New Economics Papers
on Efficiency and Productivity
Issue of 2007‒05‒12
twelve papers chosen by

  1. The decline in Italian productivity: a study in estimation of long-Run trends in Total Factor Productivity with panel cointegration methods By Fachin, Stefano; Gavosto, Andrea
  2. Exports and Productivity Growth – First Evidence from a Continuous Treatment Approach By Hemlut Fryges; Joachim Wagner
  3. Decomposing differences in total factor productivity across firm size By Laia Castany; Enrique López-Bazo; Rosina Moreno
  4. Total Factor Productivity Growth and the Environment: A Case for Green Growth Accounting By Anastasios Xepapadeas; E. Tzouvelekas; D. Vouvaki
  5. Environmental Efficiency, Emission Trends and Labour Productivity: Trade-Off or Joint Dynamics? Empirical Evidence Using NAMEA Panel Data By Massimiliano Mazzanti; Roberto Zoboli
  6. R&D Spillovers Through Trade in a Panel of OECD Industries By Bulent Unel
  7. Productivity growth and competition in spanish manufacturing firms: What has happened in recent years? By Agustí Segarra-Blasco; Mercedes Teruel-Carrizosa
  8. Productive efficiency and regulatory reform: The case of vehicle inspection services. By Francesc Trillas; Daniel Montolio; Néstor Duch
  9. Human Capital Spillovers and Economic Performance in the Workplace in 2004: Some British Evidence By Renuka Metcalfe; Peter J. Sloane
  10. Ageing, Labor Turnover and Firm Performance By Pekka Ilmakunnas; Mika Maliranta
  11. Americans Do I.T. Better: US Multinationals and the Productivity Miracle By Nick Bloom; Raffaella Sadun; John Van Reenen
  12. Measuring efficiency of Islamic banks: criteria, methods, and social priorities By Hasan, Zubair

  1. By: Fachin, Stefano; Gavosto, Andrea
    Abstract: The aim of this paper is (i) to propose a method for obtaining estimates of long-run total factor productivity (TFP) trends free from the restrictive assumptions needed by traditional growth accounting, requiring only data on inputs and output flows, and able to deliver estimates of long-run TFP trends; (ii) to apply it to the Italian manufacturing industries over the period 1980-2001, so to shed some light on the severe productivity slowdown of the last decade. The approach proposed relies on recent developments in the analysis of non-stationary, cross-correlated panels. The empirical application, consistently with growth accounting, supports the view that the decline in Italian labour productivity has been mostly due to a widespread fall in TFP growth. A simple regression points as main causes to the completion of a factor reallocation process among industries and inadequate R&D investment.
    Keywords: Labour Productvity; Productivity Slowdown; Italy; Panel Cointegration.
    JEL: C23 D24
    Date: 2007–05–07
  2. By: Hemlut Fryges (Centre of Economic Research, Mannheim); Joachim Wagner (Leuphana University of Lueneburg)
    Abstract: A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. On the other hand, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm’s export status and the growth of its labour productivity, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms’ export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm’s export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms’ export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms’ export-sales ratios.
    Keywords: Export-sales ratio, labour productivity, continuous treatment, dose-response function
    JEL: F14 F23 L60
    Date: 2007–05
  3. By: Laia Castany (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Universitat de Barcelona); Enrique López-Bazo (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona); Rosina Moreno (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de 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
    JEL: D24 J24 L25
    Date: 2007–03
  4. By: Anastasios Xepapadeas (University of Crete); E. Tzouvelekas (University of Crete); D. Vouvaki (University of Crete)
    Abstract: We examine whether the use of the environment, proxied by CO2 emissions, as a factor of production contributes, in addition to conventional factors of production to output growth, and thus it should be accounted for in total factor productivity growth (TFPG) measurement and deducted from the .residual. A theoretical framework of growth accounting methodology with environment as a factor of production which is unpaid in the absence of environmental policy is developed. Using data from a panel of 23 OECD countries, we show that emissions. growth have a statistically significant contribution to the growth of output, that emission augmenting technical change is present along with labor augmenting technical change, and that part of output growth which is traditionally attributed to technical change should be attributed to the use of the environment as a not fully compensated factor of production. Our results point towards the need for developing a concept of "Green Growth Accounting".
    Keywords: Solow Residual, Total Factor Productivity Growth, Growth, Environment, Green Growth Accounting
    JEL: O47 Q2
    Date: 2007–04
  5. By: Massimiliano Mazzanti (University of Ferrara); Roberto Zoboli (CERIS-CNR Milan & Catholic University of Milan)
    Abstract: The paper provides new empirical evidence on the relationship between environmental efficiency and labour productivity using industry level data. We first provide a critical and extensive discussion around the interconnected issues of environmental efficiency and performance, firm performances and labour productivity, and environmental and non-environmental innovation dynamics. The most recent literature dealing with environmental innovation, environmental regulations and economic performances is taken as reference. We then test a newly adapted EKC hypothesis, by verifying the correlation between the two trends of environmental efficiency (productivity, namely sector emission on added value) and labour productivity (added value on employees) over a dynamic path. We exploit official NAMEA data sources for Italy over 1990-2002 for 29 sectoral branches. The period is crucial since environmental issues and then environmental policies came into the arena, and a restructuring of the economy occurred. It is thus interesting to assess the extent to which capital investments for the economy as a whole are associated with a positive or negative correlation between environmental efficiency of productive branches and labour productivity, often claimed by mainstream theory dealing with innovation in environmental economics. We believe that on the basis of the theoretical and empirical analyses focusing on innovation paths, firm performances and environmental externalities, there are good reasons to expect a positive correlation between environmental and labour productivities, or in alternative terms a negative correlation between mission intensity of production and labour productivity. The tested hypothesis is crucial within the long standing discussion over the potential trade-off or complementarity between environmental and labour productivity, strictly associated with sectoral and national technological innovation paths. The main added value of the paper is the analysis of the aforementioned hypothesis by exploiting a panel data set based on official NAMEA sectoral disaggregated accounting data, providing both cross section heterogeneity and a sufficient time span. We find that for most emissions, if not all, a negative correlation emerges between labour productivity and environmental productivity. Though this trend appears driven by the macro sectors services, manufacturing and industry, this evidence is not homogenous across emissions. In some cases U-shapes arise, mainly for services, and the assessment of Turning Points is crucial. Manufacturing and industry, all in all, seem to have a stronger weight. Overall, then, labour productivity dynamics seem to be complementary to a decreasing emission intensity of productive processes. The extent to which this evidence derives from endogenous market forces, industrial restructuring and/or from policy effects is scope for further research. The relative role of manufacturing and services in explaining this pattern is also to be analysed in future empirical analyses. In addition, the role of capital stocks and trade openness are extensions which may add value to future analyses carried out on the same NAMEA dataset.
    Keywords: Decoupling, NAMEA Emissions, Labour Productivity, Sectoral Added Value, Kuznets Curves, Environmental Efficiency
    JEL: C23 Q38 Q56
    Date: 2007–04
  6. By: Bulent Unel
    Abstract: This paper investigates the significance of Research and Development (R&D) spillovers through intra- and international trade in intermediate goods for productivity growth in a panel of OECD industries during 1973-1994. In the model, four different sources of R&D are identified: R&D conducted in the particular industry itself, R&D conducted in the same industries in other countries, R&D conducted in other domestic industries, and R&D conducted in other foreign industries. I find that among R&D sources the most important contributions to productivity growth come from the domestic R&D efforts. Here, own R&D is important for both domestic innovation and for the productivity catch-up process. Evidence that international R&D spillovers also have significant effects on productivity growth is found to be less robust. My analysis also shows that human capital affects productivity directly as a factor of production.
  7. By: Agustí Segarra-Blasco (Grup de Recerca d'Indústria i Territori (GRIT), Department d'Economia, Universitat Rovira i Virgili); Mercedes Teruel-Carrizosa (Grup de Recerca d'Indústria i Territori (GRIT), Department d'Economia, Universitat Rovira i Virgili)
    Abstract: This paper addresses the issue of the relationship between productivity and market competition. In comparison to the economies of other European countries, the Spanish economy has been growing, while productivity growth has stagnated. Here we provide empirical evidence about the relationship between productivity and market competition from Spanish manufacturing firms at firm level between 1994 and 2004. Correcting for selection bias, our study pays special attention to the patterns of productivity growth between openness and non-openness firms. When market competition increases the effect on firms operating in domestic markets is positive but when the level of competition is high incentives to invest in innovation and productivity gains disappear. The empirical relationship between competition and productivity is an inverted U-shape, where productivity growth is highest at intermediate levels of competition. The productivity growth of firms operating in international markets is higher than that of non-openness firms, but when market competition rises they moderate their productivity growth. Our empirical results suggest that the correct competition policy in the Spanish economy should remove the barriers to competition in internal markets in order to increase the incentives for manufacturing firms to invest in innovation and productivity growth.
    Keywords: Manufacturing industries, innovation, competitiveness, international trade, Heckman equation
    JEL: L25 O14 O33
    Date: 2006–12
  8. By: Francesc Trillas (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Economia i Història Econòmica, Universitat Autònoma de Barcelona); Daniel Montolio (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Hisenda Pública, Universitat de Barcelona); Néstor Duch (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)
    Abstract: Measuring productive efficiency provides information on the likely effects of regulatory reform. We present a Data Envelopment Analysis (DEA) of a sample of 38 vehicle inspection units under a concession regime, between the years 2000 and 2004. The differences in efficiency scores show the potential technical efficiency benefit of introducing some form of incentive regulation or of progressing towards liberalization. We also compute scale efficiency scores, showing that only units in territories with very low population density operate at a sub-optimal scale. Among those that operate at an optimal scale, there are significant differences in size; the largest ones operate in territories with the highest population density. This suggests that the introduction of new units in the most densely populated territories (a likely effect of some form of liberalization) would not be detrimental in terms of scale efficiency. We also find that inspection units belonging to a large, diversified firm show higher technical efficiency, reflecting economies of scale or scope at the firm level. Finally, we show that between 2002 and 2004, a period of high regulatory uncertainty in the sample’s region, technical change was almost zero. Regulatory reform should take due account of scale and diversification effects, while at the same time avoiding regulatory uncertainty.
    Keywords: Productive Efficiency, Regulatory Reform, Vehicle Inspections.
    Date: 2006–09
  9. By: Renuka Metcalfe (WELMERC, University of Wales Swansea); Peter J. Sloane (WELMERC, University of Wales Swansea and IZA)
    Abstract: This paper considers the impact of education and training on both individual and co-worker pay and establishment performance using the matched employer-employee data in WERS 2004, the panel dataset 1998-2004 and the new Financial Performance Questionnaire. This enables us to assess the impact of workplace education and training using both subjective (managers’ assessments) and objective data on productivity, profits and establishment survival. We establish that workplace education and training can have positive impacts on establishment financial performance, survival and growth. In contrast to extant studies, it was found that the square and the interaction between own and co-workers years of training also have a positive and significant impact on hourly pay. We find evidence indicating that establishments with 60% or more of workers trained have a higher establishment performance and also have a powerful impact on the likelihood of establishment survival.
    Keywords: human capital, spillovers, education, training, productivity, profitability, establishment survival
    JEL: I2 J4
    Date: 2007–05
  10. By: Pekka Ilmakunnas; Mika Maliranta
    Abstract: We study whether older workers are costly to firms. Our estimation equations are derived from a variant of the decomposition methods frequently used for measuring micro-level sources of industry productivity growth. By using comprehensive linked employer-employee data from the Finnish business sector, we study the productivity and wage effects, and hence the profitability effects, of hiring and separation of younger and older workers. The evidence shows that separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. Robustness checks include the use of regional labor supply and other variables as instruments for the potential endogeneity of the labor flows.
    Keywords: aging, productivity, wage, profits, hiring, separation, employer-employee data
    JEL: C43 J23 J24 J63 M51
    Date: 2007–05–03
  11. By: Nick Bloom; Raffaella Sadun; John Van Reenen
    Abstract: The US has experienced a sustained increase in productivity growth since the mid-1990s, particularly in sectors that intensively use information technologies (IT). This has not occurred in Europe. If the US "productivity miracle" is due to a natural advantage of being located in the US then we would not expect to see any evidence of it for US establishments located abroad. This paper shows in fact that US multinationals operating in the UK do have higher productivity than non-US multinationals in the UK, and this is primarily due to the higher productivity of their IT. Furthermore, establishments that are taken over by US multinationals increase the productivity of their IT, whereas observationally identical establishments taken over by non-US multinationals do not. One explanation for these patterns is that US firms are organized in a way that allows them to use new technologies more efficiently. A model of endogenously chosen organizational form and IT is developed to explain these new micro and macro findings.
    JEL: E22 O3 O47 O52
    Date: 2007–05
  12. By: Hasan, Zubair
    Abstract: This paper provides an appraisal of some of the researches conducted in recent years for evaluating the efficiency of Islamic banks. It is restricted to studies using parametric (SFA) and non-parametric (DEA) models. It finds that they leave much to be desired and the conclusions they arrive at are of suspect validity for a variety of reasons. On a more important side, the criteria – cost or profit – they invariably use for measuring efficiency albeit valid miss the essence of what Islamic banking aims to achieve. These banks must of course pay their way but more than that they have to meet certain social objectives and priorities. The fulfillment of social responsibilities even at the expense of reduced profits has to be the main justification for their existence.
    Keywords: Key words: Islamic banking; Efficiency criteria; SFA; DEA; Scial priorities. Key words: Islamic banking; Efficiency criteria; SFA; DEA; Scial priorities. Key words: Islamic banking; Efficiency criteria; SFA; DEA; Scial priorities. Islamic banking; Efficiency criteria; SFA; DEA; Scial priorities. Islamic banking; Efficiency criteria; SFA; DEA; Scial priorities.
    JEL: G21
    Date: 2007

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