New Economics Papers
on Efficiency and Productivity
Issue of 2006‒09‒23
eight papers chosen by

  1. The Micro-level Dynamics of Regional Productivity Growth: The Source of Divergence in Finland Revised By Petri Böckerman; Mika Maliranta
  2. Industry Competition and Total Factor Productivity Growth By Michael D. Giandrea
  3. ICT Adoption and Productivity in Developing Countries: New Firm Level Evidence from Brazil and India By Rakesh Basant; Simon Commander; Rupert Harrison; Naercio Menezes-Filho
  4. From Groundnuts to Globalization: A Structural Estimate of Trade and Growth By Christian Broda; Joshua Greenfield; David Weinstein
  5. Regulation, Competition and Productivity Convergence By Paul Conway; Donato de Rosa; Giuseppe Nicoletti; Faye Steiner
  6. Bank Efficiency, Ownership and Market Structure By Heiko Hesse; Thorsten Beck
  7. Peers at Work By Alexandre Mas; Enrico Moretti
  8. Public & Private Spillovers, Location and the Productivity of Pharmaceutical Research By Jeffrey L. Furman; Magaret K. Kyle; Iain M. Cockburn; Rebecca Henderson

  1. By: Petri Böckerman; Mika Maliranta
    Keywords: productivity, efficiency, micro-level restructuring, convergence
    JEL: O12 R23
    Date: 2006–09–14
  2. By: Michael D. Giandrea (U.S. Bureau of Labor Statistics)
    Abstract: This paper analyzes the impact of changes in the competitive market structure on an industry's total factor productivity (TFP) growth. The impact of horizontal mergers on TFP growth is of particular interest. The number of proposed horizontal mergers among U.S. firms totaled 28,818 from 1996 to 2005, while the number of U.S. Department of Justice investigations of proposed mergers totaled 1,303 during the same time period. The impact of mergers upon total factor productivity growth is rightly a topic for consideration. Merger participants routinely claim that mergers will result in welfare improving efficiency gains. If true, these gains should translate into increased TFP growth. This paper estimates this effect and others after presenting a model of TFP growth as a function of changes in the competitive market structure of an industry, changes in production diversification measured at the establishment level, and changes in output per establishment and the number of establishments. Mergers are found to have a positive impact upon TFP growth, accounting for 0.36 percentage points of total factor productivity growth between census years.
    Keywords: Productivity Growth, Mergers, Competition
    JEL: D2 L1 L4
    Date: 2006–09
  3. By: Rakesh Basant (Indian Institute of Management Ahmedabad); Simon Commander (London Business School and IZA Bonn); Rupert Harrison (Institute for Fiscal Studies, London); Naercio Menezes-Filho (Universidade de São Paulo)
    Abstract: This paper uses a unique new data set on nearly a thousand manufacturing firms in Brazil and India to investigate the determinants of ICT adoption and its impact on performance in both countries. The descriptive evidence shows that Brazilian firms on average use ICT more intensively than their Indian counterparts but changes over time have been rather similar in both places. Within countries ICT intensity is strongly related to size, ownership structure, share of administrative workers and education. The econometric evidence documents a strong relationship between ICT capital and productivity in both countries, even after controlling for several other factors, including firm-specific fixed-effects. The rate of return of ICT investment seems to be much larger than usually found in more developed countries. Specific types of organisational changes matter for the return of ICT, but only for high adopters. Firms report several constraints to ICT investment in both countries and power disruption seems to significantly depress adoption and returns to ICT expenditures in India. This may be indicative of the impact of a cluster of poor institutions and/or infrastructure on performance.
    Keywords: ICT, productivity
    JEL: J2 E20 L20 L60 O33
    Date: 2006–09
  4. By: Christian Broda; Joshua Greenfield; David Weinstein
    Abstract: Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 15 percent of its productivity growth. These effects are larger in developing countries where the median impact of new imported varieties equals a quarter of national productivity growth.
    JEL: E00 F43 O4
    Date: 2006–09
  5. By: Paul Conway; Donato de Rosa; Giuseppe Nicoletti; Faye Steiner
    Abstract: This paper investigates the effect of product market regulations on the international diffusion of productivity shocks. The empirical results indicate that restrictive product market regulations slow the process of adjustment through which best practice production techniques diffuse across borders and new technologies are incorporated into the production process. This suggest that remaining cross-country differences in product market regulation can partially explain the recent observed divergence of productivity in OECD countries, given the emergence of new general-purpose technologies over the 1990s. The paper also investigates two channels through which product market regulations might affect the international diffusion of productivity shocks, namely the adoption of information and communications technology and the location decisions of multi-national enterprises. In both cases the effect of anticompetitive product market regulation is found to be negative and significant. <P>Régulation, concurrence et convergence de la productivité <BR>Cette étude analyse les effets de la régulation dans les marchés des biens sur la diffusion des chocs de productivité au niveau international. Les résultats empiriques indiquent que les restrictions dans les marchés des biens ralentissent le processus d'ajustement à travers lequel les techniques de production les plus avancées se répandent au-delà des frontières et sont incorporées dans l'activité productive. Ces résultats suggèrent que les différentes approches dans la régulation des marchés des biens qui caractérisent encore les pays de l'OCDE peuvent expliquer en partie la tendance à la divergence des niveaux de productivité qui a été observée récemment dans la zone OCDE, étant donné l'émergence des nouvelles technologies de l'information et communication au cours de la même période. L'étude analyse aussi deux canaux par lesquels la régulation peut influencer la diffusion des chocs de productivité au niveau international : l'investissement en nouvelles technologies de l'information et communication et les décisions de localisation des filiales des entreprises multinationales. Dans les deux cas, les résultats suggèrent que l'effet des régulations qui font obstacle à la concurrence dans les marchés des biens est négatif et significatif.
    Keywords: foreign direct investment, investissement direct étranger, productivity convergence, institutions and growth, information and communication technologies, panel data analysis, convergence de la productivité, institutions et croissance, technologies de l'ínformation et communication, analyse en données de panel
    JEL: C33 O11 O33 O40 O47
    Date: 2006–09–04
  6. By: Heiko Hesse; Thorsten Beck
    Abstract: Using a unique bank-level dataset on the Ugandan banking system over the period 1999 to 2005, we explore the factors behind consistently high interest rate spreads and margins. While foreign banks charge lower interest rate spreads, we do not find a robust and economically significant relationship between privatization, foreign bank entry, market structure and banking efficiency. Similarly, macroeconomic variables can explain little of the over-time variation in bank spreads. Bank-level characteristics, on the other hand, such as bank size, operating costs, and composition of loan portfolio, explain a large proportion of cross-bank, cross-time variation in spreads and margins. However, time-invariant bank-level fixed effects explain the largest part of bank-variation in spreads and margins. Further, we find tentative evidence that banks targeting the low-end of the market incur higher costs and therefore higher margins.
    Keywords: Foreign Bank Entry, Financial Sector Reform, Bank Efficiency, Financial Intermediation, Uganda
    JEL: G21 G30 O16
    Date: 2006
  7. By: Alexandre Mas (University of California, Berkeley and NBER); Enrico Moretti (University of California, Berkeley, NBER and IZA Bonn)
    Abstract: We investigate how and why the productivity of a worker varies as a function of the productivity of her co-workers in a group production process. In theory, the introduction of a high productivity worker could lower the effort of incumbent workers because of free riding; or it could increase the effort of incumbent workers because of peer effects induced by social norms, social pressure, or learning. Using scanner level data, we measure high frequency, worker-level productivity of checkers for a large grocery chain. Because of the firm‘s scheduling policy, the timing of within-day changes in personnel is unsystematic, a feature for which we find consistent support in the data. We find strong evidence of positive productivity spillovers from the introduction of highly productive personnel into a shift. A 10% increase in average co-worker permanent productivity is associated with 1.7% increase in a worker’s effort. Most of this peer effect arises from low productivity workers benefiting from the presence of high productivity workers. Therefore, the optimal mix of workers in a given shift is the one that maximizes skill diversity. In order to explain the mechanism that generates the peer effect, we examine whether effort depends on workers’ ability to monitor one another due to their spatial arrangement, and whether effort is affected by the time workers have previously spent working together. We find that a given worker’s effort is positively related to the presence and speed of workers who face him, but not the presence and speed of workers whom he faces (and do not face him). In addition, workers respond more to the presence of co-workers with whom they frequently overlap. These patterns indicate that these individuals are motivated by social pressure and mutual monitoring, and suggest that social preferences can play an important role in inducing effort, even when economic incentives are limited.
    Keywords: spillovers
    Date: 2006–09
  8. By: Jeffrey L. Furman; Magaret K. Kyle; Iain M. Cockburn; Rebecca Henderson
    Abstract: While there is widespread agreement among economists and management scholars that knowledge spillovers exist and have important economic consequences, researchers know substantially less about the "micro mechanisms" of spillovers -- about the degree to which they are geographically localized, for example, or about the degree to which spillovers from public institutions are qualitatively different from those from privately owned firms (Jaffe, 1986; Krugman, 1991; Jaffe et al., 1993; Porter, 1990). In this paper we make use of the geographic distribution of the research activities of major global pharmaceutical firms to explore the extent to which knowledge spills over from proximate private and public institutions. Our data and empirical approach allow us to make advances on two dimensions. First, by focusing on spillovers in research productivity (as opposed to manufacturing productivity), we build closely on the theoretical literature on spillovers that suggests that knowledge externalities are likely to have the most immediate impact on the production of ideas (Romer, 1986; Aghion & Howitt, 1997). Second, our data allow us to distinguish spillovers from public research from spillovers from private, or competitively funded research, and to more deeply explore the role that institutions and geographic proximity play in driving knowledge spillovers.
    JEL: L23 L65 O3 R3
    Date: 2006–09

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