nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2006‒05‒20
ten papers chosen by
Angelo Zago
Universita degli Studi di Verona

  1. Technical Change and Total Factor Productivity Growth for Chinese Provinces: A Panel Data Analysis By Shiu, Alice; Heshmati, Almas
  2. Bad loans and efficiency in Italian Banks By Paola Dongili; Angelo Zago
  3. Behavioral Differences Between Public and Private Not-For-Profit Hospitals in the Italian National Health Service By Gian Paolo Barbetta; Gilberto Turati; Angelo Zago
  4. An Assessment of Telecommunications Regulation Performance in the European Union By Antonio Afonso; Carla Scaglioni
  5. Multinationals, Technology, and the Introduction of Varieties of Goods By Irene Brambilla
  6. Energy Demand and Capacity to Adjust in U.S. Agricultural Production By Miranowski, John
  7. Baumol%u2019s Diseases: A Macroeconomic Perspective By William D. Nordhaus
  8. Efficiency of Insurance Firms with Endogenous Risk Management and Financial Intermediation Activities By J. David Cummins; Georges Dionne; Robert Gagné; Abdelhakim Nouira
  9. The Opportunity Cost of Electricity Outages and Privatization of Substations in Nepal By Roop Jyoti; Aygul Ozbafli; Glenn Jenkins
  10. On the use of data envelopment analysis in hedge fund selection By Huyen Nguyen-Thi-Thanh

  1. By: Shiu, Alice (Hong Kong Polytechnic University); Heshmati, Almas (The Ratio Institute)
    Abstract: We present in this paper the panel econometrics estimation approach of measuring the technical change and total factor productivity (TFP) growth of 30 Chinese provinces during the period of 1993 to 2003. The random effects model with heteroscedastic variances has been used for the estimation of the translog production functions. Two alternative formulations of technical change measured by the single time trend and the general index approach are used. Based on the measures of technical change, estimates of TFP growth could be obtained and its determinants were examined using regression analysis. The parametric TFP growth measure is compared with the non-parametric Solow residual. TFP has recorded positive growth for all provinces during the sample period. Regional breakdown shows that the eastern and central regions have higher average TFP growth when compared with the western region. Foreign direct investment (FDI) and information and communication technology (ICT) investment are found to be significant factors contributing to the TFP difference. While these two factors are found to have significant influence on TFP, their influence on production is relatively small compared to traditional inputs of production.
    Keywords: technical change; TFP growth; provinces; China; ICT; FDI; infrastructure
    JEL: C23 D24 E22 O18 O47
    Date: 2006–05–12
  2. By: Paola Dongili (Dipartimento di Scienze economiche (Università di Verona)); Angelo Zago (Dipartimento di Scienze economiche (Università di Verona))
    Abstract: The problem of taking into account the quality attributes of different goods has a long tradition in economics A strand of literature deals with the environmental impacts in the measurement of efficiency and productivity growth. Färe et al. (1989) indeed started what has become now a relatively vast literature extending efficiency measurement when some outputs are undesirable. The central notion of this paper is that of weak disposability of outputs. To credit firms for their effort to cut off on pollutants, technology is modeled so that it can handle the case when the reduction of some (bad) outputs requires the reduction of some of the other outputs and/or the increase of inputs.Besides the concept of output weak disposability, an interesting and useful idea for this setting is the directional distance function, a generalization of the radial distance function introduced to production economics by Chambers, Chung and Färe (1996). In this fashion it is possible to evaluate the performance of the firms that need to increase the production of the good outputs and decrease that bad outputs.
    JEL: G
    Date: 2005–09
  3. By: Gian Paolo Barbetta (Istituto di Economia e Finanza (Univ. Cattolica MI); Gilberto Turati (Dipartimento di Scienze economiche e Finanziarie); Angelo Zago (Dipartimento di Scienze economiche)
    Abstract: In this paper we attempt to identify behavioral differences between public and private not-forprofit hospitals, by using the opportunity of the introduction of the DRG-based payment system in the Italian NHS during the second half of the Nineties. We estimate the technical efficiency of a sample of hospitals for the period 1995-2000 considering an output distance function, and adopting both parametric (COLS) and non-parametric (DEA) approaches. All our results show a convergence of mean efficiency scores between not-for-profit and public hospitals, and seem to suggest that differences in economic performances between competing ownership forms are more the result of the institutional settings in which they operate than the effect of the incentive structures embedded in the different proprietary forms. Contrary to expectation we also observe a decline in technical efficiency, probably due to policies aimed at reducing hospitalization rates.
    Keywords: forms, technical efficiency, nonprofit organizations, hospital behavior, payment systems.
    JEL: I11 I18 L31
    Date: 2004–10
  4. By: Antonio Afonso; Carla Scaglioni
    Abstract: We assess the performance of National Regulatory Authorities across 16 EU countries regarding economic regulation in telecommunications sector, by constructing a so-called Composite Regulatory Performance Indicator for regulatory aspects such as effectiveness of the national regulatory system, effectiveness of the dispute settlement body, general market access conditions and application of remedies in markets for narrowband voice, mobile, broadband and business services. This composite indicator is the output measure used in the DEA non-parametric approach. The computation of efficiency scores allows to rank the NRAs and to detect some room for improvement in terms of efficiency gains for each national authority.
    Keywords: technical efficiency; DEA; telecommunications; regulated industries; National Regulatory Authorities; European Union.
    JEL: C14 L51 L96 O52
  5. By: Irene Brambilla
    Abstract: Firms that engage in international transactions have been shown to outperform domestic firms in several dimensions. This paper studies the advantages of affiliates of multinationals to grow through an expansion in their range of products. I first develop a monopolistic competition model with multiproduct firms in which firms are heterogeneous in two dimensions: the fixed cost of developing new varieties and the variable cost of production. Multinationals have cost advantages because of economies of scale and learning by doing across countries. Using firm-level data for the Chinese manufacturing sector during 1998-2000, I compare the performance of foreign and domestic firms in terms of the new varieties that they introduce, and, as described in the model, I estimate whether the number of new varieties can be explained by differences in the cost of development and variable productivity. Controlling for size, I find that firms with more than 50 percent of foreign ownership introduce on average more than twice as many more new varieties of goods as private domestic firms. Advantages in productivity account for 33 to 45 percent of the difference in the number and sales of new varieties, while advantages in the cost of development account for 5 to 17 percent of these differences.
    JEL: F23 F12 F14
    Date: 2006–05
  6. By: Miranowski, John
    Abstract: The objectives of this paper on energy demand and the capacity to adjust in the agricultural sector are: first, to establish a baseline for energy demand in agricultural production in the aggregate, by region, and by major type of crop and livestock farm; second, to evaluate the capacity of agricultural producers to adjust to real energy price changes and shocks as well as supply disruptions through input substitution and output adjustments; third, to assess how changing technology, improving energy efficiency, and growing agriculture productivity alter the capacity to adjust over time; and finally, to discuss the potential roles of government to achieve food and energy security.
    Date: 2006–05–16
  7. By: William D. Nordhaus
    Abstract: William Baumol and his co-authors have analyzed the impact of differential productivity growth on the health of different sectors and on the overall economy. They argued that technologically stagnant sectors experience above average cost and price increases, take a rising share of national output, and slow aggregate productivity growth. Using industry data for the period 1948-2001, the present study investigates Baumol’s diseases for the overall economy. It finds that technologically stagnant sectors clearly have rising relative prices and declining relative real outputs. Additionally, technologically progressive sectors tend to have slower hours and employment growth outside of manufacturing. Finally, sectoral shifts have tended to lower overall productivity growth as the share of stagnant sectors has risen over the second half of the twentieth century.
    JEL: D4 O3 O4
    Date: 2006–05
  8. By: J. David Cummins; Georges Dionne; Robert Gagné; Abdelhakim Nouira
    Abstract: Risk management is now present in many economic sectors. This paper investigates the role of risk management in creating value for financial institutions by analyzing U.S. property-liability insurers. Property-liability insurers are financial intermediaries whose primary roles in the economy are risk pooling and risk bearing. The risk pooling and risk bearing functions performed by insurers are the primary determinants of the need for risk management. The main goal of this paper is to test how risk management and financial intermediation activities create value for insurers by enhancing economic efficiency. Insurer cost efficiency is measured relative to an econometric cost function. Since the prices of risk management and financial intermediation services are not observable, we consider these two activities as intermediate outputs and estimate their shadow prices. The shadow prices isolate the contributions of risk management and financial intermediation to insurer cost efficiency. The econometric results show that both activities significantly increase the efficiency of the property-liability insurance industry.
    Keywords: Risk management, US property-liability insurer, risk pooling, financial intermediation, economic efficiency, intermediate output, shadow price, cost function, translog approximation
    JEL: C34 D24 D81 G22
    Date: 2006
  9. By: Roop Jyoti (Ministry of Finance, Nepal); Aygul Ozbafli (Girne American University, North Cyprus); Glenn Jenkins (Queen's University, Canada)
    Abstract: The unreliability of electricity supplies is a major cause of the high cost of manufacturing in developing countries. In this paper we are able to measure the cost imposed by power outages and suggest some feasible mitigating measures. The study employs a rich, if not unique, set of data from three large manufacturing enterprises in Nepal. Using it the opportunity costs to the enterprises from lost production from electricity outages can be estimated accurately. Power outages due to substation failure can be separated from other electricity systems failures. An analysis is carried out on the feasibility of privatized electricity substations. We find that this is a very worthwhile capital investment for the private sector to undertake, even when additional generation capacity to improve overall electricity reliability is not justified.
    Keywords: electricity supply, reliability, opportunity costs, privatization
    JEL: L94 Q41 Q48
    Date: 2006–04
  10. By: Huyen Nguyen-Thi-Thanh (LEO - Laboratoire d'économie d'Orleans - [CNRS : UMR6221] - [Université d'Orléans])
    Abstract: Previous studies have documented that Data Envelopment Analysis<br />(DEA) could be a good tool to evaluate fund performance,<br />especially the performance of hedge funds as it can incorporate<br />multiple risk-return attributes characterizing hedge fund's non<br />normal return distribution in an unique performance score. The<br />purpose of this paper is to extend the use of DEA to the context<br />of hedge fund selection when investors must face multi-dimensional<br />constraints, each one associated to a relative importance level.<br />Unlike previous studies which used DEA in an empirical framework,<br />this research puts emphasis on methodological issues. I showed<br />that DEA can be a good tailor-made decision-making tool to assist<br />investors in selecting funds that correspond the most to their<br />financial, risk-aversion, diversification and investment horizon<br />constraints.
    Keywords: hedge funds, data envelopment analysis, fund selection, performance measurement, alternative investment
    Date: 2006–05–07

This nep-eff issue is ©2006 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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