New Economics Papers
on Efficiency and Productivity
Issue of 2007‒03‒10
fourteen papers chosen by

  1. Productivity Growth in Thailand and Indonesia: How Agriculture Contributes to Economic Growth By Peter Warr
  2. Productivity in Public Services By Helen Simpson
  3. Does Offshoring Pay? Firm-Level Evidence from Japan By Alexander HIJZEN; INUI Tomohiko; TODO Yasuyuki
  4. Bank Efficiency in China, Rent Seeking versus X-inefficiency: A non-parametric Bootstrapping Approach. By Matthews, Kent; Guo, Jianguang; Zhang, Nina; Wang, Lina
  5. Entry barriers in Italian retail trade By Fabiano Schivardi; Eliana Viviano
  6. Why is Europe lagging behind? By Pyyhtiä, Ilmo
  7. A Profit Efficiency Perspective on the Future Strategic Positioning of the Portuguese Banks By Joana Resende; Elvira Silva
  8. Rational Inefficiency and non-performing loans in Chinese Banking: A non-parametric Bootstrapping Approach. By Matthews, Kent; Guo, Jianguang; Zhang, Nina
  9. Financial Integration, Productivity and Capital Accumulation By Alessandra Bonfiglioli
  10. The Effect of Competition on Wages and Productivity: Evidence from the UK By George Symeonidis
  11. The Impact on Growth of Higher Efficiency of Public Spending on Schools By Frédéric Gonand
  12. Analysing the contribution of business services to European economic growth By Kox, Henk L.M.; Rubalcaba, Luis
  13. The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms By Alexander HIJZEN; INUI Tomohiko; TODO Yasuyuki
  14. Poverty and Productivity in Female-Headed Households in Zimbabwe By Sara Horrell; Pramila Krishnan

  1. By: Peter Warr (Australian National University)
    Abstract: Total factor productivity growth in the agricultural, industry and services sectors is studied in this paper for two countries: Thailand and Indonesia, over the period 1981 to 2002. A feature of the analysis is the decomposition of aggregate total factor productivity growth into two components: productivity growth in individual sectors; and the reallocation of resources from low productivity to high productivity sectors. The results show that in both countries virtually all factor productivity growth at the sectoral level derives from agriculture, but the reallocation of resources away from agriculture was a much larger source of aggregate productivity growth.
    Keywords: total factor productivity growth, Thailand, Indonesia
    JEL: O47 Q10 O30
    Date: 2006–02
  2. By: Helen Simpson
    Abstract: This paper discusses issues arising in the measurement of productivity in public services. Compared to measuring productivity in the private sector difficulties arise because the output of public services is often un-priced and because some public services are consumed collectively. A key problem is measuring the full range of outputs and quality improvements delivered by public sector organisations that are valued by society. Without comprehensive measures of output productivity statistics may be misleading. I outline methods used in the measurement of both private and public sector productivity and discuss the measurement of public sector productivity in practice. Finally I discuss studies that examine factors underlying productivity differences and productivity growth in public and private sector organisations. Public sector reforms and the use of pilot schemes in public sector organisations present opportunities for research to identify causal effects on productivity.
    Keywords: Productivity; Public enterprises
    JEL: D24 H4 L32
    Date: 2007–01
  3. By: Alexander HIJZEN; INUI Tomohiko; TODO Yasuyuki
    Abstract: This paper explores the impact of offshoring, or contracting out of business activities to foreign providers, on firm productivity, using Japanese firm-level data for the period 1994-2000. We find that offshoring has generally a positive effect on productivity growth. This effect is robust to controlling for the possible endogeneity of offshoring with respect to unobserved productivity shocks. Our preferred specification suggests that a one percent increase in offshoring intensity raises productivity growth by 0.17 percent. For the average offshoring firm this implies a 1.8 percent increase in annual productivity growth. These results do not appear to depend much on either the level of technological sophistication of a firms' industry or a firms' international orientation. However, we find that the scope for productivity improvements from offshoring depends negatively on the initial level of productivity of the firm.
    Date: 2007–03
  4. By: Matthews, Kent (Cardiff Business School); Guo, Jianguang; Zhang, Nina; Wang, Lina
    Abstract: This study demarcates cost-inefficiency in Chinese banks into X-inefficiency and inefficiency caused by rent seeking behaviour. A protected banking market not only encourages weak management and X-inefficiency but also public ownership and state directed lending encourages moral hazard and bureaucratic rent seeking. This paper uses bootstrap non-parametric techniques to estimate measures of X-inefficiency and rent-seeking inefficiency for the 4 state owned banks and 11 joint-stock banks over the period 1997-2004. In contrast to other studies of the Chinese banking sector, the paper argues that reduced inefficiency is an indicator that the competitive threat of the opening up of the banking market in 2007 has produced tangible benefits in improved performance.
    Keywords: Bank Efficiency; China; X-inefficiency; DEA; Bootstrapping
    JEL: D23 G21 G28
    Date: 2007–02
  5. By: Fabiano Schivardi (Universita' di Cagliari); Eliana Viviano (Banca d’Italia)
    Abstract: The 1998 reform of the Italian retail trade sector delegated to the regional governments the regulation of entry of large retail shops. We use the local variation in regulation to determine the effects of entry barriers on firm performance for a representative sample of medium and large retail outlets. Using a diff-in-diff approach, we find that entry barriers are associated with substantially higher profit margins and substantially lower productivity of incumbent firms. We also find that liberalizing entry has a positive effect on investment in ICT, which the recent literature has shown to be the main driver of the remarkable sectoral productivity growth in the US. Finally, in the most liberal regions yearly inflation in the CPI component “food and beverages” was approximately half a percentage point lower than in the other regions: higher productivity coupled with lower margins resulted in lower consumer prices.
    Keywords: entry barriers, productivity growth, technology adoption, retail trade
    JEL: L5 L11 L81
  6. By: Pyyhtiä, Ilmo (Bank of Finland Research)
    Abstract: This paper builds on the literature on growth in searching for explanations for the divergent growth performance between the EU countries and the United States. We emphasise the role of R&D investment and perhaps different degrees of elasticity of substitution between capital and labour. We estimate two different production functions, namely Cobb-Douglas and CES specifications, with physical capital, a measure of labour, and residual ‘technical trend’ as inputs. <p> Our first finding is that in many ICT-producing and using countries such as Denmark, Finland, Ireland, Sweden and the United States technical progress has been accelerating during the past decade. Secondly, this speeding up of technical progress has been associated with R&D investment and perhaps with increasing elasticity of substitution between capital and labour. Hence, our results suggest that there is no growth paradox in Europe: the R&D factor and the elasticity of substitution between capital and labour which have been known to be important factors of economies’ growth potential, actually explain a significant part of the divergent growth performance of the European economies as well.
    Keywords: endogenous growth; panel data estimation; production function; R&D; technical progress; elasticity of substitution
    JEL: E22 E23 O51 O52
    Date: 2007–02–28
  7. By: Joana Resende (CETE, Faculdade de Economia, Universidade do Porto); Elvira Silva (CETE, Faculdade de Economia, Universidade do Porto)
    Abstract: The Portuguese banking sector has been recently subjected to important structural changes. The diversification of the supply of financial services, the specialization phenomena and the growing importance of new technologies are changing the sector dramatically. A profit perspective is used to investigate the efficiency performance of the commercial banking sector in Portugal in the period 2000-2004 and infer some implications for the banks´ management strategic orientation. The Nerlovian and an alternative profit efficiency measures are used, illustrating the potentialities of the directional distance functions to the profit efficiency analysis. A decomposition of the alternative profit efficiency measure is also proposed.
    Keywords: Banking; Nerlovian profit efficiency; alternative profit efficiency; directional distance functions
    JEL: C61 G21 L11
    Date: 2007–03
  8. By: Matthews, Kent (Cardiff Business School); Guo, Jianguang; Zhang, Nina
    Abstract: The existing Chinese banking system was born out of a state-planning framework focussed on the funding of state-owned enterprises. Despite the development of a modern banking system, numerous studies of Chinese banking point to its high level of average inefficiency. Much of this inefficiency relates to the high level of non-performing loans held on the banks books. This study argues that a significant component of inefficiency relates to a defunct bureaucratic incentive structure. Using bootstrap non-parametric techniques the paper decomposes cost-inefficiency into X-inefficiency and rational inefficiency caused by bureaucratic rent seeking. In contrast to other studies of the Chinese banking sector, the paper argues that a change in the incentive structure and the competitive threat of the opening up of the banking market in 2007 has produced reduced inefficiency and improved performance.
    Keywords: Bank Efficiency; China; X-inefficiency; DEA
    JEL: D23 G21 G28
    Date: 2007–02
  9. By: Alessandra Bonfiglioli
    Abstract: Understanding the mechanism through which financial globalization affect 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. The paper also provides a discussion of a simple model on the effects of financial integration, and shows additional empirical evidence supporting it.
    Keywords: Capital account liberalization, financial development, banking crises, growth, productivity, investments
    JEL: G15 F43 O40 C23
    Date: 2006–09
  10. By: George Symeonidis
    Abstract: This paper examines the impact of competition on wages and productivity using a panel data set of UK manufacturing industries over 1954-1973. The introduction of cartel law in the UK in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries, but it did not affect those industries which were not cartelized. The econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labour productivity growth. There is no evidence of any effect of collusion on wages. These results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with US data.
    Date: 2007–03–02
  11. By: Frédéric Gonand
    Abstract: This paper assesses the impact on economic growth of increased efficiency of public spending in primary and lower-secondary education. Higher efficiency in public spending in schools can bolster growth through two main channels. On the one hand, it can allow a transfer of labour from the public sector to the business sector at unchanged educational output. On the other, it can enhance educational output and productivity of the future labour force at unchanged public employment and expenditures. The paper argues that, in most cases, efficiency gains... <P>Effet sur la croissance d'un système éducatif primaire et secondaire plus efficace <BR>Ce document de travail évalue l'effet sur le PIB d'une efficacité accrue de la dépense publique dans le secteur de l'éducation primaire et secondaire. Une plus grande efficacité du système éducatif peut soutenir l'activité notamment grâce à des transferts d'effectifs du secteur public vers le secteur privé, ou une hausse de la performance des élèves et de leur productivité future à dépenses...
    Keywords: human capital, réforme structurelle, capital humain, structural reforms, Public education, Public spending efficiency, Education nationale, Efficacité de la dépense publique, long-run economic growth, croissance à long terme
    JEL: H11 I20 I28
    Date: 2007–02–27
  12. By: Kox, Henk L.M.; Rubalcaba, Luis
    Abstract: The sector business services contributes directly and indirectly to aggregate economic growth in Europe. The direct contribution comes from the sector’s own dynamism. Though the business-services industry appears to be characterised by strong cyclical volatility, there was also a strong structural growth. Business services actually generated more than half of total net employment growth in the European Union since the second half of the 1990s. Apart from this direct growth contribution, the sector also contributed in an indirect way to economic growth by generating knowledge and productivity spill-overs for other industries. The knowledge role of business services is reflected in its employment characteristics. The business-services industry created spill-overs in three ways: original innovations, knowledge diffusion, and the reduction of human capital indivisibilities at firm level. The share of knowledge-intensive business services in the intermediate inputs of the total economy has risen sharply in the last decade. Firm-level scale diseconomies with regard to knowledge and skill inputs are reduced by external deliveries of such inputs, thereby exploiting positive external scale economies. The process goes along with an increasingly complex social division of labour between economic sectors. The European business-services industry itself is characterised by a relatively weak productivity growth. Does this contribute to growth stagnation tendencies à la the so-called “Baumol disease”? The paper argues that there is no reason to expect this as long as the productivity and growth spill-overs from business services to other sectors are large enough. Finally, the paper concludes by suggesting several policy elements that could boost the role of business services in European economic growth. This might to achieve some of the ambitious Lisbon goals with respect to employment, productivity and innovation.
    Keywords: business services; structural change; economic growth; Europe; services; productivity
    JEL: E32 O4 O52 L2 L84 O3 L8
    Date: 2007–02
  13. By: Alexander HIJZEN; INUI Tomohiko; TODO Yasuyuki
    Abstract: In the present paper we investigate the causal effect of becoming a multinational on home performance for a large panel of Japanese firms for the period 1995-2002. We adopt matching techniques in combination with a difference-in-difference estimator to evaluate the causal effect of establishing a foreign affiliate on productivity, output and employment. We find that Japanese outward FDI tends to strengthen the economic activities of Japanese firms in Japan in terms of both output and employment. This finding is in line with the stylized fact in the literature that FDI and exports are complements. However, we do not find a significant positive effect on productivity.
    Date: 2007–03
  14. By: Sara Horrell; Pramila Krishnan
    Abstract: A household survey conducted in rural Zimbabwe in 2001 is used to compare the position of de facto and de jure female-headed households to those with a male head. These households are characterised by different forms of poverty that impinge on their ability to improve agricultural productivity. However, once inputs are accounted for, it is only for growing cotton that female-headed households’ productivity is lower than that found for male-headed households. General poverty alleviation policies will benefit the female-headed household but specific interventions via extension services and access to marketing consortia are also indicated.
    Keywords: Africa, Zimbabwe, gender, poverty, female-headed households, agriculture
    JEL: O12
    Date: 2006–07

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