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

  1. The efficiency in Thai financial sector after the financial crisis By Chansarn, Supachet
  2. "Productivity, Technical Efficiency, and Farm Size in Paraguayan Agriculture" By Thomas Masterson
  3. Structural breaks in labor productivity growth: the United States vs. the European Union By Juan F. Jimeno; Esther Moral; Lorena Saiz
  4. Employment, innovation and productivity: evidence from Italian microdata By Bronwyn Hall; Francesca Lotti; Jacques Mairesse
  5. Information Technology, Organisational Change and Productivity By Crespi, Gustavo; Criscuolo, Chiara; Haskel, Jonathan
  6. "Productivity, Capital Utilization, and Intra-firm Diffusion: A Study of Steel Refining Furnaces" By Tsuyoshi Nakamura; Hiroshi Ohashi
  7. Local Government Control and Efficiency of the Water Industry: An Empirical Analysis of Water Suppliers in East Germany By Peter Haug
  8. Information Technology, Efficient Restructuring and the Productivity Puzzle By Grüner, Hans Peter
  9. Political patronage in Ukranian banking By Christopher F. Baum; Mustafa Caglayan; Dorothea Schaefer; Oleksandr Talavera
  10. Total Factor Productivity and Labor Reallocation: The Case of the 1997 Korea Crisis By Benjamin, David M.; Meza, Felipe
  11. Innovation Performance of Firms in Manufacturing Industry: Evidence from Belgium, Finland and Germany in 1998-2000 By Elina Seppä
  12. Does Competition Increase Economic Efficiency in Swedish County Councils? By Rudholm, Niklas; Nordmark, Arvid; Marklund, Per-Olov
  13. Is the internet delivery channel changing banks' performance? The case of Spanish banks By Ignacio Hernando; María J. Nieto
  14. The Spillover Effects of Public Capital Formation on the Manufacturing Industry in the Turkish Geographical Regions By Ertugrul Deliktas; Özlem Önder; Metin Karadag
  15. Indirect Elicitation of Non-Linear Multiattribute Utility Functions. A Dual Procedure Combined with DEA. By Francisco J. André
  17. R&D, productivity and market value By Bronwyn Hall

  1. By: Chansarn, Supachet
    Abstract: This study aims to investigate the efficiency in Thai financial sector after the financial crisis (1998 – 2004) by looking at the total factor productivity (TFP) growth. Furthermore, the study also investigate the efficiency in commercial bank sector, finance and securities company sector and insurance company sector, and the efficiency in domestic and foreign financial companies. Based on the sample of 12 commercial banks, 13 finance and securities companies and 20 insurance companies listed on the Stock Exchange of Thailand (SET) over the period of 1998 – 2204, our finding reveals that the efficiency in Thai financial sector, commercial bank sector and finance and securities company sector was diminishing over the period of 1998 – 2004, while the efficiency in insurance company sector remained unchanged over the same period. However, the sharp decrease in efficiency in these three sectors occurred only over the period of 1998 – 1999, while the efficiency was decreasing very slightly over the period of 1999 – 2004. The study also suggests that, in overall, domestic financial companies are more efficient than foreign ones. Domestic finance and securities companies are also more efficient than foreign ones, whereas domestic and foreign commercial banks are not different in efficiency. Moreover, domestic and foreign insurance companies are not different in efficiency as well.
    Keywords: efficiency; productivity; financial sector; total factor productivity
    JEL: E0
    Date: 2005–12
  2. By: Thomas Masterson
    Abstract: This essay assesses the relationship between farm size and productivity. Both parametric and nonparametric methods are used to derive efficiency measures. Smaller farms are found to have higher net farm income per hectare, and to be more technically efficient, than larger farms.
    Date: 2007–02
  3. By: Juan F. Jimeno (Banco de España; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)); Esther Moral (Banco de España); Lorena Saiz (Banco de España)
    Abstract: There is a stark contrast between the recent evolution of labor productivity (and TFP) in the US and EU countries. In the US it accelerated around the mid-1990s and there is evidence of reversion to a high-growth regime. In some EU countries, while employment-population ratios started to rise after a period of stagnant employment, labor productivity (and TFP) decelerated. In this paper we apply univariate and multivariate methods, that have been used to detect structural breaks in productivity growth in the US economy, to EU data to confirm the existence of a significant permanent shift to lower productivity growth in some European countries around the mid-1990s. We find a structural break in mean labour productivity growth in the US around the mid-1990s (towards higher growth), in Continental Europe around the early 1990s (towards lower growth) and no evidence of structural breaks in the UK.
    Keywords: structural breaks, labor productivity, markov switching models
    JEL: C22 O47
    Date: 2006–10
  4. By: Bronwyn Hall (Institute for Fiscal Studies and University of California, Berkeley); Francesca Lotti; Jacques Mairesse
    Abstract: Italian manufacturing firms have been losing ground with respect to many of their European competitors. This paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms' productivity with the goal of understanding the roots of such poor performance. We use firm level data from the last three surveys on Italian manufacturing firms conducted by Mediocredito- Capitalia, which cover the period 1995-2003. Using a modified version of the model proposed by Harrison, Jaumandreu, Mairesse and Peters (2005), which separates employment growth rates into those associated with old and new products, we provide robust evidence that there is no employment displacement effect stemming from process innovation. The sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products. However, the contribution of product innovation is somewhat lower than that for the four comparison European countries considered by Harrison et al.
    Keywords: Innovation, employment, productivity, Italy.
    JEL: L60 O31 O33
    Date: 2006–11
  5. By: Crespi, Gustavo; Criscuolo, Chiara; Haskel, Jonathan
    Abstract: We examine the relationships between productivity growth, IT investment and organisational change (DO) using UK firm data. Consistent with the small number of other micro studies we find (a) IT appears to have high returns in a growth accounting sense when DO is omitted; when DO is included the IT returns are greatly reduced, (b) IT and DO interact in their effect on productivity growth, (c) non-IT investment and DO do not interact in their effect on productivity growth. Some new findings are (a) DO is affected by competition; (b) US-owned firms are much more likely to introduce DO relative to foreign owned firms who are more likely still relative to UK firms; (c) our predicted measured TFP growth slowdown for firms who are not doing DO and/or are in the early stages of IT investment compare well with the macro numbers documenting a UK measured TFP growth slowdown.
    Keywords: information technology; organisational change; productivity growth
    JEL: D24 E22 L22 O31
    Date: 2007–02
  6. By: Tsuyoshi Nakamura (Department of Economics, Tokyo Keizai University); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines the intra-firm diffusion of new technology in the Japanese steel industry. The introduction of the basic oxygen furnace was the greatest breakthrough in steel refining in the last century. Using unique panel data concerning capital utiliza- tion, the paper estimates total factor productivity by technology type, and associates the estimate with intra-firm diffusion. Estimation results reveal that the productivity difference between the old and new technologies plays an important role. The paper also finds that in operation, the old technology can better respond to changes in market demand, which brings about counter-cyclicality in the measured productivity.
    Date: 2007–02
  7. By: Peter Haug
    Abstract: The paper deals with the effects of local governments’ interference with business affairs of publicly owned utilities. A partial model is presented to illustrate the consequences of “democratic control” for the public managers’ effort and the efficiency of local public production. To check the theoretical results empirically, a two-stage data envelopment analysis (DEA) is carried out for a sample of East German water suppliers. The organisational form is used as a measure for the degree of municipal control. The results of the OLS- and Tobit regression indicate an efficiency-enhancing effect of organisational forms with less distinctive control options for local politicians.
    Keywords: efficiency, water industry, local governments, data envelopment analysis
    JEL: L95 L32 D73
    Date: 2007–02
  8. By: Grüner, Hans Peter
    Abstract: Labour productivity in the US has recently grown more strongly than in most European countries. It is often argued that the American productivity increase is due to the widespread introduction of new information and communication technologies (ICT). But why have the same technologies not similarly increased Europe's labour productivity? This paper provides a theoretical explanation for this productivity puzzle based on an extension of Radner's (1992) model of hierarchical information aggregation. The introduction of new ICTs enables organizations to process any given amount of information with a shorter delay. This enables organizations to restructure and solve incentive problems without risking excessive delay. Even a marginal improvement in the ICT can yield significant increases in labour productivity if - and only if - the organization is drastically restructured. Restructuring yields hierarchies with fewer layers and fewer managers, all working under incentive pay and providing first best effort. However, managers need not participate in the gains associated with the restructuring of their business firms.
    Keywords: hierarchies; ICT; Information processing; labour productivity; restructuring
    JEL: D23 D70 D83 L22 P51
    Date: 2007–02
  9. By: Christopher F. Baum (Boston College); Mustafa Caglayan (University of Sheffield); Dorothea Schaefer (DIW Berlin); Oleksandr Talavera (DIW Berlin)
    Abstract: This paper empirically investigates the link between political patronage and bank performance for Ukraine during 2003Q3-2005Q2. We find significant differences between politically affiliated and non-affiliated banks. We present evidence that affiliated banks have significantly lower interest margins. Politically affiliated banks also seem to increase their capital ratio. We conjecture that the reason behind these behavioral differences is to attract foreign investors; we report several mergers that recently took place between affiliated and foreign banks.
    Keywords: Political patronage, Ukraine, banking
    JEL: G32 G38
    Date: 2007–02–14
  10. By: Benjamin, David M.; Meza, Felipe
    Abstract: Detrended Total Factor Productivity (TFP), net of changes in capital utilization, fell by 3.3% after the Korean 1997 financial crisis. Detrended real GDP per working age person fell by 11.9%. We construct a two-sector small open economy model that can account for 30.0% of the fall in TFP in response to a sudden stop of capital inflows and an increase in international interest rates. Empirically, the fall in TFP follows a reallocation of labor from the more productive manufacturing sector to the less productive agriculture and public sectors. The model has a consumption sector and an investment sector. The reallocation of labor in the data corresponds to a movement from the investment sector to the consumption sector in the model. In the model, a sudden stop raises the costs of imports, which are used more heavily as an input in the investment sector. Also investment falls sharply in response to the increase in international interest rates. We show further that a fall in export demand and working capital requirements can both amplify the effects of the sudden stop. The model accounts for 41.0% of the fall in GDP. Keywords; Small open Economy; Total factor productivity; Korean 1997 crisis; Sudden stop
  11. By: Elina Seppä
    Abstract: The objective of this study is to study whether the R&D expenditures in Finnish firms generate better innovation output than in Belgian and German firms following the studies of Mohnen et al. (2006) and Mohnen and Dagenais (2001) and using CIS 3 data on manufacturing firms in 1998?2000. First, we use generalised tobit model to scrutinise what factors impact the firm?s propensity to innovate and the amount of innovation output, the share of sales in innovative products. Second, we construct an innovation indicator based on the estimates of pooled regression and compare the expected innovation output to the observed innovation output in sample countries and industries. We find that innovativeness is overall largest in Germany whereas the results of Belgium and Finland are nearly equal. The most surprising country differences are found in the effects of public funding, which do not have any significant impact on innovation output in Finland, have a negative impact in Belgium and positive in Germany.
    Keywords: Innovation, R&D, CIS, innovativeness, productivity, innovation and technology policy
    Date: 2007–02–14
  12. By: Rudholm, Niklas (Department of Economics, University of Gävle); Nordmark, Arvid (Norrtälje Municipality); Marklund, Per-Olov (Department of Economics, Umeå University)
    Abstract: The Swedish health care system is to a large extent publicly managed by 21 local county councils. During recent years there has been a movement were local county councils have opted to allow more of the production to be performed by alternative producers (i.e. private firms, cooperatives etc.). The purpose of this paper is thus to study if local county councils who has a large proportion of health care performed by alternative producers are more economically efficient than other county councils. The results indicate that county councils with more alternative caregivers are supplying their services more efficiently.
    Keywords: Economic efficiency in health care; Data Envelopment Analysis; Tobit regression
    JEL: H40 I11 I12
    Date: 2007–02–20
  13. By: Ignacio Hernando (Banco de España); María J. Nieto (Banco de España)
    Abstract: In spite of the conspicuous use of the Internet as a delivery channel, there is a relative dearth of empirical studies that provide a quantitative analysis of the impact of the Internet on banks´ financial performance. This paper attempts to fill this gap by identifying and estimating the impact of the adoption of a transactional web site on financial performance using a sample of 72 commercial banks operating in Spain over the period 1994-2002. The impact on banks´ performance of transactional web adoption takes time to appear. The adoption of the Internet as a delivery channel involves a gradual reduction in overhead expenses (particularly, staff, marketing and IT). This effect is statistically significant after one and a half years after adoption. The cost reduction translates into an improvement in banks´ profitability, which becomes significant after one and a half years in terms of ROA and after three years in terms of ROE. The paper also concludes that the Internet is being used as a complement to, rather than a substitute for, physical branches.
    Keywords: commercial banks, internet banking, profitability, cost and income structure
    JEL: G21 O32 O33
    Date: 2006–09
  14. By: Ertugrul Deliktas; Özlem Önder; Metin Karadag (Department of Economics, Ege University)
    Abstract: This paper investigates the spillover effects of public capital formation on the Turkish private manufacturing industry at the regional level over the period 1980-2000. The aggregate effects of public capital cannot be captured entirely from the direct effects of public capital installed in the region itself. Therefore, we estimate vector autoregression (VAR) models for the seven geographical regions of Turkey by including capital formation installed outside of the region. The results show that public capital affects private sector performance positively in all regions apart from Central Anatolia. Positive spillover effects of public capital can be seen in some regions, like Marmara.
    Keywords: Regional development, public capital, spillover effects, vector autoregression, Turkish manufacturing industry.
    JEL: C32 L60 R00
    Date: 2007–02
  15. By: Francisco J. André (Department of Economics, Universidad Pablo de Olavide)
    Abstract: In this paper, we propose an indirect method to elicit nonlinear multiattribute utility functions which is based on duality results. The idea is to obtain a utility function which is compatible with the observed behaviour of decision makers. The paper builds on a previous work by André and Riesgo (A non-interactive method to elicit non-linear multiattribute utility functions. Theory and Application to Agricultural Economics. European Journal of Operational Research. In press) but it eliminates an important shortcoming, the necessity to estimate the efficient set, by using a DEA-like approach.
    Keywords: MultiCriteria Decision Making, Multi-Attribute Utility Function, Duality, DEA.
    JEL: C61 D01
    Date: 2007–02
  16. By: A. Rodriguez-Pose; Riccardo Crescenzi
    Abstract: Research on the impact of innovation on regional economic performance in Europe has fundamentally followed three approaches: a) the analysis of the link between investment in R&D, patents, and economic growth; b) the study of the existence and efficiency of regional innovation systems; and c) the examination of geographical diffusion of regional knowledge spillovers. These complementary approaches have, however, rarely been combined. Important operational and methodological barriers have thwarted any potential crossfertilization. In this paper, we try to fill this gap in the literature by combining in one model R&D, spillovers, and innovation systems approaches. A multiple regression analysis is conducted for all regions of the EU-25, including measures of R&D investment, proxies for regional innovation systems, and knowledge and socio-economic spillovers. This approach allows us to discriminate between the influence of internal factors and external knowledge and institutional flows on regional economic growth. The empirical results highlight how the interaction between local and external research with local and external socio-economic and institutional conditions determines the potential of every region in order to maximise its innovation capacity. They also indicate the importance of proximity for the transmission of economically productive knowledge, as spillovers show strong distance decay effects. In the EU-25 context, only the innovative efforts pursued within a 180 minute travel radius have a positive and significant impact on regional growth performance.
    Keywords: Economic growth, innovation, R&D, knowledge, spillovers,
    JEL: R11 R12 R58
    Date: 2006–01
  17. By: Bronwyn Hall (Institute for Fiscal Studies and University of California, Berkeley)
    Abstract: Measuring the private returns to R&D requires knowledge of its private depreciation or obsolescence rate, which is inherently variable and responds to competitive pressure. Nevertheless, most of the previous literature has used a constant depreciation rate to construct R&D capital stocks and measure the returns to R&D, a rate usually equal to 15 per cent. In this paper I review the implications of this assumption for the measurement of returns using two different methodologies: one based on the production function and another that uses firm market value to infer returns. Under the assumption that firms choose their R&D investment optimally, that is, marginal expected benefit equals marginal cost, I show that both estimates of returns can be inverted to derive an implied depreciation rate for R&D capital. I then test these ideas on a large unbalanced panel of US manufacturing firms for the years 1974 to 2003. The two methods do not agree, in that the production function approach suggests depreciation rates near zero (or even appreciation) whereas the market value approach implies depreciation rates ranging from 20 to 50 per cent, depending on the period. The concluding section discusses the possible reasons why this is true.
    Date: 2006–11

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