New Economics Papers
on Efficiency and Productivity
Issue of 2006‒05‒06
fifteen papers chosen by

  1. Productivity differentials in the U.S. and EU distributive trade sector: statistical myth or reality By Timmer, Marcel; Inklaar , Robert
  2. Does the European Union need to revive productivity growth By Ark, Bart van
  3. Cyclical productivity in Europe and the United States, evaluating the evidence on returns to scale and input utilization By Inklaar, Robert
  4. Farm productivity and market structure : evidence from cotton reforms in Zambia By Porto, Guido G.; Brambilla, Irene
  5. Productivity and participation: an international comparison By McGuckin, Robert; Ark, Bart van
  6. Unit labour costs, productivity and international competitiveness By Ark, Bart van; Stuivenwold, Edwin; Ypma, Gerard
  7. Competition, productivity and prices in the euro area services sector By Ad van Riet; Moreno Roma
  8. Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-up of Germany and Japan By Simon Gilchrist; John C. Williams
  9. Dualism and Cross-Country Growth Regressions By Temple, Jonathan; Woessmann, Ludger
  10. Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model By Peter N. Ireland; Scott Schuh
  11. Structural Funds and Regional Convergence in Italy By Silvia Loddo
  12. An econometric analysis of motorway renewal costs in Germany By Heike Link
  13. Effects of Ownership Composition on Performance: Evidence from the Czech Republic By Georgiy Nikitin; Andrew Weiss
  14. Estimating the marginal costs of airport operation by using multivariate time series model with correlated error terms By Heike Link; Wolfgang Götze; Veli Himanen
  15. Excess burden and the cost of inefficiency in public services provision By António Afonso; Vítor Gaspar

  1. By: Timmer, Marcel; Inklaar , Robert (Groningen University)
    Abstract: In this paper we asses whether productivity growth differentials between the U.S. and Europe in the distributive trade sector are real or mainly a statistical myth. New estimates of retail trade productivity are constructed, taking into account purchase prices of goods sold. We also adjust U.S. wholesale productivity growth for the upward bias due to the use of constant-quality prices of ICT-goods sales. We find that multifactor productivity growth in the U.S. has been higher than in Europe after 1995, but that this lead is smaller than suggested by national accounts based estimates. This finding is robust for various productivity measurement models.
    Date: 2005
  2. By: Ark, Bart van (Groningen University)
    Abstract: This paper studies procyclical productivity growth at the industry level in the U.S. and in three European countries (France, Germany and the Netherlands). Industry-specific demand-side instruments are used to examine the prevalence of non-constant returns to scale and unmeasured input utilization. For the aggregate U.S. economy, unmeasured input utilization seems to explain procyclical productivity. However, this correction still leaves one in three U.S. industries with procyclical productivity. This failure of the model can also be seen in Europe and is mostly concentrated in services industries.
    Date: 2005
  3. By: Inklaar, Robert (Groningen University)
    Abstract: This paper studies procyclical productivity growth at the industry level in the U.S. and in three European countries (France, Germany and the Netherlands). Industry-specific demand-side instruments are used to examine the prevalence of non-constant returns to scale and unmeasured input utilization. For the aggregate U.S. economy, unmeasured input utilization seems to explain procyclical productivity. However, this correction still leaves one in three U.S. industries with procyclical productivity. This failure of the model can also be seen in Europe and is mostly concentrated in services industries.
    Date: 2005
  4. By: Porto, Guido G.; Brambilla, Irene
    Abstract: This paper investigates the impacts of cotton marketing reforms on farm productivity, a key element for poverty alleviation, in rural Zambia. The reforms comprised the elimination of the Zambian cotton marketing board that was in place since 1977. Following liberalization, the sector adopted an outgrower scheme, whereby firms provided extension services to farmers and sold inputs on loans that were repaid at the time of harvest. There are two distinctive phases of the reforms: a failure of the outgrower scheme, and a subsequent period of success of the scheme. The authors ' findings indicate that the reforms led to interesting dynamics in cotton farming. During the phase of failure, farmers were pushed back into subsistence and productivity in cotton declined. With the improvement of the outgrower scheme of later years, farmers devoted larger shares of land to cash crops, and farm productivity significantly increased.
    Keywords: Crops & Crop Management Systems,Economic Theory & Research,Livestock & Animal Husbandry,Rural Poverty Reduction,Rural Development Knowledge & Information Systems
    Date: 2006–05–01
  5. By: McGuckin, Robert; Ark, Bart van (Groningen University)
    Abstract: The purpose of this project is to increase our knowledge about trade-offs between productivity and labour market participation across the OECD, and more specifically in the European Union. The inquiry is focused around the question whether there is a trade-off between labour participation and productivity and, if so, how big it is and how long does it last. In particular, through a series of panel regressions we isolate the structural or long-term relationships, as well as identify how long the ?longterm? is. We also investigate the extent to which the trade-offs can be associated with particular types of workers (in terms of age or gender). Our main findings are, firstly, that the negative productivity response elasticity to a 1% rise in participation (measured as the employment rate) is less than 0.3 and peters out in less than 5 years. Secondly, increased participation is the key factor related to this productivity growth tradeoff. We find little effect of hours per worker on productivity. Thirdly, female participation has the strongest negative impact on productivity growth, but it is associated with specific age and/or cohort effects that are likely to diminish in the longer run. Finally, we investigate simple scenarios to look at the effect of increases in participation on productivity and per capita income, showing the large potential for income gains without much loss in productivity.
    Date: 2005
  6. By: Ark, Bart van; Stuivenwold, Edwin; Ypma, Gerard (Groningen University)
    Abstract: This paper provides international comparisons of relative levels of unit labour costs (ULC) for several OECD countries relative to the United States. The estimates are based on the Total Economy Database and the 60-Industry Database of the Groningen Growth and Development Centre (GGDC), and are also included in the Key Indicators of the Labour Market of the International Labour Office (ILO). The paper discusses the concept of relative ULC measures in comparison to other measures of competitiveness. It presents the main results for manufacturing and total economy measures of ULC, and makes two digressions, firstly by also presenting results for some major manufacturing sectors for a few large European countries and the U.S. and, secondly, by showing some comparable results for developing countries. An important observation from this paper is that relative productivity levels tend to move more or less in tandem with relative labour cost levels so that unit labour cost levels are closer between countries than labour cost levels per se. However, unit labour cost levels are certainly not identical between countries, as there are important deviations due to short term movements in relative prices (related to fluctuation in the nominal exchange rate) and differences in industrial structure. Whereas some of the differences cancel out at the aggregate level, differences in industry and product composition are quite important at a more detailed level.
    Date: 2005
  7. By: Ad van Riet (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany); Moreno Roma (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)
    Abstract: This paper analyses the degree of competition in the euro area services sector and its effects on labour productivity and relative prices in that sector over the period 1980-2003. The importance of the euro area services sector has significantly increased over time; it now accounts for around 70% of the euro area’s total nominal value added and employment. Labour productivity growth across the euro area services industries appears to be characterised by a high degree of diversity and the level of services inflation is on average higher than aggregate inflation. Investigating several proxies of market competition for the non-financial business services, the paper finds that limited competition in services tends to hamper labour productivity growth in the services sector. Moreover, results tend to suggest that measures aimed at increasing services market competition may have a dampening impact on relative price changes in some services sectors and thus temporarily on aggregate inflation.
    Date: 2006–04
  8. By: Simon Gilchrist (Institute for Economic Development, Boston University); John C. Williams (Board of Governors, Federal Reserve System)
    Abstract: We consider a neoclassical interpretation of Germany and Japan’s rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan’s postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.
    Keywords: putty-clay, embodied technology, productivity growth, convergence
    JEL: D24 E22 N10 O41
  9. By: Temple, Jonathan; Woessmann, Ludger
    Abstract: This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Structural change matters because, if the marginal product of labour varies across sectors, changes in the structure of employment can raise aggregate productivity. The models in the paper incorporate this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and indicate that the reallocation of labour makes a significant contribution to the international variation in productivity growth.
    Keywords: dualism; structural change; TFP growth; wage differentials
    JEL: O11 O40
    Date: 2006–04
  10. By: Peter N. Ireland (Boston College); Scott Schuh (Federal Reserve Bank of Boston)
    Abstract: A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.
    Keywords: productivity, real business cycle
    JEL: E32 O41 O47
    Date: 2006–04–01
  11. By: Silvia Loddo
    Abstract: The lack of convergence across Italian Regions has been widely cited as an incontrovertible proof of failure of Cohesion policy. This paper aims to provide a twofold contribution to the debate on the effectiveness of Cohesion policies in Italy. Firstly, we provide an up-to-date view of convergence across Italian regions by focussing on the period covered by regional development policies carried out by European Community. The analysis reveals that poorer regions in Italy have indeed caught up with the richer regions over the period 1994-2004 and much of this convergence process has occurred towards region-specific steady states. Secondly, we consider Structural Funds as a conditioning variable in the convergence equation by using recently available data on expenditure implemented during the Second and the Third Planning Period. Our panel estimates point to a positive and significant impact of the Structural Funds on regional convergence in Italy over the period 1994-2004. When the Structural Funds are considered individually we find that the expenditure allocated by ERDF has medium term positive and significant returns while support to agriculture has short-term positive effects on growth which wane quickly. Finally, our results cast some doubt both on the (i) distributive efficiency of resources allocated by ESF and (ii) on the effectiveness of the intervention policies in support to education, Human capital and employment.
    Date: 2006
  12. By: Heike Link (German Institute for Economic Research, Berlin)
    Abstract: This paper analyses the cost bahaviour of motorway renewal costs with the aim to derive an estimate of marginal infrastructure costs per vehicle-km of trucks as part of optimal road user charges. The analysis is based on cross-sectional data of motorway renewal costs and traffic volume per motorway section in Germany during the period 1980-1999. The translog model estimated in this paper includes the factor input prices for labour, material and capital, the average annual daily traffic volume of trucks and passenger cars with the respective second-order terms. and a set of dummy variables for regions (the German länder) as well as for the type of material used for renewal as the most explanatory variables. In contrast to this, we could not find any significant influence of the age of motorway sections, the past renewal expenditures and the climate conditions measured as days with temperature fluctuations around zero. The cost elasticity, i.e. the relationship between marginal and average costs found in this analysis ranges from 0.05 up to 1.17 with a digressive increase of marginal costs.
    Keywords: Cost functions, motorway renewal costs, marginal costs, infrastructure charging, road transport
    JEL: R48 L92 C31
    Date: 2004–07
  13. By: Georgiy Nikitin (Institute for Economic Development, Boston University); Andrew Weiss (Institute for Economic Development, Boston University)
  14. By: Heike Link (German Institute for Economic Research, Berlin); Wolfgang Götze (University of Applied Sciences, Stralsund); Veli Himanen (Transplan Ltd., Helsinki)
    Abstract: The research presented in this paper was motivated by the central role of infrastructure charing in European transport policy. It is dedicated to the question whether and to what extent marginal infrastructure costs of airports, e.g. the marginal costs of maintaining, renewing and operating airport infrastructure, play a significant role for charging. The analysis presented in this paper is based on hourly cost and traffic data for the airport of Helsinki. In contrast to the standard formulation of cost function analysis our research focuses on one factor input only, the labour cost which ist the dominant cost component for the case study airport. This factor input can safely assumed to be the most relevant category for analysing cost variability and deriving marginal costs. The analysis makes use of a multivariate time series approach with specific models for correlated error terms to account for random shocks such as delays. The major result ist for almost all airport service areas a linear relationship betwenn labour cost and aircraft movements with an average marginal cost of € 22.60. An exception is the relationship between the staff costs for passenger services and international departing flights where a cubic cost relationship was estimated. Our quantitative findings are comparable with earlier findings for U.S. airports.
    Keywords: Cost functions, time series analysis, airports, marginal costs, infrastructure charging
    JEL: R48 C32
    Date: 2006–02
  15. By: António Afonso (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Vítor Gaspar (Banco de Portugal, R. Francisco Ribeiro, 2, 1150-165 Lisbon, Portugal.)
    Abstract: In this paper we revisit the literature on the economic consequences from inefficiency in public services provision. Following Dupuit (1844) and Pigou (1947) we argue that it is important to take the financing side explicitly into account. The fact that public expenditure financing must rely on distortional taxation implies that both direct and indirect costs are relevant when estimating the economic impacts of inefficiency in public services provision. Using Hicks’ compensating variation (following Diamond and McFadden (1974) and Auerbach (1985)) we show that these magnification mechanisms are not only conceptually relevant, they are also important from a quantitative point of view. Specifically, we rely on a range of estimates of public sector efficiency (from Afonso, Schuknecht and Tanzi (2005, 2006)) to illustrate numerically that the relative importance of indirect costs of public sector provision inefficiency, linked to financing through distortional taxation increases with the magnitude of the inefficiency.
    Keywords: Government efficiency, excess burden, taxes, spending.
    JEL: D11 E62 H21 H50
    Date: 2006–04

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