philippe; Blundell, Richard William; Griffith, Rachel; Howitt, Peter; Prantl, Susanne
    Abstract: How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries - incumbents in technologically advanced industries react positively to entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier. We show that entry threat spurs innovation incentives in technologically advanced sectors - successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation - increased entry reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro-level productivity growth and patent panel data for the UK, and controlling for the endogeneity of entry by exploiting the large number of policy reforms undertaken during the Thatcher era.
    Keywords: entry; growth; innovation
    JEL: D21 F21 L10 O31
    Date: 2005–10
  8. By: Haskel, Jonathan; Hawkes, Denise; Pereira, Sonia
    Abstract: Using two matched plant level skills and productivity datasets for UK manufacturing we document that (i) more productive firms hire more skilled workers: in 2000, plants at the top decile of the TFP distribution (controlling for their four-digit industry) hired workers with, on average, around 1/3rd of a year of additional schooling compared to firms in the bottom decile and (ii) in an accounting sense the skills gap between the firms in the top and bottom deciles of the TFP distribution accounts for 3 to 10% of the TFP gap depending on the specification used.
    Keywords: productivity; skills
    JEL: D24 J24 L6
    Date: 2005–11
  9. By: G. Nicoletti; Stefano Scarpetta
    Abstract: This paper assesses the implications of past and ongoing reforms in OECD product markets for the labour productivity gap, a key component of cross-country differences in GDP per capita. After a brief review of the theoretical literature, we bring together the results obtained in some of our empirical work over the past few years, discussing econometric approaches and their drawbacks. We then use these results to gauge the likely effect of further reforms. We distinguish effects on capital deepening and technical progress by examining the impact of regulations on investment (domestic and foreign) and multi-factor productivity. We focus on the effects of policies aimed at strengthening private governance (e.g. through privatization) and opening up access to markets where competition is economically viable. The results suggest that pro-competitive reforms tend to increase both investment and multifactor productivity and, through both these channels, they can lead to higher growth in GDP per capita. Ce papier analyse les implications des réformes dans les marchés des biens de la zone OCDE pour un des facteurs qui expliquent les différences internationales dans le PIB par tête : les écarts dans la productivité du travail. Après avoir examiné brièvement la littérature théorique, nous résumons les résultats de quelques unes des études empiriques que nous avons réalisées aux cours des dernières années, tout en discutant les approches économétriques utilisées et leurs limites. Nous utilisons ensuite ces résultats pour évaluer les effets qui pourraient être observés si les réformes étaient poussées plus loin à l’avenir. Nous distinguons les effets des réformes sur l’accroissement de l’intensité en capital et sur le progrès technique en nous appuyant sur trois études qui analysent l’impact de la régulation anti-concurrentielle sur l’investissement (national et de l’étranger) et la productivité multifactorielle. Nous nous concentrons sur les implications quantitatives au niveau macroéconomique des politiques visant à renforcer la gouvernance des entreprises (par exemple par la privatisation) et à éliminer les barrières réglementaires à l’accès dans les marchés où la concurrence est soutenable. Cet examen porte à conclure que les réformes qui accroissent les pressions concurrentielles sur les marchés des biens tendent à augmenter à la fois l’investissement et la productivité multifactorielle. Par ce biais, les réformes peuvent mener à une croissance plus soutenue du PIB par tête dans les pays qui les réalisent.
    Keywords: investment, investissement, panel data, données de panel, regulations, régulation, productivité et croissance, aggregate productivity and growth
    JEL: C23 E22 F21 L5 O4
    Date: 2005–11–22
  10. By: Guido Travaglini (Università 'La Sapienza' Roma)
    Abstract: In this paper a Cobb-Douglas utility function is introduced and solved for a dynamic equation of property crime supply and its determinants, namely deterrents and income. Thereafter, all variables are empirically tested, by means of a simultaneous equations model, for the sign and magnitude of their mutual relationships in a panel of Italy and its two economically and culturally different areas, the North and the South. The period scrutinized is 1980-95 and the results obtained widely differ among the two. When appropriately modeled and instrumented, in fact, property crime is found to react to police and criminal justice deterrence, and also to incomes, with different parameter magnitudes and significance. The same diversity applies to the parameters related to deterrence, flawed in quite a few cases by scarce law enforcement and productivity, and to those related to local incomes, which still reflect for the South a tendency of crime to substitute for legal activities.
    Keywords: Models with Panel Data, Illegal Behavior and the Enforcement of Law
    JEL: C33 K42
    Date: 2005–12–01

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