New Economics Papers
on Efficiency and Productivity
Issue of 2007‒03‒03
fourteen papers chosen by

  1. Technical efficiency, technological change and total factor productivity growth in Malaysian manufacturing sector By Jajri, Idris; Ismail, Rahmah
  2. Explaining the gaps in labour productivity in some developed countries By Razzak, Weshah
  3. Efficient, profitable and safe banking: an oxymoron? : evidence from a panel VAR approach By Koetter, Michael; Porath, Daniel
  4. Exports and Productivity in Germany By Joachim Wagner
  5. Unit Labor Cost Growth Differentials in the Euro Area, Germany, and the US : Lessons from PANIC and Cluster Analysis By Ulrich Fritsche; Vladimir Kuzin
  6. Education and labour productivity in New Zealand By Razzak, Weshah; Timmins, Jason
  7. A Theory of Infrastructure-led Development By Pierre-Richard Agénor
  8. What Makes a Difference in Achieving Higher Labor Productivity?: The Case of Low-Income Countries in Latin America By Osvaldo Nina
  9. Mergers and Economies of Scale: Volkswagen AG 1976 - 2000 By Rudholm, Niklas
  10. The Impact of Structured Training on Workers’ Employability and Productivity By Ang Boon Heng; Park Cheolsung; Liu Haoming; Shandre M. Thangavelu; James Wong
  11. Productivity and Size of the Export Market - Evidence for West and East Geman Plants. 2004 By Joachim Wagner
  12. Enty, Exit and Productivitry - Empirical Results for German Manufacturing Industries By Joachim Wagner
  13. Branch Banking as a Device for Discipline: Competition and Bank Survivorship During the Great Depression By Mark Carlson; Kris James Mitchener
  14. To aid or not to aid: Foreign aid and productivity in cross-country regressions By Pablo Selaya

  1. By: Jajri, Idris; Ismail, Rahmah
    Abstract: The manufacturing sector is becoming more important for the Malaysia economy. The contribution of output and employment from this sector is continuously increasing since the 1980 an, except for certain period when an economy experiences recession. Viewing from its capacity to spearhead economic growth the government has given emphasis to the manufacturing sector in achieving industrialized nation by year 2020. It is a claim that productivity for this sector had not yet achieved optima level and in certain years, the growth of productivity was smaller than the growth of wages. Even though the concept of productivity usually referred to labour productivity, this concept is very much related to total factor productivity (TFP). This paper attempts to analysis trend of, technical efficiency, technological change and TFP growth in the Malaysian manufacturing sector. The analysis is based on data from the Industrial Manufacturing Survey of 1985 to 2000 collected by the Department of Statistics Malaysia using Data Envelopment Analysis (DEA). The results show that during the period under study, TFP growth is increasing and the major contribution of TFP growth in technical efficiency. Nevertheless, technological change show increasing trend over time. The industries that experienced high technical efficiency are food, wood, chemical and iron products. However, for food and wood industries technical progress is higher than technical progress. The other industry that shows larger technical progress than technical efficiency is textile industry but both values are below unity.
    Keywords: Technical efficiency; technological change; and total factor productivity
    JEL: O30
    Date: 2006
  2. By: Razzak, Weshah
    Abstract: Modern economic theories explain differences in productivity and economic growth across countries by differences in political and economic institutions, and differences in culture, geographical location, policies, and laws. The success of any of these theories in explaining the gap in productivity between any two countries depends on the countries in the sample. We argue in this paper that differences in the above variables might explain gaps in economic performance between developed and developing countries, but are too small to explain the productivity gaps between developed countries. We test this hypothesis for two pairs of developed neighbouring countries: New Zealand and Australia and Canada and the United States, hence New Zealand – Australia and Canada – United States. In this paper, more than eighty percent of labour productivity gaps between New Zealand and Australia and Canada and the United States are explained by endogenous technology shocks (TFP) and capital intensities.
    Keywords: Labour Productivity; TFP; Real exchange rate
    JEL: O57 C32 C13
    Date: 2005–02
  3. By: Koetter, Michael; Porath, Daniel
    Abstract: Efficiency is considered a key factor when evaluating a bank's performance. Moreover, efficiency enhancement is an explicit policy objective in the Single Market Directive of the European Commission. But efficiency improvements may come at the expense of deteriorating bank profits and excessive risk-taking. Both the quantitative effects and dynamic reactions of performance in response to efficiency improvements remain often unclear on both theoretical and empirical grounds. We analyze the dynamic relations between efficiency and performance in the German banking market. To this end we use panel data for all German banks for the years from 1993 to 2004 and estimate impulse response functions (IRF) derived from a vector autoregressive model. The IRF estimate the response of a shock in efficiency on profits or default probabilities. The former is estimated with stochastic frontier analysis, the latter is estimated with a hazard rate model. The results indicate that a positive unit shift in efficiency reduces the probability of default and increases prots. On the one hand, we find evidence that the long-run impact of profit efficiency on risk is larger than for cost efficiency. However, cost efficiency impacts with a shorter time lag on the probability of default. On the other hand, cost efficiency has on average a slightly larger impact on profits than profit efficiency.
    Keywords: Bank performance, efficiency, bank failure, vector autoregression, performance forecast
    JEL: C33 C53 D21 G21 G33 L25
    Date: 2007
  4. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: Using unique recently released nationally representative high-quality longitudinal data at the plant level, this paper presents the first comprehensive evidence on the relationship between exports and productivity for Germany, a leading actor on the world market for manufactured goods. It applies and extends the now standard approach from the international literature to document that the positive productivity differential of exporters compared to non-exporters is statistically significant, and substantial, even when observed firm characteristics and unobserved firm specific effects are controlled for. For West German plants (but not for East German plants) some empirical evidence for self-selection of more productive firms into export markets is found. There is no evidence for the hypothesis that plants which start to export perform better in the three years after the start than their counterparts which do not start to sell their products on the world market. Results for West Germany support the hypothesis that the productivity differential between exporters and non-exporters is at least in part the result of a market driven selection process in which those export starters that have low productivity at starting time fail as a successful exporter in the years after the start, and only those that were more productive at starting time continue to export.
    Keywords: Exports, productivity, micro data, Germany
    JEL: F14 D21
    Date: 2007–03
  5. By: Ulrich Fritsche; Vladimir Kuzin
    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, 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 Länder. 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
  6. By: Razzak, Weshah; Timmins, Jason
    Abstract: We estimate the effect of four types of education qualifications, as a proxy for human capital and skill levels, on GDP per capita, and compute the average percentage returns. We also test the effect of the product of each proxy of human capital with R&D on GDP per capita. We find that only university qualification and its product with R&D to have a positive effect on the average economy-wide productivity.
    Keywords: Labour productivity; education qualification; R&D
    JEL: D20 J08 C23
    Date: 2007–02–08
  7. By: Pierre-Richard Agénor
    Abstract: This paper proposes a theory of long-run development based on public infrastructure as the main engine of growth. The government, in addition to investing in infrastructure, spends on health services, which in turn raise labor productivity and lower the rate of time preference. Infrastructure affects the production of both commodities and health services. As a result of network effects, the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself. This in turn may cause multiplicity of equilibrium growth paths. Provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment outlays, an increase in the share of spending on infrastructure (financed by a cut in unproductive expenditure or foreign grants) may facilitate the shift from a low growth equilibrium, characterized by low productivity and low savings, to a high growth steady state.
    Date: 2006
  8. By: Osvaldo Nina (Grupo Integral)
    Abstract: This paper uses firm level surveys from Ecuador, Guatemala, Honduras and Nicaragua to estimate the determinants of labor productivity. This study started out with the hypothesis that the adverse external business conditions that firms in poor Latin American countries face, may be an important explication of the generally low levels of productivity. However, the empirical results, based on the survey of more than 1300 businesses, do not confirm this hypothesis. Compared to all the variables that are under the firms control, such as capital intensity, energy use, and worker skills, the external business environment (macroeconomic instability and labor regulations) has very little impact on productivity.
    Keywords: Labor productivity, Ecuador, Guatemala, Honduras, Nicaragua
    Date: 2005–12
  9. By: Rudholm, Niklas (The Swedish Retail Institute (HUI))
    Abstract: The purpose of this paper is to study if the acquisitions of the SEAT and Skoda has lead to increased economic efficiency for Volkswagen AG due to economies of scale. This is achieved by estimation of the VAG cost function, using a translog specification. The results indicate that the merger with SEAT did increase the economies of scale available as production volumes increased due to the merger. No such effects was, however, found for the aquisition of Skoda.
    Keywords: Automobile production; economies of scale; technological change
    JEL: D21 D24 L25
    Date: 2006–10–01
  10. By: Ang Boon Heng (Manpower Research and Statistics Department, Ministry of Manpower); Park Cheolsung (Department of Economics, National University of Singapore); Liu Haoming (Department of Economics, National University of Singapore); Shandre M. Thangavelu (Singapore Centre for Applied and Policy Economics Department of Economics, National University of Singapore); James Wong (Manpower Research and Statistics Department, Ministry of Manpower)
  11. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: Using unique recently released nationally representative high-quality data at the plant level, this paper presents the first comprehensive evidence on the relationship between productivity and size of the export market for Germany, a leading actor on the world market for manufactured goods. It documents that firms that export to countries inside the euro-zone are more productive than firms that sell their products in Germany only, but less productive than firms that export to countries outside the euro-zone, too. This is in line with the hypothesis that export markets outside the euro-zone have higher entry costs that can only by paid by more productive firms.
    Keywords: Exports, productivity, micro data, Germany
    JEL: F14 D21
    Date: 2007–03
  12. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: Using panel data from Spain Farinas and Ruano (IJIO 2005) test three hypotheses from a model by Hopenhayn (Econometrica 1992): (H1) Firms that exit in year t were in t-1 less productive than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than non-surviving firms from this cohort in the start year. Results for Spain support all three hypotheses. This paper replicates the study using a unique newly available panel data sets for all manufacturing plants from Germany (1995 – 2002). Again, all three hypotheses are supported empirically.
    Keywords: Exports, Entry, exit, productivity
    JEL: L11 L60
    Date: 2007–03
  13. By: Mark Carlson; Kris James Mitchener
    Abstract: Because California was a pioneer in the development of intrastate branching, we use its experience during the 1920s and 1930s to assess the effects of the expansion of large-scale, branch-banking networks on competition and the stability of banking systems. Using a new database of individual bank balance sheets, income statements, and branch establishment, we examine the characteristics that made a bank a more likely target of a takeover by a large branching network, how incumbent unit banks responded to the entry of branch banks, and how branching networks affected the probability of survival of banks during the Great Depression. We find no evidence that branching networks expanded by acquiring "lemons"; rather those displaying characteristics of more profitable institutions were more likely targets for acquisition. We show that incumbent, unit banks responded to increased competition from branch banks by changing their operations in ways consistent with efforts to increase efficiency and profitability. Results from survivorship analysis suggest that unit banks competing with branch bank networks, especially with the Bank of America, were more likely to survive the Great Depression than unit banks that did not face competition from branching networks. Our statistical findings thus support the hypothesis that branch banking produces an externality in that it improves the stability of banking systems by increasing competition and forcing incumbent banks to become more efficient.
    JEL: E44 G21 L1 N22
    Date: 2007–02
  14. By: Pablo Selaya (University of Copenhagen)
    Abstract: The paper reexamines empirically the robustness of competing theories of foreign aid effectiveness. By shifting the focus from the effects of aid on income to effects of aid on productivity, it is possible to put to test 3 existing theories of foreign aid effectiveness. The results provide support for the hypotheses that (i) aid has a positive effect in fostering growth of average productivity, (ii) aid doesn't operate with diminishing returns, and (iii) the magnitude of the total effect depends on climate-related circumstances. The results support the policy recommendation previously made in the literature to seriously reconsider the conditionality rule for foreign aid disbursements.
    Keywords: Foreign Aid, cross-country, conditionality
    JEL: F35
    Date: 2005–11

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