New Economics Papers
on Efficiency and Productivity
Issue of 2007‒02‒10
nineteen papers chosen by

  1. The effects of collective bargaining on firm performance : new evidence based on stochastic production frontiers and multiply imputed German establishment data By Jensen, Uwe; Rässler, Susanne
  2. The Shadow of Death: Pre-exit Performance of Firms in Japan By Kozo Kiyota; Miho Takizawa
  3. The Dynamics of Efficiency and Productivity Growth in U. S. Electric Utilities By Supawat Rungsuriyawiboon; Spyro Stefanou
  4. Skill dispersion and firm productivity: an analysis with employer-employee matched data By Susana Iranzo; Fabiano Schivardi; Elisa Tosetti
  5. Manufacturers' Outsourcing to Employment Services By Matthew Dey; Susan Houseman; Anne Polivka
  6. Do Employment Protections Reduce Productivity? Evidence from U.S. States By David H. Autor; William R. Kerr; Adriana D. Kugler
  7. Procurement Process Efficiency Analysis: Looking for a Managerial Monitoring Tool. By Francisco, Marco-Serrano
  8. Financial Integration, Productivity and Capital Accumulation By Alessandra Bonfiglioli
  9. Getting Income Shares Right: A Panel Data Investigation for OECD Countries By Aamer Abu-Qarn; Suleiman Abu-Bader
  10. Unit labor cost growth differentials in the Euro area, Germany, and the US: lessons from PANIC and cluster analysis By Ulrich Fritsche; Vladimir Kuzin
  11. Public enterprise reforms and efficiency in regulated environments: the case of the postal sector By Juan carlos Morales Piñero; Joaquim Vergés Jaime
  12. Measuring Environmental Efficiency of Industry: A Case Study of Thermal Power Generation in India By M N, Murty; Kumar, Surender; Dhavala, Kishore
  13. Nonparametric Measures of Economies of Scope By Alfons Oude Lansink; Spyro Stefanou
  14. A Dynamic Characterization of Efficiency By Spyro Stefanou
  15. University patenting and scientific productivity. A quantitative study of Italian academic inventors. By Stefano Breschi; Francesco Lissoni; Fabio Montobbio
  16. A case study approach to exploring the relationship between HR management and firm performance By CRISTINA SIMON
  17. Estimation Procedures and TFP Analysis of the JIP Database 2006 Provisional Version By FUKAO Kyoji; HAMAGATA Sumio; INUI Tomohiko; ITO Keiko; Hyeog Ug KWON; MAKINO Tatsuji; MIYAGAWA Tsutomu; NAKANISHI Yasuo; TOKUI Joji
  18. Incentives, supervision, and sharecropper productivity By Jacoby, Hanan G.; Mansuri, Ghazala
  19. Getting the Most Bang for the Buck: An Analysis of States’ Relative Efficiencies in Promoting the Birth of Small Firms By Whitney Peake; Maria Marshall

  1. By: Jensen, Uwe; Rässler, Susanne (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper makes three contributions to the literature on the effects of collective bargaining on the performance of German establishments. We include the analysis of firms' efficiency and we model productivity and efficiency simultaneously. Confronted with 25 % observations with missing values, we check the missing data mechanisms and find effects of firm size and collective bargaining on it, among others. After proper multiple imputation of the missing values - thus avoiding obvious nonresponse bias -, the results on the collective bargaining effects on productivity and efficiency change significantly. Finally, we suggest to multiply impute implausible zero values in the capital proxy as well." (author's abstract, IAB-Doku) ((en))
    JEL: C15 C24 C81 D24 J50
    Date: 2007–02–02
  2. By: Kozo Kiyota; Miho Takizawa
    Abstract: This paper examines the pre-exit productivity performance and asks how productivity affects future survival, using 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 four years before their exit. Besides, within a hair 's breadth of death, the unobserved heterogeneity of firm such as management effort played an important role in the firm survival.
    Keywords: Pre-exit performance, Productivity, Size, Unobserved heterogeneity, Firm survival
    JEL: D21 D24 L25
    Date: 2007–01
  3. By: Supawat Rungsuriyawiboon (Chiang Mai University); Spyro Stefanou (Pennsylvania State University)
    Abstract: This study recognizes explicitly the efficiency gain or loss as a source in explaining the growth. A theoretically consistent method to estimate the decomposition of dynamic total factor productivity growth (TFP) in the presence of inefficiency is developed which is constructed from an extension of the dynamic TFP growth, adjusted for deviations from the long-run equilibrium within an adjustment cost framework. The empirical case study is to U.S. electric utilities, which provides a measure to evaluate how different electric utilities participate in the deregulation of electricity generation. TFP grew by 2.26 percent per annum with growth attributed to the combined scale effects of 0.34 percent, the combined efficiency effects of 0.69 percent, and the technical change effect of 1.22 percent. The dynamic TFP grew by 1.66 percent per annum for electric utilities located within states with the deregulation plan and 3.30 percent per annum for those located outside. Electric utilities located within states with the deregulation plan increased the outputs by improving technical and input allocative efficiencies more than those located outside of states with deregulation plans.
    Keywords: productivity growth, adjustment costs, dynamic duality, inefficiency, decomposition, deregulation, e
    JEL: D24 D92 L94
    Date: 2004–07
  4. By: Susana Iranzo; Fabiano Schivardi; Elisa Tosetti
    Abstract: We study the relation between workers’ skill dispersion and firm productivity using a unique dataset of Italian manufacturing firms from the early eighties to the late nineties with individual records on all their workers. Our measure of skill is the individual worker’s effect obtained as a latent variable from a wage equation. Estimates of a generalized CES production function that depends on the skill composition show that a firm’s productivity is positively related to skill dispersion within occupational status groups (production and non-production workers) and negatively related to skill dispersion between these groups. Consistently, the variance decomposition shows that most of the overall skill dispersion is within and not between firms. We find no change over time in the share of each component, in contrast with some evidence from other countries, based on less comprehensive data.
    Keywords: Matched data, Skill distribution, Productivity, Segregation.
    JEL: D24 J24 L23
    Date: 2006
  5. By: Matthew Dey (Bureau of Labor Statistics); Susan Houseman (W.E. Upjohn Institute for Employment Research); Anne Polivka (Bureau of Labor Statistics)
    Abstract: We estimate the effects of manufacturers' use of employment services—comprised primarily of temporary help and professional employer organizations—on measured employment and labor productivity in manufacturing between 1989 and 2004. A major contribution of the paper is the construction of panel data on employment by occupation and industry from the Occupational Employment Statistics program. We use these data to document the dramatic rise of production and other manual occupations within the employment services sector and, in conjunction with information from the Contingent Worker Supplements, to estimate the number of employment services workers assigned to manufacturing over the period. Although measured employment in manufacturing declined by 4.1 percent from 1989 to 2000, counting employment services workers assigned to manufacturing, employment in that sector actually rose by an estimated 1.4 percent. Factoring in manufacturers' use of employment services workers does not erase the large declines in manufacturing employment since 2000, but a growing share of manufacturing work in the United States is being performed by employees of staffing agencies. In 2004, employment services workers added an estimated 8.7 percent to direct-hire manufacturing employment, compared to just 2.3 percent in 1989. In addition, we estimate that manufacturers' outsourcing to employment services significantly inflated manufacturing labor productivity measures, accounting for 0.5 percentage points of the annual growth rate from 1989 to 2000 and from 2001 to 2004. Although multifactor productivity measures should adjust for such outsourcing, available evidence suggests that KLEMS, the multifactor productivity measure for manufacturing, does not fully capture the relatively large effects that outsourcing to staffing services has on manufacturing productivity.
    Keywords: productivity, manufacturing, outsourcing, measurement, houseman
    JEL: J24 J40 D24
    Date: 2006–12
  6. By: David H. Autor; William R. Kerr; Adriana D. Kugler
    Abstract: Theory predicts that mandated employment protections may reduce productivity by distorting production choices. Firms facing (non-Coasean) worker dismissal costs will curtail hiring below efficient levels and retain unproductive workers, both of which should affect productivity. These theoretical predictions have rarely been tested. We use the adoption of wrongful-discharge protections by U.S. state courts over the last three decades to evaluate the link between dismissal costs and productivity. Drawing on establishment-level data from the Annual Survey of Manufacturers and the Longitudinal Business Database, our estimates suggest that wrongful-discharge protections reduce employment flows and firm entry rates. Moreover, analysis of plant-level data provides evidence of capital deepening and a decline in total factor productivity following the introduction of wrongful-discharge protections. This last result is potentially quite important, suggesting that mandated employment protections reduce productive efficiency as theory would suggest. However, our analysis also presents some puzzles including, most significantly, evidence of strong employment growth following adoption of dismissal protections. In light of these puzzles, we read our findings as suggestive but tentative.
    JEL: J21 J32 J38 J63 J83 J88 K12 K31
    Date: 2007–01
  7. By: Francisco, Marco-Serrano
    Abstract: By means of the procurement process analysis and the deviations of the optimal behaviours associated to the company's strategy, a monitoring process is proposed. We base our proposal on the total cost of ownership in order to offer a synthetic procurement index for the balanced scorecard.
    Keywords: procurement efficiency; total cost of ownership; balanced scorecard; data envelopment analysis
    JEL: L21 D21 M10
    Date: 2006–04–23
  8. By: Alessandra Bonfiglioli
    Abstract: Understanding the mechanism through which financial globalization affects economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of economic performance: productivity (TFP) and investments. I provide empirical evidence from a sample of 93 countries observed between 1975 and 1999. The results suggest that financial integration has a positive direct effect on productivity, while it spurs capital accumulation only with some delay and indirectly, since capital follows the rise in productivity. I control for indirect effects of financial globalization through banking crises. Such episodes depress both investments and TFP, though they are triggered by financial integration only to a minor extent.
    Keywords: Capital account liberalization, financial development, banking crises, growth, productivity, investments
    JEL: G15 F43 O40 C23
    Date: 2007–02–02
  9. By: Aamer Abu-Qarn (Department of Economics, Ben-Gurion University of the Negev); Suleiman Abu-Bader (Department of Economics, Ben-Gurion University of the Negev)
    Abstract: In this paper we reassess the conventional measure of the capital share in income by estimating the shares of inputs in income for 23 OECD countries for the period 1960-2003 utilizing panel data techniques. A share of physical capital of over 0.50, and not one-third as commonly accepted, is found to be robust to a variety of specifications of the production function and the econometric models used. Additionally, we find that following the first oil shock the share of physical capital dropped while the share of human capital rose. Consequently, using the conventional shares may have led to overstating the severity of the post-1973 productivity slowdown.
    Keywords: OECD, Shares of Inputs, Growth Accounting, TFP, Panel Data
    JEL: O47 C23
    Date: 2006
  10. By: Ulrich Fritsche (Department for Economics and Politics, University of Hamburg, and DIW Berlin); Vladimir Kuzin (Goethe-University Frankfurt, Faculty of Economics and Business Administration)
    Abstract: Inflation differentials in the Euro area are mainly due to a sustained divergence of wage developments across the Euro area, and narrower differences in labour productivity growth (Alvarez et al., 2006). We investigate convergence of inflation using unit labour cost (ULC) growth and applying PANIC (Bai and Ng, 2002, 2004) and cluster procedures (Hobijn and Franses, 2000, Busetti et al., 2006) to Euro area countries as well as US States, US Census Regions and German Laender. Euro area differs in that dispersion in general (and its fraction due to idiosyncratic factors in specific) is larger and common factors are much less important in explaining the variance of ULC growth. We report evidence for convergence clusters in all countries.
    Keywords: Unit labor costs, inflation, European Monetary Union, Germany, United States of America, convergence, convergence clubs, panel unit root tests, PANIC
    JEL: E31 O47 C32 C33
    Date: 2007–02
  11. By: Juan carlos Morales Piñero (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona); Joaquim Vergés Jaime (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona)
    Abstract: Purpose. This paper focuses on analyzing the effect that public reforms have on the efficiency of state-owned enterprises in regulated environments. Design, methodology, approach. The research is focused in the postal sector where public and private companies must obey a legal framework related to provide a universal service. The analysis is carried out using a panel of 7 European postal operators for the period 1997-2003. The activity analyzed was the letter mail division; we take as key variable the unit cost of a letter and use a translog cost function where as independent variables we include traffic levels, labor cost per employee, quality and availability of the service as well as the type of ownership (public or private). Additionally, in a second stage the geographical differences among countries are considered. Findings. Results indicate that postal operators that experienced organizational changes without being privatized, such as the Spanish and Greek operators, do not have higher unit costs than privatized postal operators like the one of Germany and the Netherlands. Moreover, we find that in all cases the operator of Ireland appear to be the most efficient. In this case restructuring process has been carried out giving an important leadership role to workers. This suggests us that labor culture could be a key variable to study when analyzing reform processes in public enterprises. Originality, value. Our findings show that in a regulated environment like in the postal sector, public and private companies can obtain similar efficiency levels in term of unit costs.
    Keywords: efficiency, public enterprise reforms, postal sector
    Date: 2007–01
  12. By: M N, Murty; Kumar, Surender; Dhavala, Kishore
    Abstract: Technical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology. The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency of a representative firm is estimated as 0.10 implying that the thermal power generating industry in Andhra Pradesh state of India could increase production of electricity by 10 per cent while decreasing generation of pollution by 10 percent. This result shows that there are incentives or win-win opportunities for the firms to voluntarily comply with the environmental regulation. It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms. The variation in marginal cost of pollution abatement and compliance to regulation across firms could be reduced by having economic instruments like emission tax.
    Keywords: environmental and technical efficiency; shadow prices of bad outputs; air pollution.
    JEL: Q52 Q51 Q53
    Date: 2006–04
  13. By: Alfons Oude Lansink (Business Economics, Wageningen University -The Netherlands); Spyro Stefanou (Pennsylvania State University)
    Abstract: Measuring economies of scope provides a tool for explaining and predicting trends towards specialization or diversification within sectors like agriculture and horticulture. Focusing on nonparametric measurement and decomposition of scope economies into pure economies of scope, allocative efficiency, congestion efficiency and pure technical efficiency, an application to a sample of Dutch cash crop farms over the period 1995-1999 is the empirical focus. The results show that the potential economies of scope are lowered largely by allocative inefficiency and to a lesser extent by congestion inefficiencies and technical inefficiency, and the contraction impact of the various sources of inefficiencies drive these farms, on average, well into the diseconomies of scope range. The economic losses associated with allocative, congestion and technical inefficiencies lead to the potential to reduce costs by 25%, 7% and 6%, respectively. An analysis of results of diversified vis-à-vis specialized farms shows that policies should enhance particularly small and cereal farms to diversify. Also, increases of prices of pesticides and fertilizer substantially reduce the potential for cost savings from diversification. Hence fertilizer and pesticide taxes may have a large impact on the decisions of farmers to either diversify or specialize. This study also finds that capital is shareable factors of production, while labor and land are not.
    Date: 2006
  14. By: Spyro Stefanou (Pennsylvania State University)
    Abstract: The definition and measurement of dynamic economic performance has been addressed obliquely in the literature with the notions of scope economies and capacity utilization measures, but little work has focused on develop the static theory analogs of efficiency measures into the dynamic context. This paper is an attempt to identify some of the conceptual and methodological issues to be addressed. A model allowing for dynamic production decisions in the face of inefficiency is presented to illustrate some of the issues and the extensions necessary to identify truly dynamic performance measures.
    Date: 2006–10
  15. By: Stefano Breschi (Cespri, Bocconi University, Milano, Italy.); Francesco Lissoni (Cespri, Bocconi University, Milano; Università degli studi di Brescia, Italy.); Fabio Montobbio (Cespri, Bocconi University, Milano; Università degli studi dell’Insubria, Varese,Italy.)
    Abstract: Based on longitudinal data for a matched sample of 592 Italian academic inventors and controls, the paper explores the impact of patenting on university professors’ scientific productivity, as measured by publication and citation counts. Academic inventors (university professors who appear as designated inventors on at least one patent application) publish more and better quality papers than their colleagues with no patents, and increase their productivity after patenting. Endogeneity problems are addressed using instrumental variables and applying inverse probability of treatment weights. The beneficial effect of patenting on publication rates last longer for academic inventors with more than one patent.
    Keywords: scientific productivity, university patents, technology transfer.
    Date: 2006–11
  16. By: CRISTINA SIMON (Instituto de Empresa)
    Abstract: The present paper presents a quantitative case study of a large financial services organization and explores the possible links among HR and individual and business unit levels of performance. Though being highly exploratory, the study raises a set of issues that might challenge some of the SHRM well-established statements such as the assumption of a direct, linear relationship between HR practices and business results, or the use of financial ratios as suitable indicators of the efficiency of people management practices.
    Keywords: Case study, Firm performance, Strategic HRM
    Date: 2007–01
  17. By: FUKAO Kyoji; HAMAGATA Sumio; INUI Tomohiko; ITO Keiko; Hyeog Ug KWON; MAKINO Tatsuji; MIYAGAWA Tsutomu; NAKANISHI Yasuo; TOKUI Joji
    Abstract: (Introduction) The purpose of this paper is to explain the preliminary version of the newly compiled Japan Industrial Productivity Database (JIP 2006) and report some results of our growth accounting analysis based on this database. The JIP 2006 contains information on 108 sectors from 1970 to 2002 that can be used for total factor productivity analyses. These sectors cover the whole Japanese economy. The JIP Database was compiled as part of the RIETI (Research Institute of Economy, Trade and Industry) research project "Study on Industry-Level and Firm-Level Productivity in Japan." The original version of the JIP Database (ESRI/Hi-Stat JIP Database 2003) was compiled in a collaboration between ESRI (Economic and Social Research Institute, Cabinet Office, Government of Japan) as part of its research project on "Japan's Potential Growth" and Hitotsubashi University as part of its Hi-Stat project (A 21st-Century COE Program, Research Unit for Statistical Analysis in the Social Sciences). The authors are grateful to ESRI and members of the Hi-Stat team for the support and cooperation provided for our present RIETI project. At this moment, the major data available are sectoral capital service input indices and labor service input indices, including information on real capital stocks and the nominal cost of capital by type of capital and by industry, the nominal and real values of sectoral gross output and intermediate input, as well as some supplementary tables, such as statistics on trade, inward and outward FDI, and Japan's industrial structure. All real values are based on 1995 prices. For growth accounting, nominal labor costs and nominal capital services for 108 industries are also estimated. The sum of these two values for each industry is not adjusted to be equal to the value added of that industry at factor cost base. The final version of the JIP 2006 is scheduled to be released by November, 2006. The final version will include nominal and real annual input-output tables, detailed information on ICT capital services and some additional statistics, such as R&D stocks and capacity utilization rates at the detailed sectoral level. For scholars familiar with the JIP 2003, we here briefly summarize the main differences between and the main similarities of the 2006 and 2003 versions of the JIP. 1. The JIP 2003 is based on the 1968 SNA, while the JIP 2006 is based on the 1993 SNA. The capital stock of the JIP 2006 includes order-made software, plant engineering, and assets accumulated by the search for minerals. The JIP 2003 uses SNA statistics as control totals. Following Japan's present SNA statistics, capital stock in the preliminary version of the JIP 2006 does not include prepackaged and in-house software. However, the final version of the JIP 2006 will include two sets of statistics, one in which capital stock does not include prepackaged and in-house software and one in which it does. 2. In the case of the JIP 2006, labor input data include detailed information on labor input cross-classified by categories of labor. The paper is organized as follows: In the next section, we report the estimation procedures of our annual input-output tables. In Sections 2 and 3, we explain the capital service input data and the labor input data of the JIP 2006, respectively. Finally, in Section 4, we analyze Japan's sectoral and macro TFP growth.
    Date: 2007–01
  18. By: Jacoby, Hanan G.; Mansuri, Ghazala
    Abstract: Although sharecropping has long fascinated economists, the determinants of this contractual form are still poorly understood and the debate over the extent of moral hazard is far from settled. The authors address both issues by emphasizing the role of landlord supervision. When tenant effort is observable, but at a cost to the landlord, otherwise identical share-tenants can receive different levels of supervision and have different productivity. Unique data on monitoring frequency collected from sharetenants in rural Pakistan confirm that, controlling for selection, " supervised " tenants are significantly more productive than " unsupervised " ones. Landlords ' decisions regarding the intensity of supervision and the type of incentive contract to offer depend importantly on the cost of supervising tenants.
    Keywords: Contract Law,Economic Theory & Research,Investment and Investment Climate,Municipal Housing and Land,Urban Housing
    Date: 2007–02–01
  19. By: Whitney Peake; Maria Marshall
    Abstract: Firm birth has recently been an important topic for many state governments. However, ways in which state governments can influence firm births are not obvious, and their efficiency in fostering firm births in comparison with their peers is even less so. Focusing on the birth of small U.S. firms, regression analysis and non-parametric efficiency testing are employed to determine both the expenditures state governments can target to promote firm birth and their relative efficiency in utilizing these expenditures. The relative efficiency tests provide insight as to how states compare with their peers in terms of efficient target expenditure use.
    Date: 2007

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.