New Economics Papers
on Efficiency and Productivity
Issue of 2007‒04‒14
thirteen papers chosen by

  1. An Analysis of Hospital Efficiency and Productivity Growth Using the Luenberger Productivity Indicator By Carlos Pestana Barros; António Gomes de Menezes; José Cabral Vieira; Nicolas Peypoch; Bernardin Solonandrasana
  2. Can Measurement Error Explain the Weakness of Productivity Growth in the Canadian Construction Industry? By Peter Harrison
  3. The Effect of Imports and Exports on Total Factor Productivity in Korea By Sangho KIM; Hyunjoon LIM; Donghyun PARK
  4. Market access and the evolution of within plant productivity in Chile By Maria Bas; Yvan Ledezma
  5. The Relationship between ICT Investment and Productivity in the Canadian Economy: A Review of the Evidence By Andrew Sharpe
  6. Trade Marks and Performance in UK Firms: Evidence of Schumpeterian Competition through Innovation By Christine Greenhalgh; Mark Rogers
  7. Does Foreign Direct Investment Have Impacts on the Growth in Labor Productivity of Vietnamese Domestic Firms? By Le Thanh THUY
  8. Efficiency measurement in the port industry: A survey of the empirical evidence By Marianela González; Lourdes Trujillo
  9. The Productivity to Paycheck Gap: What the Data Show By Dean Baker
  10. An Econometric Model of Wildfire Suppression Productivity By Mariam Lankoande; Jonathan Yoder
  11. X-efficiency, scale economies, Technological Progress and Competition of Pakistani’s banks By Qayyum, Abdul; Khan, Sajawal
  12. The Relationship between Corporate Governance Indicators and Firm Value: A Case Study of Karachi Stock Exchange By Attiya Y. Javed; Robina Iqbal
  13. Inferring the Latent Incidence of Inefficiency from DEA Estimates and Bayesian Priors By Daniel Friesner; Ron Mittelhammer; Robert Rosenman

  1. By: Carlos Pestana Barros (ISEG, Technical University of Lisbon); António Gomes de Menezes (University of the Azores and CEEAplA); José Cabral Vieira (University of the Azores, CEEAplA and IZA); Nicolas Peypoch (Université de Perpignan); Bernardin Solonandrasana (Université de Perpignan)
    Abstract: We analyze the efficiency and productivity growth of a representative sample of Portuguese hospitals from 1997 to 2004, using an innovative approach by employing the directional distance function and the Luenberger productivity indicator. The primary advantage of our approach is that both input contractions and output expansions are considered. Our model generates a productivity indicator that is decomposed into the usual constituents of productivity growth: technological change and efficiency change. The results show that, on average, Portuguese hospitals did not experience productivity growth during the period analyzed. In addition, the incidence of positive productivity growth across Portuguese hospitals was remarkably low.
    Keywords: hospitals, Luenberger productivity indicator, efficiency, technological change, productivity
    JEL: I11 I18 L5
    Date: 2007–03
  2. By: Peter Harrison
    Abstract: According to Statistics Canada productivity estimates, the rate of growth of real output per hour in the construction industry in Canada over the 1981-2006 period was 0.53 per cent per year, one-third of the business sector average. This article examines evidence for and against the hypothesis that measurement error explains this below average productivity performance. The article finds that the use of input cost indexes to adjust nominal output to obtain real output, instead of the more appropriate use of output price indexes, for certain sub-industries of the construction sector represents the most likely source of measurement error. This procedure may result in a downward bias to labour productivity growth in the construction sector of up to 0.44 percentage points per year. It is thus likely that measurement error explains some, but not all, of the gap in labour productivity growth between the construction industry and the business sector.
    Keywords: Real labour productivity, Construction industry, Business sector, Input cost indexes, Measurement error, Productivity gap.
    JEL: C40 C80 C82 L74 O40 O51
  3. By: Sangho KIM; Hyunjoon LIM; Donghyun PARK
    Abstract: We investigate the effect of imports and exports on total factor productivity in Korea during 1980-2003. We find Granger causality from imports to total factor productivity (TFP) growth, but no causality from exports to TFP growth. We then investigate the impact of trade and other variables on TFP growth. According to our results, imports have a significant positive effect on TFP growth but exports do not. In addition, our results indicate that the positive impact of imports arises not only from the competitive pressures associated with the imports of consumer goods but also from technological transfers embodied in imports of capital goods from developed countries.
    Date: 2007–04
  4. By: Maria Bas; Yvan Ledezma
    Abstract: This paper studies the impact of trade reforms on the evolution of plant's productivity. We use plant level panel data of Chilean’s manufacturing for the period 1979-2000. The main contribution of the paper is to construct detailed measures of trade liberalization disentangling the impact of export and import oriented policies. Firstly, we estimate the production functions to obtain factor contributions and to compute plant's TFP controlling for firm heterogeneous productivity which is unobservable and evolves over the time. Secondly, we construct a measure of market access as an outcome of trade policies by estimating the difficulties to trade (border effects) between Chile and its main trading partners at the industry level and across time using a gravity model. Finally, we estimate the impact of trade reform on plant's productivity using the border effects estimated in the previous step. We find evidence of a positive impact of export oriented policies on productivity of traded sectors relative to non traded. On the other hand, relative to the latter, the reduction of import barriers has a positive impact on productivity in export oriented sectors, but it hurts local firms in import competing ones probably due to the existence of increasing returns.
    Date: 2007
  5. By: Andrew Sharpe
    Abstract: The objective of this report is to shed light on the relationship between information and communications technologies (ICT) and productivity in the Canadian economy.The key conclusion of the report is that ICT has been the driving force behind the acceleration of productivity growth in Canada and the United States since 1996. However, the potential of ICT has not been fully exploited and we will continue to see significant ICT contributions to productivity growth in coming years. The role for government is to develop appropriate policy frameworks so that the productivity-enhancing effects of ICT can be fully realized.
    Keywords: Productivity, ICT, Productivity drivers, Policy frameworks, ICT investment, ICT capital.
    JEL: O00 O11 O16 O31 O40 L60
    Date: 2006–12
  6. By: Christine Greenhalgh; Mark Rogers
    Abstract: This paper uses novel data on trade mark activity of UK manufacturing and service sector firms to investigate whether trade marks improve the profitability and productivity of firms. We first analyse Tobin`s q, the ratio of stock market value to book value of tangible assets. We then investigate the relationship between trade mark activity and productivity, using a value added production function. Finally we examine interactions between firms IP activity, to explore creative destruction and growth via innovation. We find trade marks are positively related to both Tobin`s q and to productivity. Also in the short run greater IP activity by other firms in the industry reduces the value added of the firm, but this same competitive pressure has later benefits via productivity growth, also reflected in higher stock market value. This describes the Schumpeterian process of competition through innovation, restraining profit margins while increasing product variety and quality.
    Keywords: Trade Marks, Market Value, Productivity, Manufacturing, Services
    JEL: O30 L60 L80
    Date: 2007
  7. By: Le Thanh THUY
    Abstract: Foreign Direct Investment has been considered a very important factor in the growth of recent Vietnam's economy and so far it has drawn a lot of concerns of economic researches in Vietnam. However, studies on the impacts of Foreign Direct Investment on Vietnam's economy, especially the technological spillovers are still very scarce compared with other developing countries. This study makes an attempt to figure out the main channels and estimate the degree of Spillover effects in Vietnam using industry level data for 1995-1999 and 2000-2002 periods. The linkage between foreign investors and domestic private sectors is found to play an important role for technological spillovers from Foreign Direct Investment in Vietnam.
    Date: 2007–04
  8. By: Marianela González (DAEA, Universidad de Las Palmas de Gran Canaria); Lourdes Trujillo (Department of Economics, City University, London and DAEA, Universidad de Las Palmas de Gran Canaria)
    Abstract: The purpose of this paper is to further the understanding of the port sector through a systematic analysis of the existing studies assessing the economic efficiency and productivity of the sector. The emphasis is on the measurement methodologies, the variables used and the results in terms of the various port activities as well as on the relevance of dimensions such as the size of the port, its ownership, location, etc. One of the main contributions of our analysis is the evidence provided of the need to very clearly isolate and spell out the port activity for which the efficiency assessment is being conducted. From an economic policy viewpoint, our assessment also points to the necessity of more closely involving the relevant authorities to improve the data collection system.
    JEL: L92 H54
    Date: 2007–04
  9. By: Dean Baker
    Abstract: This report makes a series of adjustments to the most common measure of U.S. productivity growth (i.e., non-farm business sector) as well as to measures of wage growth, to determine the extent to which lagging wages can be blamed on weak productivity growth vs. income redistribution. Weak wage growth between 1973 and 2006 has generally been attributed to a redistribution of income from typical workers to higher paid workers. However, the report shows that, along with a redistribution of income, lagging wage growth has also been caused by slow productivity growth.
    JEL: O40 O47 J30 J32
    Date: 2007–04
  10. By: Mariam Lankoande; Jonathan Yoder (School of Economic Sciences, Washington State University)
    Abstract: We estimate a model of suppression productivity for individual fires, where suppression productivity is measured in terms of the reduction in the estimated market value of wildfire losses. Estimation results show that at the margin, every dollar increase in suppression costs reduces resource damage by 12 cents, while each dollar invested in pre-suppression reduces suppression expenditures by 3.76 dollars. These results suggest that there is an over-allocation of fire management funds to suppression activities relative to prevention measures in terms of cost-effectiveness. This paper provides an empirical basis for a widely used economic model of wildfire management that seeks to minimize the sum of suppression costs and economic losses from wildfires, the cost plus net value change model of fire suppression (C+NVC).
    Keywords: wildfire suppression, productivity
    JEL: Q2
    Date: 2006–10
  11. By: Qayyum, Abdul; Khan, Sajawal
    Abstract: This study aims at investigating empirically the x-efficiency, scale economies, and technologicalprogress of commercial banks operating in Pakistan. As banking sector efficiency is consider as a precondition for macroeconomic stability, monetary policy execution, and economic growth.We also make efficiency comparisons between the domestic and foreign banks and big banks.Our results indicate that the domestic banks operating in Pakistan are relatively less efficient than their foreign counterparts. The scale economies for small banks, especially foreign banks are higher. Results show also that market share of big five banks are declining over the period but average interest spread shows fluctuations. The main conclusions that can be drawn from these results are that mergers are more likely to take place, especially in small banks. If the mergers do take place between small domestic banks and foreign banks, these will reduce cost due to scale economies as well as x-efficiency (because foreign banks are x-efficient relative to small domestic banks). Even if mergers do take place between small and big banks, cost will reduce with out conferring any monopolistic power to these banks. This will also help in stability of the financial sector, which an important concern of the State Bank of Pakistan SBP). So the best policy option for SBP is to encourage mergers, while keeping a check on interest spread, so that the benefits from reduction in cost due mergers are passed on to depositors and borrowers.
    Keywords: x-efficiency; scale economies; technologicalprogress; Commercial Banks; Pakistan
    JEL: G21
    Date: 2006
  12. By: Attiya Y. Javed (Pakistan Institute of Development Economics, Islamabad); Robina Iqbal (Quaid-i-Azam University, Islamabad)
    Abstract: We investigated whether differences in quality of firm-level corporate governance can explain the firm-level performance in a cross-section of companies listed at Karachi Stock Exchange. Therefore, we analysed the relationship between firm-level value as measured by Tobin’s Q and total Corporate Governance Index (CGI) and three sub-indices: Board, Shareholdings and Ownership, and Disclosures and Transparency for a sample of 50 firms. The results indicate that corporate governance does matter in Pakistan. However, not all elements of governance are important. The board composition and ownership and shareholdings enhance firm performance, whereas disclosure and transparency has no significant effect on firm performance. We point out that those adequate firm-level governance standards can not replace the solidity of the firm. The low production and bad management practices
    Keywords: Corporate Governance, Firm Performance, Tobin’s Q, Agency Problem, Board Size, Shareholdings, Disclosures, Leverage, Code of Corporate Governance
    JEL: G12 G34 G38
    Date: 2007
  13. By: Daniel Friesner; Ron Mittelhammer; Robert Rosenman (School of Economic Sciences, Washington State University)
    Abstract: Data envelopment analysis (DEA) is among the most popular empirical tools for measuring cost and productive efficiency. Because DEA is a linear programming technique, establishing formal statistical properties for outcomes is difficult. We show that the incidence of inefficiency within a population of Decision Making Units (DMUs) is a latent variable, with DEA outcomes providing only noisy sample-based categorizations of inefficiency. We then use a Bayesian approach to infer an appropriate posterior distribution for the incidence of inefficient DMUs based on a random sample of DEA outcomes and a prior distribution on the incidence of inefficiency. The methodology applies to both finite and infinite populations, and to sampling DMUs with and without replacement, and accounts for the noise in the DEA characterization of inefficiency within a coherent Bayesian approach to the problem. The result is an appropriately up-scaled, noise-adjusted inference regarding the incidence of inefficiency in a population of DMUs.
    Keywords: Data Envelopment Analysis, latent inefficiency, Bayesian inference,Beta priors, posterior incidence of inefficiency
    JEL: C11
    Date: 2006–08

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