New Economics Papers
on Efficiency and Productivity
Issue of 2007‒05‒26
six papers chosen by

  1. Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach By Helmut Fryges; Joachim Wagner
  2. Does financial intermediation matter for macroeconomic efficiency? By Pierre-Guillaume Meon; Laurent Weill
  3. X-efficiency, Scale Economies, Technological Progress and Competition: A Case of Banking Sector in Pakistan By Idrees Abdul Qayyum; Sajawal Khan
  4. Using a modified DEA model to estimate the importance of objectives. An application to agricultural economics. By Francisco J. André; Inés Herrero; Laura Riesgo
  5. Productivity and Taxes as Drivers of FDI By Razin, Assaf; Sadka, Efraim
  6. Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China By David Dollar; Shang-Jin Wei

  1. By: Helmut Fryges (ZEW Mannheim); Joachim Wagner (Leuphana University of Lüneburg and IZA)
    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
  2. By: Pierre-Guillaume Meon (DULBEA, Université Libre de Bruxelles, Brussels.); Laurent Weill (LARGE, Université Robert Schuman, Institut d'Etudes Politiques, France)
    Abstract: This paper investigates whether financial intermediary development influences macroeconomic technical efficiency on a sample of 47 countries, both developed and developing, over 1980-1995. We do so by applying Battese and Coelli (1995)’s method at the aggregate level. It is found that financial intermediary development, except financial depth, is on average associated with more efficiency. However we find strong evidence that this relationship is conditional on the level of economic development. The lower economic development the weaker is the impact of financial development on efficiency. That impact can even become negative in the poorest countries.
    Keywords: financial development, income, aggregate productivity, efficiency.
    JEL: C33 O11 O16 O47
    Date: 2007–04
  3. By: Idrees Abdul Qayyum (Pakistan Institute of Development Economics, Islamabad.); Sajawal Khan (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: This study aims at empirical investigation of the x-efficiency, scale economies, and technological progress of commercial banks operating in Pakistan using balance panel data for 29 banks. As banking sector efficiency is considered 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 for the period 2000-05. The scale economies for small banks, especially foreign banks are higher. Our results suggest the existence of technological progress for all groups of banks for the year 2000 and onward. It was lowest for big banks in 2000 and highest for foreign banks in 2005. Again, technological progress is lower for domestic banks relative to foreign banks. The results show also that the 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 without conferring any monopolistic power to these banks. This will also help in stability of the financial sector, which is 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 to mergers are passed on to depositors and borrowers.
    Keywords: X-efficiency, Scale Economies, Technological Progress, Competition, Spread
    JEL: G14 G18 G21
    Date: 2007
  4. By: Francisco J. André (Department of Economics, Universidad Pablo de Olavide); Inés Herrero (Department of Business Administration, Universidad Pablo de Olavide); Laura Riesgo (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper shows a connection between Data Envelopment Analysis (DEA) and the methodology proposed by Sumpsi et al. (1997) to estimate the weights of objectives for decision makers in a multiple attribute approach. This connection gives rise to a modified DEA model that allows to estimate not only efficiency measures but also preference weights by radially projecting each unit onto a linear combination of the elements of the payoff matrix (which is obtained by standard multicriteria methods). For users of Multiple Attribute Decision Analysis the basic contribution of this paper is a new interpretation of the methodology by Sumpsi et al. (1997) in terms of efficiency. We also propose a modified procedure to calculate an efficient payoff matrix and a procedure to estimate weights through a radial projection rather than a distance minimization. For DEA users, we provide a modified DEA procedure to calculate preference weights and efficiency measures which does not depend on any observations in the dataset. This methodology has been applied to an agricultural case study in Spain.
    Keywords: Multicriteria Decision Making, Goal Programming, Weights, Preferences, Data Envelopment Analysis.
    JEL: C61 Q12
    Date: 2007–05
  5. By: Razin, Assaf; Sadka, Efraim
    Abstract: We study the role of productivity and corporate taxation as driving forces of FDI among OECD countries in the presence of threshold barriers, which generate two margins for FDI decisions. Some simulations, based on the estimation results, suggest that there are marked differences in the sensitivity of FDI flows from the U.S. to productivity and taxes in OECD countries. Data on FDI flows are drawn from the International Direct Investment dataset (Source OECD), covering the bilateral FDI flows among 18 OECD countries over the period 1987 to 2003.The sensitivity of these flows to productivity in the U.K. is positive and high, relative to other EU countries and Japan. Similarly, the sensitivity of these flows to taxes in the U.K is negative and high, relative to other EU countries and Japan.
    Keywords: corporate taxation; Foreign direct investment; productivity; selection and flow equations
    JEL: F2 F3 H2
    Date: 2007–05
  6. By: David Dollar; Shang-Jin Wei
    Abstract: Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors. It provides a systematic comparison of investment efficiency among wholly and partially state-owned, wholly and partially foreign-owned, and domestic privately owned firms, conditioning on their sector, location, and size characteristics. It finds that even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms. Similarly, certain regions and sectors have consistently lower returns to capital than other regions and sectors. By our calculation, if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth (and hence could raise its household consumption and deliver a faster improvement to its citizens' living standard).
    JEL: E22 F21 O1
    Date: 2007–05

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