New Economics Papers
on Efficiency and Productivity
Issue of 2006‒04‒08
seventeen papers chosen by

  1. Labor productivity in Europe: Evidence from a sample of regions By Lionel Artige; Rosella Nicolini
  2. Is Firm Productivity Related to Size and Age? The Case of Large Australian Firms By Alfons Palangkaraya; Jongsay Yong; Andreas Stierwald
  3. Exports and Productivity: A survey of the evidence from firm level data By Joachim Wagner
  4. Measuring Hospital Efficiency through Data Envelopment Analysis when Policy-makers’ Preferences Matter. An Application to a sample of Italian NHS hospitals By Dino Rizzi; Vincenzo Rebba
  5. German Works Councils and Productivity: First Evidence from a Nonparametric Test By Joachim Wagner
  6. Estimating Heterogeneous Production in Fisheries By Kurt E. Schnier; Christopher M. Anderson; William C. Horrace
  7. Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data By Iranzo, Susana; Schivardi, Fabiano; Tosetti, Elisa
  8. Works Councils, Labor Productivity and Plant Heterogeneity: First Evidence from Quantile Regressions By Joachim Wagner; Thorsten Schank; Claus Schnabel; John T. Addison
  9. Data Structure of Korea for Estimating Productivity in KLEMS Model By Bongchan Ha; Hak K. Pyo
  10. Exports, foreign direct investment, and productivity: Evidence from German firm level data By Joachim Wagner
  11. Industrial Productivity in 51 Countries, Rich and Poor By Causa, Orsetta; Cohen, Daniel
  12. Identifying Technically Efficient Fishing Vessels: A Non-Empty, Minimal Subset Approach By Alfonso Flores-Lagunes; William C. Horrace; Kurt E. Schnier
  13. The Role of R&D in Productivity Growth: The Case of Agriculture in New Zealand: 1927 to 2001 By Julia Hall; Grant M Scobie
  14. Productividad Regional y Sectorial en Colombia: Análisis utilizando datos de panel By Ana María Iregui B.; Luis Fernando Melo V.; María Teresa Ramírez G.
  15. Evaluación y análisis de eficiencia de la educación en Colombia By Ana María Iregui; Ligia Melo B.; Jorge Ramos
  16. Measuring and Explaining Management Practices Across Firms and Countries By Bloom, Nicholas; Van Reenen, John
  17. Linkages and Spillovers from Foreign Ownership in the Indian Pharmaceutical Firms By Shandre M. Thangavelu; Sanja Samirana Pattnayak

  1. By: Lionel Artige; Rosella Nicolini
    Abstract: The present paper aims at analyzing the sources of productivity in Europe to account for its recent underperformance and identify potential geographic idiosyncracies. We study the productivity performance and its sources in a sample of ten European regions belonging to four countries (France, Germany, Italy and Spain). Exploiting the increasing availability of disaggregated data at regional level in Europe, we propose both a descriptive statistics and an econometric analysis of productivity sources since 1995. Our main finding is that the sources of labor productivity are rather heterogeneous across our sample but may be associated with regional or national idiosyncracies.
    Keywords: Labor productivity, productivity determinants, European regions
    JEL: J24 O11 O18 O52
    Date: 2006–03–30
  2. By: Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Andreas Stierwald (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: We investigate the relationship between productivity, size and age of large Australian firms employing more than 100 employees or holding assets in excess of $100 million. In addition, we also investigate the extent of productivity persistence among these firms by looking at transition matrices of productivity distribution and productivity-rank mobility. The empirical study is based on the IBISWorld database used to estimate translog cost function to measure (a residual based) productivity. We find evidence, though somewhat weak, that larger and older firms are on average less productive. Furthermore, we find stronger evidence for a high degree of inertia in terms of productivity ranking within an industry.
    JEL: L25
    Date: 2006–03
  3. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: While the role of exports in promoting growth in general, and productivity in particular, has been investigated empirically using aggregate data for countries and industries for a long time, only recently have comprehensive longitudinal data at the firm level been used to look at the extent and causes of productivity differentials between exporters and their counterparts which sell on the domestic market only. This papers surveys the empirical strategies applied, and the results produced, in 45 microeconometric studies with data from 33 countries that were published between 1995 and 2004. Details aside, exporters are found to be more productive than non-exporters, and the more productive firms self-select into export markets, while exporting does not necessarily improve productivity.
    Keywords: Exports, productivity, literature survey, micro data
    JEL: F14 D21
    Date: 2005–03–02
  4. By: Dino Rizzi (Department of Economics, University Of Venice Cà Foscari); Vincenzo Rebba (Department of Economics - University of Padova)
    Abstract: In this paper we show how both the choice of specific constraints on input and output weights (in accordance with health care policy-makers’ preferences) and the consideration of exogenous variables outside the control of hospital management (and linked to past policy-makers’ decisions) can affect the measurement of hospital technical efficiency using the Data Envelopment Analysis (DEA). Considering these issues, the DEA method is applied to measure the efficiency of 85 (public and private) hospitals in Veneto, a Northern region of Italy. The empirical analysis allows us to verify the role of weight restrictions and of demand in measuring the efficiency of hospitals operating within a National Health Service (NHS). We find that the imposition of a lower bound on the virtual weight of acute care discharges weighted by case-mix (in order to consider policy-maker objectives) reduces average hospital efficiency. Moreover, we show that, in many cases, low efficiency scores are attributable to external factors, which are not fully controlled by the hospital management; especially for public hospitals low total efficiency scores can be mainly explained by past policy-makers’ decisions on the size of the hospitals or their role within the regional health care service. Finally, non-profit private hospitals exhibit a higher total inefficiency while both non-profit and for-profit hospitals are characterised by higher levels of scale inefficiency than public ones.
    Keywords: Hospital performance, Technical efficiency, Data envelopment analysis, NationalHealth Service
    JEL: D24 I12
    Date: 2006
  5. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    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: 2005–09–15
  6. By: Kurt E. Schnier (University of Rhode Island, Department of Environmental and Natural Resource Economics, Coastal Institute, 1 Greenhouse Road, Suite 212, Kingston, Rhode Island 02881); Christopher M. Anderson (Department of Environmental and Natural Resource Economics, University of Rhode Island); William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse NY 13244-1020)
    Abstract: Stochastic production frontier models are used extensively in the agricultural and resource economics literature to estimate production functions and technical efficiency, as well as to guide policy. Traditionally these models assume that each agent's production can be specified as a representative, homogeneous function. This paper proposes the synthesis of a latent class regression and an aagricultural production frontier model to estimate technical efficiency while allowing for the possibility of production heterogeneity. We use this model to estimate a latent class production function and efficiency measures for vessels in the Northeast Atlantic herring fishery. Our results suggest that traditional measures of technical efficiency may be incorrect, if heterogeneity of agricultural production exists.
    Keywords: latent class regression, EC algorithm, stochastic production frontier, technical efficiency
    JEL: D24 N52
    Date: 2006–03
  7. By: Iranzo, Susana; Schivardi, Fabiano; Tosetti, Elisa
    Abstract: We study the relation between workers' skill dispersion and firm productivity using a unique dataset of Italian manufacturing firms from the early eighties to the late nineties with individual records on all their workers. Our measure of skill is the individual worker's effect obtained as a latent variable from a wage equation. Estimates of a generalized CES production function that depends on the skill composition show that a firm's productivity is positively related to skill dispersion within occupational status groups (production and non-production workers) and negatively related to skill dispersion between these groups. Consistently, the variance decomposition shows that most of the overall skill dispersion is within and not between firms. We find no change over time in the share of each component, in contrast with some evidence from other countries, based on less comprehensive data.
    Keywords: matched data; productivity; segregation; skills
    JEL: D24 J24 L23
    Date: 2006–03
  8. By: Joachim Wagner (Institute of Economics, University of Lüneburg); Thorsten Schank (Chair of Labour and Regional Economics, Friedrich-Alexander-University Erlangen-Nuremberg); Claus Schnabel (Chair of Labour and Regional Economics, Friedrich-Alexander-University Erlangen-Nuremberg); John T. Addison (Department of Economics, University of South Carolina (US))
    Abstract: Using OLS and quantile regression methods and rich cross-section data sets for western and eastern Germany, this paper demonstrates that the impact of works council presence on labor productivity varies between manufacturing and services, between plants that are or are not covered by collective bargaining, and along the conditional distribution of labor productivity. No productivity effects of works councils are found for the service sector and in manufacturing plants not covered by collective bargaining. Besides demonstrating that it is important to look at evidence based on more than one data set, our empirical findings point to the efficacy of supplementing OLS with quantile regression estimates when investigating the behavior of heterogeneous plants.
    Keywords: Labor productivity, works councils, quantile regressions, heterogeneous firms
    JEL: J50
    Date: 2006–02–21
  9. By: Bongchan Ha; Hak K. Pyo
    Date: 2006–03
  10. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: This paper presents the first empirical test with German establishment level data of a hypothesis derived by Helpman, Melitz and Yeaple in a model that explains the decision of heterogeneous firms to serve foreign markets either trough exports or foreign direct investment: only the more productive firms choose to serve the foreign markets, and the most productive among this group will further choose to serve these markets via foreign direct investments. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of foreign direct investors dominates that of exporters, which in turn dominates that of national market suppliers.
    Keywords: Exports, foreign direct investment, productivity, heterogeneous firms, stochastic dominance
    JEL: F14 F23 D21
    Date: 2005–03–10
  11. By: Causa, Orsetta; Cohen, Daniel
    Abstract: This Discussion Paper analyses 23 industrial sector in a sample of 51 developed and developing countries. It distinguishes the contribution of five factors: private capital, infrastructure, education, trade integration, and net efficiency. Several relatively small handicaps, combined multiplicatively, can make a country poor or very poor. In average, the average productivity of the industrial sector is indeed the product of about five times 70%. But 0.70 to the power of five is 17%. The least productive country in the sample, Bangladesh, has a productivity level worth about 2% of that of the richest nations. From this perspective, industry is not much different from aggregate GDP such as analysed in Cohen and Soto (2004) where a similar picture emerged The paper then sheds light on the effect of TFP differential between industry and GDP at large on the relative price of manufactured goods. We show that productivity differentials explain about half of the relative price discrepancy. It then analyses the extent to which this is an explanation of the Lucas Paradox. So far as manufacturing is concerned the paper highlights an "anti-Lucas" paradox whereby the capital output ratio is higher in poor countries than in rich countries. This result tends to deflate the theories according to which fear of expropriation is the critical explanation of the low level of capital in the economy at large.
    Keywords: industry; Lucas Paradox; productivity
    JEL: F15 L16
    Date: 2006–03
  12. By: Alfonso Flores-Lagunes (University of Arizona); William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse NY 13244-1020); Kurt E. Schnier (University of Rhode Island)
    Abstract: There is a growing resource economics literature, concerning the estimation of the technical efficiency of fishing vessels utilizing the stochastic frontier model. In these models, vessel output is regressed on a linear function of vessel inputs and a random composed error. Using parametric assumptions on the regression residual, estimates of vessel technical efficiency are calculated as the mean of a truncated normal distribution and are often reported in a rank statistic as a measure of a captain's skill and used to estimate excess capacity within fisheries. We demonstrate analytically that these measures are potentially flawed, and extend the results of Horrace (2005) to estimate captain skill for thirty-nine vessels in the Northeast Atlantic herring fleet, based on homogeneous and heterogeneous production functions within the fleet. When homogeneous production is assumed, we find inferential inconsistencies between our methods and the methods of ranking the means of the technical inefficiency distributions for each vessel. When production is allowed to be heterogeneous, these inconsistencies are mitigated.
    JEL: C12 C16 D24
    Date: 2006–03
  13. By: Julia Hall; Grant M Scobie (New Zealand Treasury)
    Abstract: Productivity growth is a key determinant of rising living standards. The agricultural sector has been an important contributor to the overall growth of productivity in New Zealand. The average rate of multifactor productivity growth in agriculture from 1926-27 to 2000-01 was 1.8%. We find evidence that this rate has been increasing especially since the reforms of the 1980s. This paper estimates the contribution that R&D has made to agricultural productivity. It develops a theoretical framework based on the stock of knowledge available to producers. This model incorporates foreign stocks of knowledge and the spill-in effect for New Zealand. The estimation allows for extended lag effects of research spending on productivity. We find that foreign knowledge is consistently an important factor in explaining the growth of productivity. It appears that the agricultural sector relies heavily on drawing on the foreign stock of knowledge generated off-shore. The contribution of domestic knowledge generated by New Zealand’s investment in R&D is less clear cut. However, there is typically a significant positive relation between domestic knowledge and the growth of productivity. We find a wide range of estimates of the return to domestic R&D. The results are sensitive to the type of model used and the specification of the variables. Based on our preferred model we estimate that investment in domestic R&D has generated an annual rate of return of 17%. The results underscore the importance of foreign knowledge in a small open economy. The very existence of foreign knowledge may be a necessary condition for achieving productivity growth in a small open economy. However in no way could it be argued that this was sufficient. Having a domestic capability that can receive and process the spill-ins from foreign knowledge is vital to capturing the benefits. The challenge is to be able to isolate those effects from aggregate data for the agricultural sector. In that task we claim only modest success.
    Keywords: New Zealand; technological change; R&D; productivity; economics of knowledge; spillovers; rates of return; agriculture
    JEL: O30 O40
    Date: 2006–03
  14. By: Ana María Iregui B.; Luis Fernando Melo V.; María Teresa Ramírez G.
    Abstract: En este documento se estimó la productividad total de los factores (PTF) y las elasticidades de los factores para la industria manufacturera colombiana, por área metropolitana y sector económico, durante el período 1975-2000, con el fin de incorporar las diferencias regionales en el análisis de la productividad. Para este fin, se utilizó la metodología de datos de panel y los desarrollos recientes de pruebas de raíz unitaria y cointegración para paneles. Para el total nacional, se obtuvo una elasticidad del trabajo de 0.85 y una del capital de 0.15. En cuanto a los parámetros de productividad, los sectores industriales más productivos son el de industria de bebidas, fabricación de sustancias químicas industriales y fabricación de papel y productos de papel. Al estimar las elasticidades factoriales tanto a nivel regional como sectorial, se encontró una gran heterogeneidad entre ellas.
    Keywords: Productividad total de los factores (PTF) , Colombia, economía regional datos de panel.
    JEL: C23 D24 L60 R30
  15. By: Ana María Iregui; Ligia Melo B.; Jorge Ramos
    Abstract: En este documento se presenta una visión amplia de los problemas y del funcionamiento del sector educativo en Colombia, con énfasis en la educación pública. Con este fin, en primer lugar, se realiza una evaluación detallada de las normas sobre descentralización educativa, así como de aquellas que rigen la carrera docente en el país; también se evalúa el comportamiento reciente de indicadores de gasto público, cobertura, eficiencia, calidad, se presentan algunas comparaciones internacionales y el esquema de remuneración e incentivos de los docentes. En segundo lugar, se mide el impacto sobre el rendimiento académico de factores asociados al colegio y al entorno socioeconómico de los estudiantes,y se estiman los niveles de eficiencia de una muestra de 4.542 colegios públicos y privados en el año 2002. Para este ejercicio se estima una función de producción del sistema educativo, utilizando técnicas de frontera estocástica. Los resultados indican que las variables asociadas a la infraestructura de los colegios y al entorno socioeconómico de los estudiantes, tienen un impacto positivo y significativo sobre el logro académico. En términos de eficiencia, los resultados muestran que los colegios privados se podrían estar beneficiando de condiciones de entorno más favorables, teniendo en cuenta que estos, en promedio, atienden alumnos de mayores ingresos. No obstante, cuando se asumen entornos equivalentes, no existen grandes diferencias en los niveles de eficiencia entre colegios públicos y privados.
    Keywords: Análisis de eficiencia, Frontera Estocástica, Colombia, Educación.
    JEL: D61 I21
  16. By: Bloom, Nicholas; Van Reenen, John
    Abstract: We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US, France, Germany and the UK. These measures of managerial practice are strongly associated with firm-level productivity, profitability, Tobin’s Q, sales growth and survival rates. Management practices also display significant cross-country differences with US firms on average better managed than European firms, and significant within-country differences with a long tail of extremely badly managed firms. We find that poor management practices are more prevalent when (a) product market competition is weak and/or when (b) family-owned firms pass management control down to the eldest sons (primo geniture). European firms report lower levels of competition, while French and British firms also report substantially higher levels of primo geniture due to the influence of Norman legal origin and generous estate duty for family firms. We calculate that product market competition and family firms account for about half of the long tail of badly managed firms and up to two thirds of the American advantage over Europe in management practices.
    Keywords: competition; family firms; management practices; productivity
    JEL: L2 M2 O32 O33
    Date: 2006–03
  17. By: Shandre M. Thangavelu (Department of Economics National University of Singapore, 1 Arts Link); Sanja Samirana Pattnayak (Department of Economics National University of Singapore, 1 Arts Link)
    Abstract: The paper examines the spillover and linkage effects from the presence of foreign firms in the Indian pharmaceutical industry. A comprehensive panel data consisting of nearly 200 firms from 1989 to 2000 was used in the current study. The recent semi-parametric estimation methods as suggested by Olley and Pakes (1996) and Levinsohn and Petrin (2003) were adopted to account for the endogeneity in the input demand. Our results suggest the existence of positive and significant spillover from the foreign equity ownership in the Indian pharmaceutical industry. However, we also found negative and significant spillovers from the backward linkages with foreign firms. The negative spillovers from the backward linkages suggest the possibility of large technology and efficiency gap between local and foreign firms. The results also suggest that institutional arrangements that protect intellectual property rights such as product patents as opposed to process patents will be important for establishing positive linkages and spillovers between local and foreign firms in the Indian pharmaceutical industry.
    Keywords: FDI, Backward and Horizontal Linkages, Olley-Pakes, Levinsohn-Petrin
    JEL: F23 C23 O3

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