New Economics Papers
on Efficiency and Productivity
Issue of 2007‒02‒17
24 papers chosen by

  1. Efficiency, technology and productivity change in Australian universities, 1998-2003 By Andrew Worthington; Boon L. Lee
  2. Efficiency and productivity change in the English higher education sector from 1996/97 to 2002/03 By Jill Johnes
  3. The measurement and determinants of efficiency and productivity in the FE sector in England By Jill Johnes; Steve Bradley; Alan Little
  4. Efficiency and Productivity Analysis in Regulation and Governance By Thomas Weyman-Jones
  5. The Dynamics of Provincial Growth in China: A Nonparametric Approach By Bulent Unel; Harm Zebregs
  6. Do Employment Protections Reduce Productivity? Evidence from U.S. States By David H. Autor; William R. Kerr; Adriana D. Kugler
  7. Models of Labour Services and Estimates of Total Factor Productivity By Robert Dixon; David Shepherd
  8. The U-Shaped productivity dynamics of French Exporters By Flora Bellone; Patrick Musso; Lionel Nesta; Michel Quéré
  9. ICT adoption and productivity in developing countries: new firm level evidence from Brazil and India By Basant, R. & Commander, S. & Harrison, R. & Menezes Filho, N. A.
  10. Regulatory Benchmarking with Panel Data By Necmiddin Bagdadioglu; Thomas Weyman-Jones
  11. Cost structure and productivity growth of the Taiwanese international tourist hotels By Kwok Tong Soo; Ching-Fu Chen
  12. Wage and Productivity Effect of Continuing Training in Germany: A Sectoral Analysis By Kuckulenz, Anja
  13. Stuck in the Slow Lane: Traffic Composition and the Measurement of Labor Productivity in the U.S. Trucking Industry By Kenneth D. Boyer; Stephen V. Burks
  14. Corporate Governance and Corporate Performance: Some Evidence from Newly Listed Firms on Chinese Stock Markets By Langnan Chen; Steven Li; Yijia Chen
  15. Efficiency in the further education sector in England: A subject level analysis By Jill Johnes; Steve Bradley; Alan Little
  16. Measuring the research performance of Chinese higher education institutions using data envelopment analysis By Jill Johnes; Li Yu
  17. Sources of Knowledge and Productivity: How Robust is the Relationship? By Mosahid Khan; Kul B. Luintel
  18. Europe's Productivity Gap: Catching Up or Getting Stuck? By Bart van Ark
  19. Explaining the East German Productivity Gap — The Role of Human Capital By Joachim Ragnitz
  20. Explaining the Low Labor Productivity in East Germany. A Spatial Analysis By Nicola Fuchs-Schündeln; Rima Izem
  21. Indeterminacy and endogenous fluctuations under input-specific externalities. By Thomas Seegmuller
  23. The Changing Nature of Manufacturing in OECD Economies By Dirk Pilat; Agnès Cimper; Karsten Bjerring Olsen; Colin Webb
  24. Estimating Germany's Potential Output By Gustav Horn; Camille Logeay; Silke Tober

  1. By: Andrew Worthington; Boon L. Lee (School of Economics and Finance, Queensland University of Technology)
    Abstract: In this study, productivity growth in thirty-five Australian universities is investigated using nonparametric frontier techniques over the period 1998 to 2003. The inputs included in the analysis are full-time equivalent academic and non-academic staff, non-labour expenditure and undergraduate and postgraduate student load and the outputs are undergraduate, postgraduate and PhD completions, national competitive and industry grants and publications. Using Malmquist indices, productivity growth is decomposed into technical efficiency and technological change. The results indicate that annual productivity growth averaged 3.3 percent across all universities, with a range between -1.8 percent and 13.0 percent, and was largely attributable to technological progress. However, separate analyses of research-only and teaching-only productivity indicate that most of this gain was attributable to improvements in research-only productivity associated with pure technical and some scale efficiency improvements. While teaching-only productivity also contributed, the largest source of gain in that instance was technological progress offset by a slight fall in technical efficiency.
    Keywords: Productivity; technical and scale efficiency; technological progress; Malmquist indices; universities.
  2. By: Jill Johnes
    Abstract: This study uses data envelopment analysis (DEA) and a distance function approach to derive Malmquist productivity indexes for 113 English higher education institutions (HEIs) over the period 1996/97 to 2002/03. The analysis finds that over the period of the study HEIs have experienced an annual average increase in Malmquist productivity of 1.5%. On investigating the components of this productivity change, however, it becomes apparent that HEIs have enjoyed an annual average of 2.3% increase in technology combined with a decrease in technical efficiency of -0.8%. The finding of the importance of technology change (relative to technical efficiency change) in the Malmquist productivity indexes for HEIs is in line with previous studies (Flegg et al 2004; Worthington & Lee 2005), but the finding of negative technical efficiency change is new. Further examination of the indexes reveals differences between the subgroups of HEIs in England. Pre-1992 HEIs have experienced much lower Malmquist productivity (and technology change) than post-1992 and colleges which belong to the Standing Conference of Principals Ltd (SCOP). Further examination reveals that, for pre- and post-1992 institutions, technology change may be related positively to change in the ratio of students to staff, while technical efficiency change may be negatively related to change in the student staff ratio. Thus rapid changes in the higher education sector may have a positive effect on the technology of production but this may be achieved at the cost of lower technical efficiency.
    Keywords: higher education; efficiency measurement; data envelopment analysis; distance functions; productivity change; Malmquist index
    Date: 2006
  3. By: Jill Johnes; Steve Bradley; Alan Little
    Abstract: This study uses data for more than 500 Further Education providers in England to investigate the level of efficiency and change in productivity over the period 1999-2003. Using Data Envelopment Analysis we find that the mean provider efficiency varies between 82% and 86% over the period. Productivity change over the period was nearly 17%, and this was comprised of 10% technology change and 7% technical efficiency change. However, bootstrapping procedures show that the middle performing providers cannot be distinguished on the basis of their efficiency, but there are significant differences between the best and worst performing providers. A multivariate analysis is therefore performed, which shows that student-related variables, such as gender, ethnic and age mix are more important than staff-related variables in determining efficiency levels. The local unemployment rate also has an effect on provider efficiency.
    Keywords: Further Education, Efficiency, Data Envelopment Analysis, productivity change
    Date: 2006
  4. By: Thomas Weyman-Jones (Dept of Economics, Loughborough University)
    Abstract: This paper surveys the application of efficiency and productivity analysis to recent regulatory experience, especially in Europe. From a review of regulatory case studies, particularly of network industries, it is clear that regulatory practice differs from theoretical precedent in choice of methodology, sample size, model specification and price or revenue control implementation. A principal-agent model of linear regulatory contracts is used to understand this discrepancy, suggesting that efficiency and productivity analysis has been used to capture economic rent rather than to provide incentives for efficiency. Predictions of the model are used to investigate other assumptions in efficiency and productivity analysis.
    Keywords: regulation, data envelopment analysis, stochastic frontier analysis.
    JEL: D24 L25 L51
    Date: 2007–01
  5. By: Bulent Unel; Harm Zebregs
    Abstract: We use a recently developed non-parametric approach to analyze the variation in labor productivity growth across China's provinces. This approach imposes less structure on the data than the standard growth accounting framework and allows for a breakdown of labor productivity into capital deepening, efficiency gains, and technological progress. We find that capital deepening is the prime factor behind the change in the distributional dynamics of the labor productivity: on average capital deepening accounts for 75 percent of total labor productivity growth, while improvements in efficiency and technological progress account for 7 percent and 18 percent, respectively. We also find that while improvements in efficiency levels are higher in initially less productive provinces, relatively more productive provinces benefitted more from technological progress than less developed ones.
  6. By: David H. Autor (MIT, NBER and IZA); William R. Kerr (Harvard Business School); Adriana D. Kugler (University of Houston, NBER, CEPR and IZA)
    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.
    Keywords: dismissal costs, employment fluctuations, entry and exit, labor productivity, TFP, entrepreneurship
    JEL: J11 J21 J31 J61
    Date: 2007–01
  7. By: Robert Dixon; David Shepherd
    Abstract: This paper examines the manner in which labour services are modelled in the aggregate production function, concentrating on the relationship between numbers employed and average hours worked. It argues that numbers employed and hours worked are not perfect substitutes and that conventional estimates of total factor productivity which, by using total hours worked as the measure of labour services, assume they are perfect substitutes, will be biased when there are marked changes in average hours worked. The relevance of the theoretical argument is illustrated using data for the United States and the United Kingdom.
    Keywords: Labour Services, Production Function, Total Factor Productivity
    JEL: O4 E23
    Date: 2007
  8. By: Flora Bellone (Université de Nice); Patrick Musso (CNRS); Lionel Nesta (Observatoire Français des Conjonctures Économiques); Michel Quéré (CEREQ)
    Date: 2007
  9. By: Basant, R. & Commander, S. & Harrison, R. & Menezes Filho, N. A.
    Date: 2007–10
  10. By: Necmiddin Bagdadioglu (Dept of Public Finance, Haceteppe University, Turkey); Thomas Weyman-Jones (Department of Economics, Loughborough University, UK)
    Abstract: This paper considers panel data procedures for regulatory benchmarking that allow for both latent heterogeneity and inefficiency, encapsulating the regulatory dilemma in comparative efficiency analysis for incentive regulation. It applies a distance function model with appropriate concavity properties for econometric estimation to a panel of electricity distribution utilities in Turkey, since electricity industry reform is a major policy issue there. The results confirm the importance of allowing simultaneously for heterogeneity and inefficiency and emphasise the need for specific time-invariant heterogeneity information, such as geographical data, on regulated utilities in different regions.
    Keywords: efficiency and productivity analysis, regulation, electricity distribution.
    JEL: L51 D24 C23
    Date: 2007–01
  11. By: Kwok Tong Soo; Ching-Fu Chen
    Abstract: This study investigates the cost structure and economic implications of the Taiwanese international tourist hotel industry. A multi-product translog cost function with three inputs and three outputs is estimated using seemingly unrelated regression estimation (SURE) and three-stage-least-squares (3SLS). A balanced panel dataset consisting of 47 international tourist hotels in Taiwan over the period 1997-2001 was obtained from Taiwanese Tourism Bureau and used to estimate the cost function. The results show that both scale and scope economies exist in the Taiwanese international tourist hotel industry. In addition, productivity growth is positive over the study period. Managerial and policy implications for the Taiwanese international tourist hotel industry are also discussed.
    Keywords: cost structure, scale economies, scope economies, productivity growth, hotel industry
    Date: 2006
  12. By: Kuckulenz, Anja
    Abstract: Wage and productivity effects of training are compared to study how the training rent is shared between employers and employees. With panel data from 1996-2002, I analyse the impact of continuing training on wages and productivity in a Cobb-Douglas production framework. Using system GMM techniques allows me to account for endogeneity and time invariant unobserved factors. Results suggest that the training rent is shared between employer and employee due to a positive effect of continuing training on both wages and productivity. The effect on productivity is about three times higher than the one on wages. High skilled workers capture a larger share of the rent than low skilled workers.
    Keywords: continuing vocational training, system GMM estimation, wage effect, productivity effect, external effect
    JEL: C21 C23 J24 J31
    Date: 2006
  13. By: Kenneth D. Boyer (Michigan State University); Stephen V. Burks (University of Minnesota, Morris and IZA)
    Abstract: Mirroring the railroad industry of the 1940’s and 1950’s, the trucking industry today appears to be achieving impressive productivity gains. But it is easy to confuse true productivity advances in transportation industries with changes in ton-miles per unit of input that are due simply to changes in the composition of traffic, as initially happened with the mid-20th century U.S. railroads. This is due to the fact that transportation has vastly different productivities in different settings - for example, when moving long haul versus short haul traffic - and the measurement of changes in physical productivity can be overwhelmed by even subtle changes in the traffic mix. After controlling for endogenous changes in the composition of truck traffic, we find that trucking has in fact been a lagging sector of the U.S. economy over the period of our data, 1982-1997, with observed productivity changes much more likely due to changes in speed limits and the dimensions of vehicles than adoption of information technology. Our finding of a slow improvement in the physical productivity of trucking inputs does not deny the real improvements in the quality of trucking services (reliability, predictability, speed, order tracking, etc.) that have taken place in the last quarter century. But as in other service industries, true physical productivity improvements in trucking are hard to find.
    Keywords: labor productivity, physical productivity, nominal versus real productivity, ton-mile, transportation, trucking industry, VIUS, traffic mix, long haul, short haul, service quality
    JEL: L92 D24 C43
    Date: 2007–01
  14. By: Langnan Chen; Steven Li; Yijia Chen (School of Economics and Finance, Queensland University of Technology)
    Abstract: This paper is concerned with some corporate governance issues related to newly listed firms in China based on a sample of 329 firms commencing listing on Shanghai Stock Exchange (SHSE) and Shenzhen Stock exchange (SZSE) during the period from 1998 to 2000. We first investigate the impact of ownership change due to stock market listing on corporate performance. We consider four aspects of corporate performance: profitability, sales, leverage and employee productivity. Our research results indicate that, on average, profitability, sales and employee productivity have improved from pre-listing to post-listing. We further investigate the impacts of state majority control, foreign ownership and regulation effects on corporate performance. Overall, this paper provides some new evidence on the listing effect, ownership structure and regulation effect on Chinese firms which will be valuable to the future reform of state owned enterprises in China.
    Keywords: State owned enterprise, corporate governance, and corporate performance
  15. By: Jill Johnes; Steve Bradley; Alan Little
    Abstract: An earlier study used data envelopment analysis (DEA) to establish that efficiency in further education (FE) colleges varies widely (Bradley, Johnes & Little 2006a). Further statistical analysis suggested that this is explained, to some extent, by student composition and factors relating to the area in which the college is located. This study builds on those results by investigating efficiency levels by subject of study within FE colleges. Mean DEA efficiency is found to vary from 76% to 88% in the worst- and best-performing subject areas, respectively. Further investigation using statistical methods indicates that, while student composition and regional characteristics affect efficiency at the subject level, their effects can vary by area of learning. This has the clear policy implication that strategies to improve efficiency in FE colleges must be devised and operated at subject rather than provider level.
    Keywords: Further Education, Efficiency, Data Envelopment Analysis
    Date: 2007
  16. By: Jill Johnes; Li Yu
    Abstract: This study uses data envelopment analysis (DEA) to examine the relative efficiency of over 100 selected Chinese regular universities. Various models are developed to measure the research efficiency of these higher education institutions (HEIs) using data for 2003 and 2004. The findings show that the level of efficiency depends on whether or not a subjective measure of research output (based on experts’ opinions of the HEIs) is included as an output in the model. Mean efficiency is higher when the reputation variable is included (around 90%) than when it is not (mean efficiency is around 55% in this case). However, the rankings of the universities are remarkably insensitive to whether or not this variable is included. Bootstrapping procedures are used to find the 95% confidence intervals for the efficiencies, and indicate that the best and worst performing institutions are significantly different from each other; only the middle-performing 30% of HEIs cannot be distinguished from each other in terms of their performance. Further investigation suggests that regional location, source of funding and whether the university is comprehensive or specialist may all contribute to the observed differences in performance. The regional differences are consistent but not significant at conventional levels of significance; the efficiencies differ significantly by administrative type when the subjective measure of research output is excluded from the analysis; comprehensive universities consistently and significantly outperform specialist institutions. The possibility of regional differences in performance is particularly worrying since the already economically disadvantaged Western region may suffer a continued lag in development if its HEIs are less efficient than those in the better developed Central and coastal regions.
    Keywords: data envelopment analysis; efficiency measurement; Chinese higher education
    Date: 2006
  17. By: Mosahid Khan; Kul B. Luintel
    Abstract: We estimate domestic productivity relationships for a sample of 16 OECD countries through probably the most general specification yet. We identify ten key determinants of productivity - all derived from different theoretical models. Our specification may address the potential problem of omitted variables. The issues of cross-country heterogeneity and endogeneity are addressed. The sources of knowledge appear robust in driving productivity; however, other determinants postulated by different theoretical models are also significant. The productivity relationships are heterogeneous across OECD countries implying that country-specific factors may play an important role in domestic productivity policy. <P>Quelle est la robustesse de la relation entre sources de connaissances et productivité ? <BR>Nous estimons des relations concernant la productivité intérieure pour un échantillon de 16 pays de l'OCDE, en utilisant une spécification qui est probablement la plus générale ayant été employée jusqu'ici. Nous identifions dix déterminants essentiels de la productivité, tous obtenus à partir de modèles théoriques différents. Notre spécification peut permettre de remédier au problème potentiel soulevé par l'omission de certaines variables. Les problèmes d'hétérogénéité entre pays et d'endogénéité sont également traités. La relation de détermination existant entre les sources de connaissances et la productivité semble robuste, mais d'autres déterminants retenus par différents modèles théoriques jouent également un rôle significatif. Les relations concernant la productivité sont hétérogènes entre les pays de l'OCDE, ce qui tend à indiquer que des facteurs nationaux spécifiques peuvent jouer un rôle important dans la politique relative à la productivité intérieure.
    Keywords: productivité multifactorielle, dynamic heterogeneity, methods of moments
    JEL: C15 F12 F2 O3 O4
    Date: 2006–07–28
  18. By: Bart van Ark (The Conference Board and University of Groningen)
    Abstract: An earlier version of this paper was presented at the International Symposium on Productivity, Competitiveness and Globalisation at Banque de France on 4 November 2005. The present paper is updated and extended. The paper makes use of earlier work, including Van Ark (2005), O’Mahony and Van Ark (2003), Timmer and Van Ark (2005) and Van Ark and Inklaar (2005).
    Date: 2006–06
  19. By: Joachim Ragnitz
    Abstract: The paper concentrates on the question whether the low level of productivity in East Germany can be explained by deficits in the stock of human capital. It is shown that figures on “formal” qualifications yield a too optimistic view on human capital endowments; in fact, the effective stock on human capital in East Germany is lower than in West Germany when differences in job activities are taken into account. One reason is the dominance of non human capitalintensive industries as a consequence of locational decisions in the past. Another reason is a low human capital intensity within the different branches which is a consequence of specialization within affiliated firms. In the next years human capital endowment of the East German economy will further deteriorate as a result of selective migration and unfavorable educational attendance of the younger cohorts. This impedes a fast convergence in productivity between East and West Germany.
    Keywords: Productivity, East Germany, Human Capital
    JEL: J24 O47
    Date: 2007–01
  20. By: Nicola Fuchs-Schündeln; Rima Izem
    Abstract: This paper presents a spatial analysis of unemployment rates in Germany. The goal of this analysis is to explain the stubbornly low labor productivity and high unemployment rates in Eastern Germany. We build a model of commuting to distinguish between worker and job characteristics as the main causes of the low labor productivity, and use the method of simulated moments to estimate the East-West ratios of worker and job characteristics. The “slope” of the unemployment rate across the former East-West border serves as the main identification of the model. The preliminary results suggest that East and West German skills are very similar, while job characteristics differ significantly between East and West.
    Keywords: Transferability of Human Capital, Spatial Allocation of Labor
    JEL: C15 J24 J61
    Date: 2007–01
  21. By: Thomas Seegmuller (Centre d'Economie de la Sorbonne)
    Abstract: A lot of papers have analyzed the role of productive externalities on the occurrence of indeterminacy and endogenous cycles, assuming that the total productivity of factors increases with respect to average capital and labor. In this paper, we extend such type of analysis introducing a more general formulation of externalities, i.e. input-specific externalities. Indeed, we assume that different externalities affect each input in the production function. Considering a Woodford (1986) framework, we show that this generalized from of externalities allows us to obtain new dynamic results concerning the occurrence of local indeterminacy and endogenous cycles. Moreover, we exhibit some configurations where the emergence of endogenous fluctuations requires a weaker degree of increasing returns than in the usual case where externalities are represented by the total productivity of factors.
    Keywords: Indeterminacy, endogenous fluctuations, externalities, increasing returns, capital-labor substitution.
    JEL: C62 E32
    Date: 2006–12
  22. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a new “Pro-Poor Policy (PPP)” index, which measures the pro-poorness of government programmes, as well as basic service delivery in education, health and infrastructure. The index provides a means to assess the targeting efficiency of government programmes compared to perfect targeting. The paper also deals with the policy issue of how targeting efficiency of government programmes varies across various socioeconomic groups. To this effect, the paper develops two types of PPP indices by socioeconomic groups, which are within-group and total-group PPP indices. The within-group PPP index captures how well targeted a programme is within a group. On the other hand, if our objective is to maximize poverty reduction at the national level, the targeting efficiency of particular group should be judged on the basis of total-group PPP index. Using micro unit-record data on household surveys from Thailand, Russia, Vietnam, and 15 African countries, the paper evaluates a wide range of government programmes and basic services.
    Keywords: Targeting, Universal, Pro-Poor, Poverty
    JEL: C15 I32
    Date: 2005–05
  23. By: Dirk Pilat; Agnès Cimper; Karsten Bjerring Olsen; Colin Webb
    Abstract: This paper provides empirical evidence on the changing nature of manufacturing in OECD countries, including the continued loss of employment in the manufacturing. It examines the extent to which manufacturing output and employment are declining in OECD countries and explores possible causes, including increased productivity, slow growth in demand for manufacturing products, loss of markets to imports, statistical and classification issues, and so on. The paper finds that the share of manufacturing in OECD economies is declining and argues that this is likely to continue. It also presents...
    Date: 2006–10–27
  24. By: Gustav Horn (IMK at the Hans Boeckler Foundation); Camille Logeay (IMK at the Hans Boeckler Foundation); Silke Tober (IMK at the Hans Boeckler Foundation)
    Abstract: Potential output measures a country's attainable aggregate living standard and is thus one of the most important categories of economics. It is also a key indicator for monetary and fiscal policy. Despite its prominence, however, potential output is a difficult concept to pinpoint both theoretically and even more so empirically. The article discusses the reasons for the marked revisions of potential output estimates by major international organisations. The authors then present the results of our attempts to quantify Germany's potential output based on a production function approach coupled with the Kalman-filter technique to estimate the NAIRU. The authors find that potential output and potential output growth greatly depend on how the NAIRU and potential total factor productivity are modelled. Given the difficulties involved in robustly estimating potential output, especially in real time, economic policy makers need to learn to pursue their policy objectives without reference to this variable.
    Keywords: Potential Output, Nairu, Kalman-filter, revisions
    JEL: C5 E32 E52 O11
    Date: 2007–01

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.