nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2006‒08‒12
eleven papers chosen by
Angelo Zago
Universita degli Studi di Verona

  1. Impact of R&D on Productivity - Firm-level Evidence from Finland By Jyrki Ali-Yrkkö; Mika Maliranta
  2. Technological Breakthroughs and Productivity Growth By Henrekson, Magnus; Edquist, Harald
  3. Human capital, trade and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960-2001 By Aurora A.C. Teixeira; Natércia Fortuna
  4. Disaggregated Productivity Growth and Technological Progress in the interpretation of Spanish Economic Growth, 1958-1975 By Mª Teresa Sanchis Llopis
  5. Economies of Scope in European Railways: An Efficiency Analysis By Christian Growitsch; Heike Wetzel
  6. Investment and Performance of Firms: Correlation or Causality? By Heshmati, Almas; Lööf, Hans
  7. Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency By Nancy L. Rose; Kira Markiewicz; Catherine Wolfram
  8. Plant Turnover and TFP Dynamics in Japanese Manufacturing By Kyoji Fukao; Young Gak Kim; Hyeog Ug Kwon
  9. Is public capital productive in Europe? By Jerome Creel; Gwenaëlle Poilon
  10. Human Capital, Productivity and Growth By Abdurrahman Aydemir; Chris Robinson
  11. Financial crises and total factor productivity By Felipe Meza; Erwan Quintin

  1. By: Jyrki Ali-Yrkkö; Mika Maliranta
    Keywords: R&D, research and development, dynamic, productivity, lag, long run
    JEL: H25 O32
    Date: 2006–08–08
  2. By: Henrekson, Magnus (Research Institute of Industrial Economics); Edquist, Harald (SNS)
    Abstract: This study consists of an examination of productivity growth following three major technological breakthroughs: the steam power revolution, electrification and the ICT revolution. The distinction between sectors producing and sectors using the new technology is emphasized. A major finding for all breakthroughs is that there is a long lag from the time of the original invention until a substantial increase in the rate of productivity growth can be observed. There is also strong evidence of rapid price decreases for steam engines, electricity, electric motors and ICT products. However, there is no persuasive direct evidence that the steam engine producing industry and electric machinery had particularly high productivity growth rates. For the ICT revolution the highest productivity growth rates are found in the ICT-producing industries. We suggest that one explanation could be that hedonic price indexes are not used for the steam engine and the electric motor. Still, it is likely that the rate of technological development has been much more rapid during the ICT revolution compared to any of the previous breakthroughs.
    Keywords: Electrification; General purpose technologies; ICT revolution; Productivity growth; Steam power
    JEL: N10 O10 O14 O40
    Date: 2006–05–03
  3. By: Aurora A.C. Teixeira (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto); Natércia Fortuna (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto)
    Abstract: An important characteristic of the role of foreign trade in the technological catch-up of countries is the complementary nature of technological change and human capital formation. In this context, the level of education is likely to have a crucial impact on total factor productivity because it determines the capacity of an economy to carry out technological innovation, and to adopt and to implement efficiently technology from abroad. However, the role of human capital as a pre requisite for technology absorption although theoretically acknowledged has been empirically neglected. One of the main problems with empirical studies in this domain is that they do not clearly test the mechanisms through which trade, namely the import of capital goods, affects total factor productivity or, roughly the level of technological development of a given country. Through cointegration techniques, we demonstrate the relevance of the technological absorption hypothesis. We show that the interaction between human capital and (lagged) machinery imports – that is, the technological absorption capability - is the most critical determinant of Portuguese long-run total factor productivity.
    Keywords: Human capital – Innovation – Trade – Economic growth – Cointegration
    JEL: C22 J24 O30 O40
    Date: 2006–08
  4. By: Mª Teresa Sanchis Llopis
    Abstract: Spanish economic records in terms of GDP growth and convergence to European levels in the sixties, provide an excellent opportunity to look at a central question underlying in the interpretation of any process of economic growth. The relevance of industrial specific technological progress is confronted to a general and multifaceted productivity change coming from a variety of sectors and causes. This paper exploits sectoral growth accounting methodology in two different ways in order to answer this crucial question revisited recently by historiography with reference to British Industrial Revolution and to Information and Telecommunications Technologies. First, we calculate TFP growth following the Kendrick approach (1961) and using four input-output tables corresponding to 1958, 1962, 1970 and 1975 disaggregated at 25 productive branches. And Second, we examine the impact of electricity and electric machinery and equipment as a General Purpose Technology (GPT) in Spanish economic growth.
    Date: 2005–05
  5. By: Christian Growitsch (Halle Institute for Economic Research); Heike Wetzel (Institute of Economics, University of Lüneburg)
    Abstract: In the course of railway reforms at the end of the last century, European national governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway companies argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investigate the performance of European railways with a particular focus on economies of scope associated with vertical integration. We test the hypothesis that integrated railways realize economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply an innovative Data Employment. Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a virtual reference set consisting of the separated production technology and which is applicable to other network industries as energy and telecommunication as well. Our findings are that for a majority of European Railway economies of scope exist.
    Keywords: Efficiency, Vertical Integraton, Railway Industry
    JEL: L22 L43 L92
    Date: 2006–07–24
  6. By: Heshmati, Almas (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (
    Abstract: The purpose of this paper is to provide empirical analysis of the two-way causal relationship between some important investment and performance indicators at the firm level, in particular controlling for differences in these relationships between two cohorts of small and middle-sized firms and large firms respectively. Investigated performance variables include sales, value added, profit, cash flow, capital structure and employment. A multivariate vector autoregressive approach is applied to a panel of Swedish firms observed between 1992 and 2000. In particular, an attempt is made to investigate whether causal relationships between R&D and firm performance are of a transitory nature and whether the causal relationships are similar for small and medium-sized and large firms. Results show evidence of some two way causal relationships, which are mainly transitory in character. Significant heterogeneity is observed in the firms’ investment and performance behavior by their size.
    Keywords: R&D investment; productivity growth; financial constraints; panel data
    JEL: C23 C33 G32 L19 O33
    Date: 2006–08–03
  7. By: Nancy L. Rose; Kira Markiewicz; Catherine Wolfram
    Abstract: Although the allocative efficiency benefits of competition are a tenet of microeconomic theory, the relation between competition and technical efficiency is less well understood. Neoclassical models of profit-maximization subsume static cost-minimizing behavior regardless of market competitiveness, but agency models of managerial behavior suggest possible scope for competition to influence cost-reducing effort choices. This paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investorowned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach.
    Date: 2004–11
  8. By: Kyoji Fukao; Young Gak Kim; Hyeog Ug Kwon
    Abstract: This study analyzes the cause of the slowdown in Japan's TFP growth during the 1990s. Many preceding studies, examining the issue at the macro- or industry-level, have found that the slowdown was primarily due to the stagnation in TFP growth in the manufacturing sector. Using establishment level panel data covering the entire sector, we investigate the causes of the TFP slowdown and find that the reallocation of resources from less efficient to more efficient firms was very slow and limited. This "low metabolism" seems to be an important reason for the slowdown in Japan's TFP growth.
    JEL: O4 O53
    Date: 2006–08
  9. By: Jerome Creel (Observatoire Français des Conjonctures Économiques); Gwenaëlle Poilon (Sciences Po)
    Abstract: This paper addresses the issue of whether and by how much public investment or public capital can enhance economic performance. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A VAR model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are therefore estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a “golden rule of public finance” in EMU is legitimate.
    Keywords: public capital, VAR model, panel, European economies
    JEL: C32 E62 H54
    Date: 2006
  10. By: Abdurrahman Aydemir (Statistics Canada); Chris Robinson (University of Western Ontario)
    Abstract: Recent immigration appears to be characterized by frequent return and onward migration. This has important consequences for the contribution of immigrants to the economy of the host country. Lack of longitudinal data has prevented much analysis of whether recent international migration is more like internal migration and not a once-for-all move with a possible return should the move prove to have been a mistake. A newly available longitudinal data set covering all immigrants to Canada since 1980 provides the opportunity to address the issues raised by the new migration. The results show that a large fraction of male immigrants who are working age, especially among skilled workers and entrepreneurs, are highly internationally mobile.
    Keywords: immigration; return migration; visa category
    JEL: J61 J11 J68
    Date: 2006
  11. By: Felipe Meza; Erwan Quintin
    Abstract: Total factor productivity (TFP) falls markedly during financial crises, as we document with recent evidence from Mexico and Asia. These falls are unusual in magnitude and present a difficult challenge for the standard small open economy neoclassical model. We show in the case of Mexico’s 1994-95 crisis that the model predicts that inputs and output should have fallen much more than they did. Using models with endogenous factor utilization, we find that capital utilization and labor hoarding can account for a large fraction of the TFP fall during the crisis. However, these models also predict that output should fall significantly more than in the data. Given the behavior of TFP, the biggest challenge may not be explaining why output falls so much following financial crises, but rather why it falls so little.
    Keywords: Financial crises - Mexico
    Date: 2005

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