New Economics Papers
on Efficiency and Productivity
Issue of 2006‒02‒05
25 papers chosen by

  2. Regional Labour Productivity in The Netherlands - Diversification and Agglomeration Economies By Lourens Broersma; Jan Oosterhaven
  3. The effect of changing technology use on plant performance in the Canadian manufacturing sector By Baldwin, John R.; Sabourin, David
  4. Cost Efficiency of Finnish Municipalities in Basic Service Provision 1994-2002 By Heikki A. Loikkanen; Ilkka Susiluoto
  6. Threshold Effects of the Public Capital Productivity : An International Panel Smooth Transition Approach By Gilbert Colletaz; Christophe Hurlin
  7. Trade liberalization: export-market participation, productivity growth and innovation By Baldwin, John R.
  8. Convergence in TFP among Italian Regions - Panel Unit Roots with Heterogeneity and Cross Sectional Dependence By Joseph Byrne; Giorgio Fazio; Davide Piacentino
  9. Innovation, survival and performance of Canadian manufacturing plants By Baldwin, John R.; Gu, Wulong
  10. Canada/U.S. labour productivity revisions in the business sector By Kaci, Mustapha; Maynard, Jean-Pierre
  11. What determines productivity level in the long run? Evidence from Italians regions By Raffaello Bronzini; Paolo Piselli
  12. Productivity Effects and Determinants of the Allocation of Public Infrastructure By Fumitoshi Mizutani; Tomoyasu Tanaka
  13. Water use, shadow prices and the Canadian business sector productivity performance By Dachraoui, Kaïs; Harchaoui, Tarek
  14. Aggregate Productivity Effects of Road Investment - A Reassessment for Western Europe By Andreas Kopp
  15. Productivity: the evolution of Statistics Canada's program By Baldwin, John R.
  16. ICT and Productivity - relations and dynamics in a spatial context By Otto Raspe; Frank Van Oort; Lambert Van der Laan
  17. Competitiveness and regional growth in the European Union: unit labour costs disparities By Óscar Rodil-Marzábal
  18. Industrial competition, shifts in market share and productivity growth By Baldwin, John R.; Gu, Wulong
  19. A comparison of Canadian and U.S. productivity levels: an exploration of measurement issues By Baldwin, John R.; Maynard, Jean-Pierre; Tanguay, Marc; Wong, Fanny; Yan, Beiling
  20. The output gap between Canada and the United States: the role of productivity (1994-2002) By Baldwin, John R.; Maynard, Jean-Pierre; Wong, Fanny
  21. Economic structure, technology diffusion and convergence - the case of the Italian regions By Matteo Lanzafame
  22. Innovation Capabilities and Firm Labor Productivity. By Carine Peeters; Bruno Van Pottelsberghe
  23. The integration of the Canadian productivity accounts within the System of National Accounts: current status and challenges ahead By Baldwin, John R.; Harchaoui, Tarek
  24. From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter? By Dominique Guellec; Bruno Van Pottelsberghe
  25. Regional Heterogenity and Conditional Convergence By Michael Beenstock; Daniel Felsenstein

  1. By: Julie Le Gallo; Sandy Dall’erba
    Abstract: This paper analyzes the evolution of labor productivity disparities among 145 European regions over 1975-2000 according to the concepts of sigma- and beta-convergence and emphasizes the importance of including both spatial effects and a disaggregated analysis at a sectoral level. We detect sigma-convergence in aggregate labor productivity and in the service sectors but not in the other sectors. This result can be explained by a transfer of resources from the agricultural sector to the more productive sectors that has been more marked in the poor regions. Empirical results also indicate that the common indicator of sigma-convergence lead to a bias when spatial effects are not included in the analysis. We then estimate beta-convergence models including the relevant spatial effects for each sector. The results show that inequality in productivity levels between core and peripheral regions persist and highlight how convergence speeds and the nature of spatial effects vary from one sector to another.
    Date: 2005–08
  2. By: Lourens Broersma; Jan Oosterhaven
    Abstract: This paper studies the extent to which diversification and agglomeration effects account for regional differences in labour productivity levels and labour productivity growth. Using a large set of regional data for The Netherlands for 40 labour market areas between 1990-2001 we find that roughly 60% of the explained variation in regional productivity differences and 55% of the regional growth differences can be attributed to indicators of diversification and agglomeration effects. A sensitivity analysis shows that these effects are fairly robust.
    Date: 2005–08
  3. By: Baldwin, John R.; Sabourin, David
    Abstract: This paper investigates how changes in technology use of individual plants in the Canadian manufacturing sector are related to two measures of performance --productivity growth and market-share growth.
    Keywords: National accounts, Manufacturing, Productivity, Manufacturing industries
    Date: 2004–07–27
  4. By: Heikki A. Loikkanen; Ilkka Susiluoto
    Abstract: Cost efficiency of basic welfare service provision in 353 Finnish municipalities in 1994-2002 is investigated. In a basically two tier public sector (central government and municipalities) the municipal sector has a central role in the Finnish economy as a provider of welfare services. Data Envelopment Analysis (DEA), a non-parametric linear programming method is employed, calculating a best practise total cost frontier for the decision making units, and comparing the various DMUs with this frontier. The outputs consist of up to ten volume indicators of services in health, social and educational sector. As the combined input, total real production costs of these services is used. According to the results efficiency differences were considerable between the municipalities, and a small group of a peripheral municipalities scored clearly below the others. Also annual changes in cost efficiency were estimated. As a second stage, differences in the DEA cost efficiency scores were explained with statistical models. Here the explanatory variables included structural and demographic indicators of municipalities, their location and measures of political power at local level. According to the results several of these variables had an expected effect on cost efficiency.
    Date: 2005–08
  5. By: Laia Castany; Enrique López-Bazo; Rosina Moreno
    Abstract: Productivity has been considered a key element for firms and economies to be more competitive. Several studies on productivity at a microeconomic level have found notable heterogeneity between firms. More concretely, differences in Total Factor Productivity (TFP) between large and small firms have been observed. Those differences might be caused by differences in the distribution of the factors determining the level of TFP across firms’ size, and by differences in the return to such factors. To assess to what extent the observed differences in TFP between large and small Spanish manufacturing firms are caused by the above-mentioned reasons we propose a methodology that, built on the traditional Oaxaca-Blinder decomposition, focuses the attention on the entire distribution of productivity. The TFP index used in our paper guarantees comparison of the level of productivity across firms in a given year and over time, and has been computed using the information in the Encuesta sobre Estrategias Empresariales (ESEE), a comprehensive survey of manufacturing firms in Spain from 1990 to 1999. Results confirm that the distribution of TFP in the large firms dominates that for the small firms, and how besides differences in the distribution of, for example, human capital and R&D expenditures across firms’ size, heterogeneity in returns between large and small firms play a major role in explaining differences in the distribution of TFP. Important policy issue are derived in connection with the possibility of increasing the aggregate productivity of the Spanish economy considering that the average firm size in Spain is smaller than in other European countries.
    Date: 2005–08
  6. By: Gilbert Colletaz (LEO - Laboratoire d'économie d'Orleans - - CNRS : FRE2783 - Université d'Orléans); Christophe Hurlin (LEO - Laboratoire d'économie d'Orleans - - CNRS : FRE2783 - Université d'Orléans)
    Abstract: Using a non linear panel data model we examine the threshold effects in the productivity of the public capital stocks for a panel of 21 OECD countries observed over 1965-2001. Using the so-called "augmented production function" approach, we estimate various specifications of a Panel Smooth Threshold Regression (PSTR) model recently developed by Gonzalez, Teräsvirta and Van Dijk (2004). One of our main results is the existence of strong threshold effects in the relationship between output and private and public inputs : whatever the transition mechanism specified, tests strongly reject the linearity assumption. Moreover this model allows cross-country heterogeneity and time instability of the productivity without specification of an ex-ante classification over individuals. Consequently it is posible to give estimates of productivity coefficients for both private and public capital stocks at any time and for each countries in the sample. Finally we proposed estimates of individual time varying elasticities that are much more reasonable than those previously published.
    Keywords: Public Capital ; Panel Smooth ; Threshold Regression Models
    Date: 2006–01–20
  7. By: Baldwin, John R.
    Abstract: The paper examines how Canadian manufacturing plants have responded to reductions in tariff barriers between Canada and the rest of world over the past two decades.
    Keywords: Trade, National accounts, Science and technology, Exports, Productivity, Innovation
    Date: 2004–12–14
  8. By: Joseph Byrne; Giorgio Fazio; Davide Piacentino
    Abstract: This paper performs a number of tests to estimate convergence in total factor productivity (TFP) among Italian regions during the period 1970-2001. We generate the regional TFP series using growth accounting methodologies, and then apply a range of panel unit root tests to analyse the process of convergence. We extend the existing literature by incorporating three main improvements. Firstly, we control for the heterogeneity arising from the different economic structure of each region. Secondly, we account for the cross-sectional dependence due to common shocks or spillovers among different regions at the same time. Finally, we look for clubs of convergence using tests of poolability both on economic and statistical grounds.
    Date: 2005–08
  9. By: Baldwin, John R.; Gu, Wulong
    Abstract: This paper examines the determinants of innovation and the role of innovation in productivity growth, shifts in market share and survival in the Canadian manufacturing sector. It presents a model that examines the effect of innovation on plant performance and plant survival.
    Keywords: National accounts, Science and technology, Manufacturing, Productivity, Innovation, Manufacturing industries
    Date: 2004–09–21
  10. By: Kaci, Mustapha; Maynard, Jean-Pierre
    Abstract: This paper examines the revision cycle for labour productivity estimates over the period 2000-2003.
    Keywords: Business enterprises, National accounts, Business finance, Productivity
    Date: 2005–03–10
  11. By: Raffaello Bronzini; Paolo Piselli
    Abstract: In this paper we estimate the long-run relationship between total factor productivity, R&D capital stock and human capital in the Italian regions between 1980 and 2001. We exploit recent developments of panel cointegration techniques to estimate the cointegration relationship, allowing for endogeneity and heterogeneity of regional cointegration vectors. The evidence shows that there exists a long-run equilibrium among the variables and that human capital elasticity is larger than R&D elasticity. Conditioned on the long-run equilibrium, we set out an Error Correction Model of TFP growth. In this framework, we test for exogeneity of TFP determinants, by carrying out Granger-causality tests. Our findings show that human capital is exogenously generated out of the model, while TFP and R&D are simultaneously determined.
    Date: 2005–08
  12. By: Fumitoshi Mizutani; Tomoyasu Tanaka
    Abstract: Inefficient use of public money is a policy issue of concern in Japan. Some contend that spending towards the formation of public capital does not promote economic growth, one reason being that such investment is concentrated in underdeveloped regions which have a low impact on the growth of economic activity. Investment in underdeveloped regions might be the result of political misallocation or simply the fact that public capital no longer contributes to private productivity. Our study addresses these two important issues: whether or not public infrastructure contributes to production in the private sector, and whether or not political factors really affect the allocation of public infrastructure investment. If the political factors indeed affect allocation, what kinds of political factors are the most deterministic? First, we survey studies on this topic published since the 1970s. For methodology, we plan to take a simultaneous approach to examine these issues. Second, because some data are not publicly available, we construct a data set of public infrastructure and related variables. Public capital in this study is limited to public infrastructure such as roads, ports, airports, banks and dams. Railroads and electric power plants are excluded because these were built by the private sector in Japan. In this study, we plan to use a panel data set covering 46 prefectures and 9 time periods for every 5 years from 1955 to 1995 in Japan. Therefore, the total sample size in this study is 414. Third, after constructing the data set, we overview the regional distribution of public infrastructure and the relationship between public infrastructure allocation and political factors. Last, we estimate simultaneous equations regarding regional production function, infrastructure investment function and grant allocation function. By using these estimated functions, we evaluate whether or not public capital contributes to production and what kind of political factors affect the allocation of public infrastructure investment.
    Date: 2005–08
  13. By: Dachraoui, Kaïs; Harchaoui, Tarek
    Abstract: This paper develops a production framework that allows for self-supplied water intake, an unpriced 'natural' input. The framework is then exploited to estimate the corresponding water shadow prices and to assess the extent to which water impacts on the multifactor productivity performance of the Canadian business sector's industries.
    Keywords: Environment, National accounts, Environmental impact, Productivity
    Date: 2004–12–01
  14. By: Andreas Kopp
    Abstract: The paper investigates the productivity effects of national road infrastructure investment in Western Europe.The study makes use of newly available OECD/ECMT data showing a secular decline of productivity growth and of transport infrastructure investment. Infrastructure availability is modelled like an unpaid shadow factor allowing for more than constant aggregate returns to scale while firms operate with linear homogenous production functions, with transport as an input. Productivity increases are measured by the Toernquist index The link between road investment and macroeconomic productivity is studied using a new econometric technique to avoid the identification problem that discredited the early literature. The results show that there is no clear over- or underinvestment. The aggregate level of road investment seems to be such that the implied rate of return is close to the opportunity cost of private capital.
    Date: 2005–08
  15. By: Baldwin, John R.
    Abstract: This paper discusses the productivity program at Statistics Canada, covering topics such as international efforts to provide more comparable statistics, attempts to expand our knowledge of the factors behind productivity growth, and challenges facing the program.
    Keywords: National accounts, Productivity
    Date: 2004–08–06
  16. By: Otto Raspe; Frank Van Oort; Lambert Van der Laan
    Abstract: The strong emergence of ICT in the past decades was accompanied by much research on the potential productivity boosting qualities of ICT: high productivity growth was expected. However, empirical evidence on the productivity impact of ICT stayed behind: the Solow paradox. Since then analytical steps were made by using alternative indicators for both ICT adoption and productivity and including longer time periods, distinctions in types of economic activities and adding micro level and firm specific characteristics like size, age, and intensity of innovation. Moreover, ICT was linked to network relations including externalities. These adaptations led to outcomes in favour of a positive relation between the use of ICT and productivity. However, most convincing in this debate was the finding that the effects of ICT on economic performance should be analysed from a perspective which, besides ICT, includes changes in knowledge and organisations. Knowledge is defined here broadly and includes both codified and tacit knowledge. In this paper we focus on the trinity ‘ICT, knowledge and organization’ and add the regional dimension to this. Based on economic literature our hypothesis is that regions where firms increasingly use ICT show a stronger growth of added value and productivity. This positive relationship is, however, co-determined by changes in the broadly defined knowledge level. The use of ICT by firms is analysed at different levels of urbanism in the Netherlands. Most central is the distinction between the metropolitan Randstad, the intermediate zone and the national periphery. By this regional distinction the debate on the centrifugal and centripetal effects of ICT (the death of distance) is included. The empirical measurement as such is based on the low spatial scale of 496 municipalities.
    Date: 2005–08
  17. By: Óscar Rodil-Marzábal
    Abstract: This paper analyses the wage cost and labour productivity differentials in the European Union for period 1995-2000, from a regional and sectorial perspective. To this end we analyse the evolution of the unit labour cost by sector and its decomposition between the unit labour requirement and the unit price of labour. Results show the existence of high regional disparities, that differ with the sector. Also, we find diverse combinations in terms of productivity and unit price of labour, driving to the existence of different competitive strategies. Finally, we try to find the existence of relation between the different patterns of competitiveness and regional economic growth.
    Date: 2005–08
  18. By: Baldwin, John R.; Gu, Wulong
    Abstract: This paper proposes a method for measuring the impact of plant turnover on productivity growth and outlines how this contribution has changed in Canada as a result of substantial trade liberalization in the 1990s.
    Keywords: National accounts, Business enterprises, Productivity, Business conditions
    Date: 2004–07–22
  19. By: Baldwin, John R.; Maynard, Jean-Pierre; Tanguay, Marc; Wong, Fanny; Yan, Beiling
    Abstract: This paper examines the level of labour productivity in Canada relative to that of the United States in 1999. In doing so, it addresses two main issues. The first is the comparability of the measures of GDP and labour inputs that the statistical agency in each country produces. Second, it investigates how a price index can be constructed to reconcile estimates of Canadian and U.S. GDP per hour worked that are calculated in Canadian and U.S. dollars respectively. After doing so, and taking into account alternative assumptions about Canada/U.S. prices, the paper provides point estimates of Canada's relative labour productivity of the total economy of around 93% that of the United States. The paper points out that at least a 10 percentage point confidence interval should be applied to these estimates. The size of the range is particularly sensitive to assumptions that are made about import and export prices.
    Keywords: Statistical methods, National accounts, Data analysis, Productivity
    Date: 2005–01–20
  20. By: Baldwin, John R.; Maynard, Jean-Pierre; Wong, Fanny
    Abstract: The difference in the output gap (GDP per capita) between Canada and the United States is broken down into two components - differences in productivity (GDP per hour worked) and differences in effort (hours worked per capita) for the period 1994 to 2002. The paper shows that, on average, the majority of the output gap is accounted for by differences in hours worked rather than differences in productivity. Since 1994, the output gap has narrowed slightly, primarily because of an increase in hours worked in Canada relative to the United States.
    Keywords: National accounts, Gross domestic product
    Date: 2005–01–13
  21. By: Matteo Lanzafame
    Abstract: Over the years, Italy’s regional disparities have been the object of much investigation in the literature. Recent evidence points to a revival of the convergence process, which had come to a halt in the mid-1970s, and renews the interest in the subject. This paper aims at contributing to the debate. Endorsing the critiques of the neoclassical assumption of technology as a public good, we investigate the link between economies’ structural characteristics and their growth performance. Specifically, treating technology as sector-specific and modelling technological spillovers as a positive function of the degree of similarity between economies’ sectoral features, a modified version of the Solow model is put forward and used to 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. From a theoretical viewpoint, our model suggests that the effects of technology diffusion on the convergence process are twofold. Firstly, if technological progress is partly dependent on external innovations, the temporal evolution of each economy’s productivity level, and its speed of convergence to the steady state value, cannot be ascribed solely to the existence of diminishing returns to capital, as suggested by Neoclassical Growth Theory, but is affected by technology diffusion as well. The difficulty in disentangling the effects of the two factors on the convergence rate remains, but the “extended” convergence equation arrived at reveals that the size of technological spillovers will have a level effect on productivity. Secondly, treating technological progress as sector dependent, our model implies potential steady-state growth rate heterogeneity. Thus, the estimated convergence rate can be ascribed to the concept of “Weak Conditional Convergence” [Islam (2003)], with each economy converging to its own steady state growth rate, which is more likely to be different from the others the more diverse the steady state production structures. These arguments lend support to the concept of “Club Convergence”.
    Date: 2005–08
  22. By: Carine Peeters (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels); Bruno Van Pottelsberghe (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels)
    Abstract: This study relies on a Cobb-Douglas production function to assess the relationship between the development of innovation capabilities by firms and their labor productivity. Intra-organizational capabilities relate to firms’ corporate culture and work organization, generation of innovative ideas and selection of projects, and innovation funding sources. Inter-organizational capabilities relate to the use of external information from vertical partners, competitors, and consultants, and to R&D partnerships with scientific institutions. In addition to the traditional effect of a growth in the ratio of physical capital per employee, both types of innovation capabilities are found to significantly increase labor productivity.
    Keywords: Innovation, organizational capabilities, performance, labor productivity.
    JEL: O32 O33 L25 M21
    Date: 2004–04
  23. By: Baldwin, John R.; Harchaoui, Tarek
    Abstract: A statistical agency faces several challenges in building Productivity Accounts. Measures of productivity require that outputs be compared to inputs. During the last forty years, data users in the economics profession have requested an increasingly sophisticated set of productivity measures. What started out as a request for simple ratios of output to employment has moved to a demand for multifactor (total factor) productivity measures that take into account both labour and capital inputs, the compositional changes in both, and price corrections for the changing quality of outputs. The challenge that faces users of productivity measures is that many series often exist within statistical agencies that can be used on an ad hoc basis by outsiders to generate productivity estimates; however, these series often generate conflicting estimates. Only by pulling together data into one coherent consistent framework can the statistical agency solve the problem of 'multiple' stories. This can be done by developing a set of Productivity Accounts that are part of an integrated system of National Accounts. Creating a set of integrated productivity accounts provides a challenge to a statistical agency. Data on outputs and inputs have to be created that are comprehensive in terms of industry coverage, but also that have adequate quality. Labour estimates have to be created that are consistent with the definitions of the SNA but that are also consistent at the industry level with key estimates contained in the National Accounts (e.g., labour income). Investment and capital stock data need to be collected that can be allocated to industries and are consistent with the commodity structure of input/output tables. This paper discusses the challenges that a statistical agency faces in this area -as illustrated by the Canadian experience. First, it examines the progress that has been made in developing a system that integrates the Productivity Accounts into the overall System o
    Keywords: National accounts, Productivity
    Date: 2005–04–28
  24. By: Dominique Guellec (European Patent Office.); Bruno Van Pottelsberghe (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels)
    Abstract: This paper presents estimates of the long-term impact of various sources of knowledge (R&D performed by the business sector, the public sector and foreign firms) on multifactor productivity growth of 16 countries from 1980 to 1998. The main results show that the three sources of knowledge are significant determinants of long term productivity growth. Further evidence suggests that several factors determine the extent to which each source of knowledge contributes to productivity growth. These factors are the absorptive capability, the origin of funding, the socio economic objectives of government support, and the type of public institutions that perform R&D.
    Keywords: Science and technology policies, R&D, Spillovers, Growth.
    JEL: O11 O40 O47 O50
    Date: 2004–03
  25. By: Michael Beenstock; Daniel Felsenstein
    Abstract: This paper stresses the importance of accounting for regional heterogenity in the dynamic analysis of regional economic disparities. Studies of regional growth invariably presume regions are homogenous in that their socio-demographic composition is assumed to be broadly similar. We argue that any analysis of regional convergence needs to be tested conditionally, i.e. conditional upon the socio-demographic structure of the workers in the various regions. To this end, we estimate various measures of conditional regional earnings inequality using Israeli regional data for the period 1991-2002. Our results show that much of the regional earnings inequality may be accounted for by the conditioning variables. Both in measures of regional convergence and regional mobility, conditioning makes a large difference to the results accounting for up to half of the observed levels of inequality. Ignoring regional heterogeneity may therefore lead to serious over-estimation of the underlying level of regional inequality.
    Date: 2005–08

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