New Economics Papers
on Efficiency and Productivity
Issue of 2006‒09‒03
seven papers chosen by

  1. Total Factor Productivity and R&D Capital in Manufacturing Industries By Jeong Yeon Lee; Jung Woo Kim
  2. The Shadow of Death: Pre-exit Performance of Firms in Japan By Kozo Kiyota; Miho Takizawa
  3. Competing or Collaborating Siblings? Industrial and Trade Policies in India By Gunjan Sharma
  4. Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland By Medhi Farsi; Massimo Filippini
  5. Screening Efficiency of Networks By D. Lanzi
  6. Marginal railway infrastructure cost estimates in the presence of unobserved effects By Andersson, Mats
  7. Wage Compression and the Division of Returns to Productivity Growth: Evidence from EOPP By Harley Frazis; Mark A Loewenstein

  1. By: Jeong Yeon Lee (Graduate School of International Studies, Yonsei University); Jung Woo Kim (Samsung Economic Research Insitute)
    Abstract: This study analyzes total factor productivity in manufacturing industries for a sample of OECD countries. The estimates of Malmquist indexes clearly indicate that research and development (R&D) capital is an important determinant of productivity growth in manufacturing industries. The empirical results also show that it is the pace, not the intensity, of R&D investment that is significantly related to the extent to which R&D capital formation contributes to output growth. Furthermore, this study finds that productivity gains in manufacturing industries depend importantly on R&D spillovers as well.
    Date: 2006–06
  2. By: Kozo Kiyota; Miho Takizawa
    Abstract: This paper examines the pre-exit productivity performance and asks how productivity affects future survival, controlling for firm size and unobserved firm heterogeneity. Based on firm-level data in Japan for 1995–2002, we found that firms did not face "sudden death" but there was a "shadow of death." Future exiting firms had lower performance five years before their exit. Moreover, unobserved firm heterogeneity had a statistically significant effect on firm survival analysis. However, we also found that the effects of unobserved heterogeneity were not very large and thus did not reverse the conclusion.
    Date: 2006–08
  3. By: Gunjan Sharma (Department of Economics, University of Missouri-Columbia)
    Abstract: This paper investigates the link between economic de-regulation–domestic as well as trade de-regulation–and firm-level productivity using two unique data sets. We use the industrial licensing regime in India (operating from the 1950s onwards) and its gradual relaxation during the 1980s and 1990s to test whether industrial de-regulation that leads to more competition domestically, affects firm-level productivity. To our knowledge, ours is the only detailed data set on Indian industrial policy. Our firm-level data for the period 1980-94 is a census of firms in India and has been rarely used in literature. We also use the interesting chronology of reforms in India (industrial de-regulation in the 1980s and trade reforms in 1991) to test whether industries that faced more competition domestically tend to perform better when facing foreign competition. Our identification strategy uses an important institutional feature of Indian policy. Firms with assets below a certain defined rupee threshold were exempt from licensing requirements. This institutional feature provides us within-industry variation that allows us to identify the interaction between de-licensing and exemption status. We find that industrial de-regulation during the 1980s led to a significant rise in firm productivity. Further preliminary results suggest that there exists a strategic complementarity relationship between industrial and trade policies–industries and firms that were de-licensed tend to perform better vis productivity after trade liberalization. Our results are robust to the inclusion of a wide variety of firm and industry fixed effects and controls for policies other than de-licensing that may affect productivity. This paper contributes to the literature by being the only detailed empirical analysis of the industrial licensing regime in India, especially the de-licensing that took place during the 1980s and by providing evidence of the crucial link between trade and industrial de-regulation.
    Keywords: India, Trade liberalization, reforms, industrial policy, industrial licensing, firm-level productivity, market structure, complementarity
    JEL: D82 C7
    Date: 2006–08–29
  4. By: Medhi Farsi (Department of Management, Technology and Economics, ETH Zurich, Switzerland); Massimo Filippini (Istituto microeconomia e economia pubblica (MecoP), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera)
    Abstract: This paper explores the cost structure of Swiss hospitals, focusing on differences due to teaching activities and those across different ownership and subsidization types. A stochastic total cost frontier with a Cobb-Douglas functional form has been estimated for a panel of 150 general hospitals over the six-year period from 1998 and 2003. Inpatient cases adjusted by DRG cost weights and ambulatory revenues are considered as two separate outputs. The adopted econometric specification allows for unobserved heterogeneity across hospitals. The results indicate that the time-invariant unobserved factors could account for considerable cost differences that could be only partly due to inefficiency. The results suggest that teaching activities are an important cost driving factor and hospitals that have a broader range of specialization are relatively more costly. The excess costs of university hospitals can be explained by more extensive teaching activities as well as the relatively high quality of medical units. However, even after controlling for such differences university hospitals have shown a relatively low cost-efficiency especially in the first two or three years of the sample period. The analysis does not provide any evidence of significant efficiency differences across ownership and subsidization categories.
    Keywords: general hospitals, teaching hospitals, stochastic frontier, cost efficiency
    Date: 2006–07
  5. By: D. Lanzi
    Date: 2006
  6. By: Andersson, Mats (VTI)
    Abstract: New railway legislation in Sweden has increased the need for transparent access charges on the Swedish railway network. The purpose of this paper is to estimate cost functions for infrastructure operation, maintenance and renewal in the Swedish national railway network, using unobserved effects models. The estimated cost functions are used to calculate the marginal cost for railway infrastructure wear and tear and give the Swedish National Rail Administration (Banverket) support in designing a marginal cost based pricing scheme in line with Swedish transport policy. A panel of 185 track sections is observed during 1999-2002. Collected data covers infrastructure, traffic and cost data. Despite having a rich set of information, unobserved effects are assumed to exist, which will bias estimates by ordinary least squares (OLS) due to omitted variables. We therefore use random effects specifications to estimate our models. We find evidence of unobserved effects at a track district level for infrastructure operation, maintenance and renewal costs. We estimate the marginal infrastructure operation cost to SEK 0.50 per train kilometre and the marginal maintenance cost to SEK 0.0029 per gross tonne kilometre. Combining maintenance and renewal cost increases the estimate to SEK 0.0065 per gross tonne kilometre. For all models, elasticities and marginal cost estimates are in line with previous work using pooled ordinary least squares (Andersson, In press).
    Keywords: Railway; Infrastructure operation; Maintenance; Renewal; Marginal costs; Unobserved effects models
    JEL: C23 H54 L92 R48
    Date: 2006–08–25
  7. By: Harley Frazis (U.S. Bureau of Labor Statistics); Mark A Loewenstein (U.S. Bureau of Labor Statistics)
    Abstract: This paper analyzes the relationship between wages and productivity during the early years of an employment relationship. Data from the Employment Opportunity Pilot Project show that worker productivity grows substantially during the first two years on the job, with most of the growth in productivity occurring at the very start of the job. Correcting for measurement error and the fact that expected productivity beyond the start of the job may be folded into the starting wage if wage revisions are not instantaneous, one finds that variation in productivity is only partially reflected in wages. Not only is productivity growth stemming from human capital accumulation while on the job only partially reflected in wage growth, but starting productivity differences for workers in the same job – in large part driven by differences in relevant experience - are only partially reflected in starting wage differences. Our empirical findings can be explained by a simple model of employer – worker cost sharing in which (a) the cost to a worker of locating and moving to a new job increases with the worker's stock of human capital and (b) equity norms prevent employers from paying senior workers lower wages than junior workers who are no more productive.
    Keywords: Wages, Productivity, Compression
    JEL: J31
    Date: 2006–08

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