New Economics Papers
on Efficiency and Productivity
Issue of 2007‒03‒24
ten papers chosen by

  1. Growth accounting in items of turbulence and death: efficiency, technology, capital accumulation and human capital 1929-1950 By Kerstin Enflo; Jörg Baten
  2. Public Infrastructure, Input Efficiency and Productivity Growth in the Canadian Food Processing Industry By Jeffrey I. Bernstein; Theofanis P. Mamuneas
  3. Decomposing differences in total factor productivity across firm size. By Laia Castany; Enrique Lopez-Bazo; Rosina Moreno
  4. The Sources of Long-run Growth in Spain 1850-2000 By de la Escosura, Leandro Prados; Rosés, Joan R.
  5. A reasonable benchmarking frontier using DEA : an incentive scheme to improve efficiency in public hospitals By Diego Prior; Jordi Surroca
  6. Cost Improvements, Returns to Scale, and Cost Inefficiencies for Real Estate Investment Trusts By Stephen M. Miller; Thomas M. Springer
  7. Do Institutions, Ownership, Exporting and Competition Explain Firm Performance? Evidence from 26 Transition Countries By Simon Commander; Jan Svejnar
  8. Overseas R&D Activities and Home Productivity Growth: Evidence from Japanese Firm-Level Data By TODO Yasuyuki; SHIMIZUTANI Satoshi
  9. Technical Efficiency and Small-scale Fishing Households in Tanzanian coastal Villages: An Empirical Analysis By Jennifer K. sesabo; Richard S.J. Tol
  10. Total Factor Productivity and Monetary Policy: Evidence from Conditional Volatility By Nicholas Apergis; Stephen M. Miller

  1. By: Kerstin Enflo; Jörg Baten
    Abstract: We employ a non-parametrical approach to growth accounting (Data Envelopment Analysis, DEA) to disentangle the proximate sources of labour productivity growth in 41 nations between 1929 and 1950 by decomposing productivity growth into four components: technological change; efficiency catch-up (movements towards the production frontier), capital accumulation and human capital accumulation. We show that efficiency catch-up generally explains productivity growth, whereas technological change and factor accumulation were limited and distorted by the effects of war. War clearly hampered efficiency. Moreover, an unbalanced ratio of human capital to physical capital (a gap to the technological leader) was crucial for efficiency catching-up.
    Keywords: DEA, growth accounting, productivity, interwar period
    JEL: N10 N40 O47
  2. By: Jeffrey I. Bernstein (Department of Economics, Florida International University); Theofanis P. Mamuneas (Department of Economics, University of Cyprus,)
    Abstract: Canadian food processing is an important manufacturing industry, accounting for 13 percent of shipments. By its nature food processing depends on infrastructure capital. Our objective is to estimate infrastructure’s effects on input requirements, cost and productivity. The increase in capital and decrease in materials were respectively 2.5 and 3 times greater than the -0.07 infrastructure elasticity of labor. Infrastructure investment was cost-reducing by inducing reductions in employment and intermediate inputs. A 1 percent increase caused cost to decline by 0.16 percent. Infrastructure capital was a major contributor to productivity, annually contributing 0.5 percentage points. This was nearly double TFP growth.
    Keywords: Food Processing, Infrastructure Capital, Productivity Growth.
    JEL: D24 L66
    Date: 2007–03
  3. By: Laia Castany (Faculty of Economics, University of Barcelona); Enrique Lopez-Bazo (Faculty of Economics, University of Barcelona); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.
    Keywords: Total Factor Productivity, skilled labor, innovation, firm size, Oaxaca decomposition
    Date: 2007–03
  4. By: de la Escosura, Leandro Prados; Rosés, Joan R.
    Abstract: Between 1850 and 2000, Spain’s real income increased by about 40-fold, at an average rate of 2.5 percent. The sources of this long-run growth are investigated using Jorgenson-type growth accounting analysis. We find that growth upsurges are closely related to increases in TFP. Spanish economic growth went through three successive phases. The century before 1950 was characterized by slow growth driven by factor accumulation. TFP improvements pushed up explosive growth during the Golden Age and mitigated the deceleration during the transition to democracy years (1975-86). Since the accession to the European Union Spain has experienced a dramatic productivity slowdown.
    Keywords: factor accumulation; growth accounting; Spain; total factor productivity
    JEL: N13 N14 O47
    Date: 2007–03
  5. By: Diego Prior; Jordi Surroca
    Abstract: There exists research relating management concepts with productivity measurement methods that offers useful solutions for improving management control in the public sector. Within this sphere, we connect agency theory with efficiency analysis and describe how to define an incentives scheme that can be applied in the public sector to monitor the efficiency and productivity of managers. To fulfill the main objective of this research, we propose an iterative process for determining what we define as a ‘reasonable frontier’, a concept that provides the foundation required to establish the incentive scheme for the managers. Our ‘reasonable frontier’ has the following properties: i) it detects the presence of outliers, ii) it proposes a procedure to establish the influence introduced by extreme observations, and iii) it sorts out the problem of data masking. The proposed method is applied to a sample of hospitals taken from the public network of the Spanish health service. The results obtained confirm the applicability of the proposal made. Summing up, we define and apply a useful method, combining aspects of agency theory and efficiency analysis, which is of interest to those public authorities trying to design effective incentive schemes which influence the decision making of the public managers.
    Date: 2007–03
  6. By: Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas); Thomas M. Springer (Clemson University)
    Abstract: This paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate stochastic-frontier, panel-data models specifying a translog cost function. The specified model updates the cost frontier with new information as it becomes available over time. The model can identify frontier cost improvements, returns to scale, and cost inefficiencies over time. The results disagree with most previous research in that we find no evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, higher leverage associates with more efficiency.
    Keywords: Real Estate Investment Trusts, X-efficiency, scale economies
    JEL: G2 L25 L85
    Date: 2007–02
  7. By: Simon Commander (EBRD, London Business School and IZA); Jan Svejnar (University of Michigan, CERGE-EI, CEPR and IZA)
    Abstract: We analyze a large stratified random sample of firms that provide us with measures of performance and each firm’s top manager’s perception of the severity of business environment constraints faced by his/her firm. Unlike most existing studies that rely on external and aggregated proxy measures of the business environment, defined to include legal and institutional features, we have information from each surveyed firm. Specifically, we use the 2005 and 2002 Business Environment and Enterprise Performance Survey (BEEPS) to assess the effect on performance of ownership, competition, export orientation and the business environment of the firm. We employ a variety of approaches to deal with the problem of omitted variables, errors in variables and endogeneity that plague studies in this area. We find that foreign ownership and competition have an impact on performance – measured as the level of sales controlling for inputs. Export orientation of the firm does not have an effect on performance once ownership is taken into account. When we analyze the impact of perceived constraints, we show that few retain explanatory power once they are introduced jointly rather than one at a time, or when country, industry and year fixed effects are introduced. Indeed, country fixed effects largely absorb the explanatory power of the constraints faced by individual firms. Replicating the analysis with commonly used countrylevel indicators of the business environment, we do not find much of a relationship between constraints and performance. Our analysis brings into question an important part of the conventional wisdom in this area. It indicates that country fixed effects, reflecting timeinvariant differences in the business environment but also other factors, matter for firm performance, but that differences in the business environment observed across firms within countries do not. Moreover, the limited firm- and country-level variations in the business environment over time do not appear to affect performance either. This suggests that the effect of business environment on performance and the analysts’ ability to identify this effect are more limited than has been assumed to date.
    Keywords: firm performance, productivity, competition, institutions, business environment, export orientation, firm ownership, subjective data
    JEL: D24 L21 O12 O57
    Date: 2007–02
  8. By: TODO Yasuyuki; SHIMIZUTANI Satoshi
    Abstract: This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms using firm-level panel data for Japanese multinational enterprises. We distinguish between overseas R&D for the utilization and acquisition of foreign advanced knowledge, or innovative R&D, and overseas R&D for the adaptation of technologies and products to local conditions, or adaptive R&D. Our major finding is that overseas innovative R&D helps to raise the productivity growth of the parent firm, while overseas adaptive R&D has no such effect. In addition, we examine whether overseas innovative R&D has an indirect effect on home productivity growth by improving the rate of return on home R&D. However, we find no evidence of such an indirect effect, suggesting that overseas innovative R&D does not engender any knowledge transfers from overseas to home R&D units.
    Date: 2007–03
  9. By: Jennifer K. sesabo; Richard S.J. Tol (Economic and Social Research Institute, Dublin)
    Abstract: The effort to conserve fisheries resources and improve the welfare of small-scale fishing households is an important objective of Poverty Reduction Strategies (PRS) in Tanzania. The success of such strategies depends both on the variation and the level of efficiency within small-scale fishing households. This paper examines the technical efficiency of small-scale fishing households in Tanzania using data from two coastal villages (Mlingotini and Nyamanzi). A stochastic frontier (with technical inefficiency effects) model is specified and estimated. The estimated mean technical efficiency of small-scale fishing households is 52%. Results show that the efficiency of individual fishing households is positively associated with fishing experience, size of farming land, distance to the fishing ground, and potential market integration and negatively related to non-farm employment and bigger household sizes. We find that future policies aiming at targeting conservation-development issues in fishing communities should be concerted to provide mechanisms, which improve the access of small-scale fishing households to less destructive fishing tools via provision of credits, and markets as well as the creation of new employment opportunities in other sectors.
    Keywords: Fishing households, Fisheries development, Stochastic production frontier, Technical efficiency, Tanzania
    JEL: D13 O13 Q22
    Date: 2006–01
  10. By: Nicholas Apergis (University of Macedonia); Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas)
    Abstract: This paper empirically assesses whether monetary policy affects real economic activity through its affect on the aggregate supply side of the macroeconomy. Analysts typically argue that monetary policy either does not affect the real economy, the classical dichotomy, or only affects the real economy in the short run through aggregate demand %G–%@ new Keynesian or new classical theories. Real business cycle theorists try to explain the business cycle with supply-side productivity shocks. We provide some preliminary evidence about how monetary policy affects the aggregate supply side of the macroeconomy through its affect on total factor productivity, an important measure of supply-side performance. The results show that monetary policy exerts a positive and statistically significant effect on the supply-side of the macroeconomy. Moreover, the findings buttress the importance of countercyclical monetary policy as well as support the adoption of an optimal money supply rule. Our results also prove consistent with the effective role of monetary policy in the Great Moderation as well as the more recent rise in productivity growth.
    Keywords: Total Factor Productivity; Monetary Policy; Volatility; GARCH models
    JEL: E32 E51
    Date: 2007–03

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.