nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2006‒09‒16
eight papers chosen by
Angelo Zago
Universita degli Studi di Verona

  1. Micro Efficiency and Aggregate Growth in Chile By Raphael Bergoeing; Andrea Repetto
  2. Outsourcing, Offshoring, and Productivity Measurement in Manufacturing By Susan Houseman
  3. Productivity in Economies with Financial Frictions: Facts and a Theory By David Benjamin, Felipe Meza
  4. Analyzing cost efficient production behavior under economies of scope : a nonparametric methodology By Cherchye,Laurens; De Rock,Bram; Vermeulen,Frederic
  5. Banks, Distances and Financing Constraints for Firms By Pietro ALESSANDRINI; Alberto ZAZZARO; Andrea PRESBITERO
  6. Productivity, External Balance and Exchange Rates: Evidence on the Transmission Mechanism Among G7 Countries By Giancarlo Corsetti; Luca Dedola; Sylvain Leduc
  7. The production function approach to the Belgian output gap, Estimation of a Multivariate Structural Time Series Model By Philippe Moës
  8. How Rapidly Does Science Leak Out? By James D. Adams; J. Roger Clemmons; Paula E. Stephan

  1. By: Raphael Bergoeing; Andrea Repetto
    Abstract: Using plant-level data on Chilean manufacturing firms for the 1980-2001 period, we estimate and characterize disaggregate total factor productivity. We use these estimates to study the microeconomic sources of aggregate efficiency, a fundamental part of aggregate growth. By decomposing productivity dynamics into production reallocation and within plant efficiency changes, we find that reallocation accounted for almost all of total efficiency gains in Chile during the past few decades. The entry of new, more productive units explains most of these reallocation gains. Within-plant productivity growth contributes positively only during the 1990s, due perhaps to a lag between the implementation of major market oriented structural reforms -- mostly undertaken during the late 1970s and early 1980s -- and their complete effect on the economy. Our findings suggest that once reforms were consolidated, unbounded within-plant efficiency gains driven by technology adoption and innovation occurred.
    Date: 2006
  2. By: Susan Houseman (W.E. Upjohn Institute for Employment Research)
    Abstract: Because of gaps in existing surveys and methodological problems with the computation of productivity measures, outsourcing and offshoring result in an overstatement of labor productivity and multifactor productivity growth in manufacturing. Although it is impossible to fully characterize the size of the bias, I present several pieces of evidence indicating that it is large. Any overstatement of productivity in manufacturing, which has been a driver of productivity in the American economy, may have important implications for aggregate productivity measurement, particularly to the extent that the bias arises from offshoring activities. These findings may help explain why recent high growth in labor productivity has not been associated with widespread wage gains but rather with an increase in capital's share of GDP: labor productivity growth in manufacturing, and most likely in the aggregate economy, are overstated, and the very factors that have led to the overstatement - outsourcing and offshoring - depress wages. The effects of outsourcing and offshoring on manufacturing and aggregate productivity measurement, I argue, warrant further study, and productivity measures should be interpreted with caution.
    Keywords: offshoring, productivity, manufacturing, outsourcing, measurement, houseman
    JEL: D24 D33 O47 J24
    Date: 2006–09
  3. By: David Benjamin, Felipe Meza
    Abstract: We document and account for two facts regarding the relation between international interest rates and total factor productivity (TFP) in a sample of developing countries. First, there is a negative correlation between both variables at quarterly frequency. Second, the share of agricultural labor and interest rates are positively correlated, whereas the share of agricultural labor and TFP are negatively correlated. Manufacturing labor shows opposite correlations. These relationships are particularly strong in the aftermath of financial crises. We then construct a model in which the presence of costly intermediation can produce such relationships. We show that, after increases in interest rates, the presence of significant requirement to intermediate factors of production in high productivity sectors, like manufacturing, causes resources to leave these sectors. Resources end up in low productivity sectors where intermediation is cheaper like agriculture. We show that the channel we identify is quantitatively important in the case of Korea after the 1997 financial crisis. Keywords; small open economy, financial intermediation, total factor productivity JEL Classification: E44, F41,F32
  4. By: Cherchye,Laurens; De Rock,Bram; Vermeulen,Frederic (Tilburg University, Center for Economic Research)
    Abstract: In designing a production model for firms that generate multiple outputs, we take as a starting point that such multi-output production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in Economics and Business Management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.
    Keywords: production behavior;multi-product firms;input externalities;joint input use; economies of scope;nonparametric tests
    JEL: C12 C14 D21 P32 Q12
    Date: 2006
  5. By: Pietro ALESSANDRINI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alberto ZAZZARO (Universita' Politecnica delle Marche, Dipartimento di Economia); Andrea PRESBITERO ([n.a.])
    Abstract: The wave of bank mergers and acquisitions experienced in European and U.S. credit markets during the Nineties has deeply changed the geography of banking industry. While the number of bank branches has increased in almost every country, reducing the operational distance between banks and borrowers, bank decisional centres and strategic functions have been concentrated in only a few places within each nation, increasing the functional distance between banks and local communities. In this paper, we carry out a multivariate analysis to assess the correlation of functional and operational distances with local borrowers' financing constraints. We apply our analysis on Italian data at the local market level defined as provinces. Our findings consistently show that increased functional distance makes financing constraints more binding, it being positively associated with the probability of firms being rationed, investment-cash flow sensitivity, and the ratio of credit lines utilized by borrowers to credit lines make available by banks. These adverse effects are particularly evident for small firms and for firms located in southern Italian provinces. Furthermore, our findings suggest that the negative impact on financing constraints following the actual increased functional distance over the period 1996-2003 has substantially offset (and sometimes exceeded) the beneficial effects of the increased diffusion of bank branches occurring during the same period.
    Keywords: financing constraints, funtional distance, local banking system, operational proximity
    JEL: G21 G34 R51
    Date: 2006–09
  6. By: Giancarlo Corsetti; Luca Dedola; Sylvain Leduc
    Abstract: This paper investigates the international transmission of productivity shocks in a sample of five G7 countries. For each country, using long-run restrictions, we identify shocks that increase permanently domestic labor productivity in manufacturing (our measure of tradables) relative to an aggregate of other industrial countries including the rest of the G7. We find that, consistent with standard theory, these shocks raise relative consumption, deteriorate net exports, and raise the relative price of nontradables --- in full accord with the Harrod-Balassa-Samuelson hypothesis. Moreover, the deterioration of the external account is fairly persistent, especially for the US. The response of the real exchange rate and (our proxy for) the terms of trade differs across countries: while both relative prices depreciate in Italy and the UK (smaller and more open economies), they appreciate in the US and Japan (the largest and least open economies in our sample); results are however inconclusive for Germany. These findings question a common view in the literature, that a country's terms of trade fall when its output grows, thus providing a mechanism to contain differences in national wealth when productivity levels do not converge. They enhance our understanding of important episodes such as the strong real appreciation of the dollar as the US productivity growth accelerated in the second half of the 1990s. They also provide an empirical contribution to the current debate on the adjustment of the US current account position. Contrary to widespread presumptions, productivity growth in the US tradable sector does not necessarily improve the US trade deficit, nor deteriorate the US terms of trade, at least in the short and medium run.
    JEL: F32 F41 F42
    Date: 2006–08
  7. By: Philippe Moës (National Bank of Belgium, Research Department)
    Abstract: A multivariate structural time series model is applied to the factor inputs of a production function (or components thereof) to estimate the Belgian output gap. The usefulness of capacity utilization is also investigated but the variable is not given a prominent status. The number of independent cycles - there may be more than one - and the frequencies retained in the cycles are not restricted a priori. To allow for leads and lags between variables, phase shifts à la Rünstler are introduced at a later stage. Additivity of leads and lags is not imposed. Over 1983-2004, a 3.5 years periodicity is found in the cycles. At that periodicity, the cycles in the participation and unemployment rates are negligible. Two independent cycles hide behind the cycles of the other variables: hours, TFP and capacity utilization. A common cycle restriction is rejected, even allowing for idiosyncratic cycles. The cycles present in the whole data set cannot be subsumed in a single measure such as capacity utilization. Phase shifts are significant, with hours leading by as much as 3 quarters and capacity utilization lagging but additivity of leads and lags is rejected. The resulting output gap has much in common with the NBB business survey indicator.
    Keywords: Business cycle, output gap, phase shifts, structural time series models
    JEL: C32 E32
    Date: 2006–09
  8. By: James D. Adams; J. Roger Clemmons; Paula E. Stephan
    Abstract: In science as well as technology, the diffusion of new ideas influences innovation and productive efficiency. With this as motivation we use citations to scientific papers to measure the diffusion of science through the U.S. economy. To indicate the speed of diffusion we rely primarily on the modal or most frequent lag. Using this measure we find that diffusion between universities as well as between firms and universities takes an average of three years. The lag on science diffusion between firms is 3.3 years, compared with 4.8 years in technology for the same companies using the same methodology. Industrial science diffuses fifty per cent more rapidly than technology, and academic science diffuses still faster. Thus the priority publication system in science appears to distribute information more rapidly than the patent system, although other interpretations are possible. We also find that the speed of science diffusion in the same field varies by a factor of two across industries. The industry variation turns out to be driven by frictional publication lags and firm size in R&D and science. Friction increases the lag, but firm size in R&D and science decrease it. Industries having a lot of R&D or science and composed of fields with little friction exhibit rapid diffusion. Industries where the reverse is true exhibit slow diffusion.
    JEL: O3 L3
    Date: 2006–01

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