New Economics Papers
on Efficiency and Productivity
Issue of 2005‒12‒14
ten papers chosen by

  1. Learning-by-Doing, Learning-by-Exporting, and Productivity : Evidence from Colombia By Ana M. Fernandes; Alberto E. Isgut
  2. Productivity, Ownership and the Investment Climate : International Lessons for Priorities in Serbia By Itzhak Goldberg; Branko Radulovic; Mark Schaffer
  3. Bank Privatization and Productivity : Evidence for Brazil By Marcio I. Nakane; Daniela B. Weintraub
  4. Assessing the Impact of the Investment Climate on Productivity Using Firm-Level Data : Methodology and the Cases of Guatemala, Honduras, and Nicaragua By Alvaro Escribano; J. Luis Guasch
  5. Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia By Jens Matthias Arnold; Beata Smarzynska Javorcik
  6. The Impact of Business Environment and Economic Geography on Plant-Level Productivity : An Analysis of Indian Industry By Somik V. Lall; Taye Mengistae
  7. Electricity Sector Reform in Developing Countries : A Survey of Empirical Evidence on Determinants and Performance By Tooraj Jamasb; Raffaella Mota; David Newbery; Michael Pollitt
  8. Nonparametric estimation of concave production technologies by entropic methods By Gad Allon; Michael Beenstock; Steven Hackman; Ury Passy; Alex Shapiro
  9. Home Versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers By Priit Vahter; Jaan Masso

  1. By: Ana M. Fernandes (The World Bank); Alberto E. Isgut (Wesleyan University)
    Abstract: The empirical evidence on whether participation in export markets increases plant-level productivity has been inconclusive so far. The authors explain this inconclusiveness by drawing on Arrow's (1962) characterization of learning-by-doing, which suggests focusing on young plants and using measures of export experience rather than export participation. They find strong evidence of learning-by-exporting for young Colombian manufacturing plants between 1981 and 1991: total factor productivity increases 4-5 percent for each additional year a plant has exported, after controlling for the effect of current exports on total factor productivity. Learning-by-exporting is more important for young than for old plants and in industries that deliver a larger percentage of their exports to high-income countries.
    Keywords: Private sector development, International economics
    Date: 2005–03–01
  2. By: Itzhak Goldberg (The World Bank); Branko Radulovic (The World Bank); Mark Schaffer (The World Bank)
    Abstract: The authors use data on 27,000 firms from 50 countries, half of which are transition economies, together with the case of Serbia to examine the relationship between productivity, the investment climate, and private ownership of firms. As government capacity to address investment climate constraints is limited, the prioritization of the constraints is critical. Identification of the relative effects of various investment climate constraints and ownership on productivity should serve as a guide for such prioritization. Although ownership has recently received less attention in policy decisions than before, according to the econometric analysis of productivity reported by the authors, private ownership is an equally or more important determinant of productivity than other components of the investment climate. The importance of ownership shows that an unfinished privatization and restructuring agenda might have negative effects on productivity, in parallel to poor investment climate. Another important finding is that countries in which firms complain more about infrastructure tend to have less productive firms.
    Keywords: Domestic finance, Industry, Private sector development, Governance, Macroeconomics and growth
    Date: 2005–08–01
  3. By: Marcio I. Nakane (Central Bank of Brazil and University of Sao Paulo, Brazil); Daniela B. Weintraub (University of Sao Paulo, Brazil)
    Abstract: Over the past decade, the Brazilian banking industry has undergone major and deep transformations with several privatizations of state-owned banks, mergers and acquisitions, closing down of troubled banks, entry by foreign banks, and so on. The purpose of this paper is to evaluate the impacts of these changes in banking on total factor productivity. The authors first obtain measures of bank level productivity by employing the techniques due to Levinsohn and Petrin (2003). They then relate such measures to a set of bank characteristics. Their main results indicate that state-owned banks are less productive than their private peers, and that privatization has increased productivity.
    Keywords: Domestic finance
    Date: 2005–07–01
  4. By: Alvaro Escribano (Universidad Carlos III and Georgetown University); J. Luis Guasch (The World Bank and University of California, San Diego)
    Abstract: Developing countries are increasingly concerned about improving country competitiveness and productivity as they face the increasing pressures of globalization and attempt to improve economic growth and reduce poverty. Among such countries, investment climate assessments (ICA) have become a standard instrument for identifying key obstacles to country competitiveness and imputing their impact on productivity, in order to prioritize policy reforms for enhancing competitiveness. Given the survey objectives and the nature and limitations of the data collected, the authors discuss the advantages and disadvantages of using different productivity measures based on data at the firm level. Their main objective is to develop a methodology to appropriately estimate, in a robust manner, the productivity impact of the investment climate variables. To illustrate the use of this methodology, the authors apply it to the data collected for ICAs in three countries-Guatemala, Honduras, and Nicaragua. Observations in logarithms (logs) of the variables, and not in rates of growth, are pooled from all three countries. The econometric analysis is done with variables in logs to reduce the impact of measurement errors and allow inclusion of as many observations as possible since the "panel" data set is very unbalanced. The authors address the endogeneity of the production function inputs and of the investment climate variables by using a variant of the control function approach based on individual firm information, and by aggregating investment climate variables by industry and region. The authors show that it is possible to get robust results for 10 different productivity measures, if one follows a consistent econometric methodology of specification and estimation. For policy analysis, they recommend using those results of investment climate variables on productivity that are robust for most of the productivity measures. The also analyze efficiency aspects of firms in each country. Finally, they decompose the results to obtain country-specific impacts and establish corresponding priorities for policy reform. The actual estimates for the three countries show the level of significance of the impact of investment climate variables on productivity. Variables in several categories, red tape and infrastructure in particular, appear to account for over 30 percent of productivity. The policy implications are clear: investment climate matters enormously and the relative impact of the various investment climate variables indicates where reform efforts should be directed. Given the robustness of the results, the authors argue that the econometric methodology of productivity analysis developed here ought to be used as a benchmark to assess productivity effects for other ICAs or surveys with firm-level data of similar characteristics.
    Keywords: Infrastructure, Industry, Private sector development
    Date: 2005–06–01
  5. By: Jens Matthias Arnold (The World Bank and Bocconi University); Beata Smarzynska Javorcik (The World Bank and CEPR)
    Abstract: This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, the difference in differences approach is combined with a matching technique. An advantage of this novel method is the ability to follow the timing of the observed changes in productivity and other aspects of plant performance. The results suggest that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in the subsequent periods. After three years, the acquired plants outperform the control group in terms of productivity by 34 percentage points. The data also suggest that the rise in productivity is a result of restructuring, as acquired plants increase their investment outlays, employment, and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports.
    Keywords: Private sector development, International economics
    Date: 2005–05–01
  6. By: Somik V. Lall (The World Bank); Taye Mengistae (The World Bank)
    Abstract: The authors' analysis of manufacturing plants sampled from India's major industrial centers shows large productivity gaps across cities. The gaps partly reflect differences in agglomeration economies and in market access. However, they are also explained to a greater extent by differences in the degree of labor regulation and in the severity of power shortages. This is an indication that governments can help narrow regional disparities in industrial growth by fostering the "right business environment" in locations where industry might otherwise be held back by powerful forces of economic geography. There is indeed a pattern in the data whereby geographically disadvantaged cities seem to compensate partially for their natural disadvantage by having a better business environment than more geographically advantaged locations.
    Keywords: Infrastructure, Industry, Private sector development, Governance, Urban development, Macroeconomics and growth
    Date: 2005–07–01
  7. By: Tooraj Jamasb (University of Cambridge); Raffaella Mota (University of Cambridge); David Newbery (University of Cambridge); Michael Pollitt (University of Cambridge)
    Abstract: Driven by ideology, economic reasoning, and early success stories, vast amounts of financial resources and effort have been spent on reforming infrastructure industries in developing countries. It is therefore important to examine whether evidence supports the logic of reforms. The authors review the empirical evidence on electricity reform in developing countries. They find that country institutions and sector governance play an important role in the success and failure of reform. And reforms also appear to have increased operating efficiency and expanded access to urban customers. However, the reforms have to a lesser degree passed on efficiency gains to customers, tackled distributional effects, and improved rural access. Moreover, some of the literature is not methodologically robust and on par with general development economics literature. Further, findings on some issues are limited and inconclusive, while other important areas are yet to be addressed. Until we know more, implementation of reforms will be more based on ideology and economic theory rather than solid economic evidence.
    Keywords: Infrastructure
    Date: 2005–03–01
  8. By: Gad Allon (Northwestern University); Michael Beenstock (Hebrew University); Steven Hackman (Georgia Tech); Ury Passy (Technion); Alex Shapiro (Georgia Tech)
    Abstract: An econometric methodology is developed for nonparametric estimation of concave production technologies. The methodology, bases on the priciple of maximum likelihood, uses entropic distance and concvex programming techniques to estimate production functions.
    Keywords: convex programming, production functions, entropy
    JEL: C1 C2 C3 C4 C5 C8
    Date: 2005–12–06
  9. By: Priit Vahter; Jaan Masso
    Abstract: The aim of this paper is to study the effects of both inward and outward foreign direct investment (FDI) on productivity. The main novelty is the analysis of the spillover effects of outward FDI that may occur outside the investing firms on the rest of the home country. The effects are addressed both for the manufacturing and services sectors. To our best knowledge there have so far been no studies based on enterprise-level panel data analysing the spillovers of outward FDI in the production function estimation framework. We find that engaging in outward FDI or receiving inward FDI is positively related to the productivity of the parent firm in Estonia or the subsidiary in Estonia. We do not find much evidence of positive spillovers via outward or inward FDI that is robust to the specification of the model or does not depend on the sector being studied. The results on spillover effects vary according to different specifications of the spillover variable, sector or the model, being either statistically insignificant or, in some cases, positive.
    Keywords: foreign direct investment, spillovers, home country effects, productivity
    JEL: F10 F21 F23
  10. By: Antonio Morillas (Universidad de Málaga); Laura Moniche (Universidad de Málaga); J Marcos Castro (Universidad de Málaga)
    Abstract: En este trabajo se evalúan los efectos ex-post del MAC 1994-1999 en Andalucía (España), los efectos directos e indirectos de las inversiones dentro de la región y los efectos fuga producidos hacia el resto del país (cross-border leakage). Utilizando un modelo multisectorial de dos regiones, la andaluza y el resto de España, se comparan los estímulos inducidos por los fondos estructurales en es resto de la economía nacional con los producidos en la economía andaluza. Los resultados muestran que, al menos a corto y medio plazo, los resultados sobre la convergencia real pueden ser poco o nada relevantes. Podría afirmarse que las regiones más desarrolladas del país han sido grandes beneficiarias indirectas de los fondos destinados a las regiones de objetivo 1.
    Keywords: Structural Funds Evaluation; Regional Convergence; Cross- Border Leakages
    JEL: R
    Date: 2005–12–09

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