New Economics Papers
on Efficiency and Productivity
Issue of 2007‒06‒23
eighteen papers chosen by

  1. Production Efficiency and Total Factor Productivity Growth in Turkish State Agricultural Enterprises By Ertugrul Deliktas; Mehmet Candemir
  2. Foreign direct investment and firm level productivity - A panel data analysis By Gachino, Geoffrey
  3. Human Capital, Innovation, and Productivity Growth: Tales from Latin America and Caribbean By Yoruk, Baris
  4. Urban Economies and Productivity By Baldwin, John R.; Beckstead, Desmond; Brown, W. Mark; Rigby, David
  5. Sectoral productivity in the United States: recent developments and the role of IT By Carol Corrado; Paul Lengermann; Eric J. Bartelsman; J. Joseph Beaulieu
  6. Why labour market regulation may pay off: Worker motivation, co-ordination and productivity growth By Servaas Storm; C.W.M. Nastepaad
  7. Exprots, FDI, and Productivity: Evidence from Japanese Manufacturing Firms By Hyeog Ug Kwon
  8. Productivity and Transition in Swedish Iron and Steel, 1870-1940 By Houpt, Stefan
  9. Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms By Del Gatto, Massimo; Ottaviano, Gianmarco I P; Pagnini, Marcello
  10. What Determines Productivity in Senegal? Sectoral Disparities and the Dual Labor By Fabrice Murtin; Damien Echevin
  11. On the Sensitivity of Aggregate Productivity Growth Rates to Noisy Measurement By Frank T. Denton
  12. The effect of Strategic Sale of Banks: Evidence from Indonesia By Rasyad A. Parinduri; Yohanes E. Riyanto
  13. Bank Efficiency and Market Structure: What Determines Banking Spreads in Armenia? By Holger Floerkemeier; Era Dabla-Norris
  14. Barriers to Technology Adoption, International R&D Spillovers and Growth By Jesus Crespo Cuaresma; Neil Foster; Johann Scharler
  15. Disaggregate Productivity Comparisons: Sectoral Convergence in OECD Countries By Johannes Van Biesebroeck
  16. Ownership, Performance and Executive Turnover By Chi, Wei; Wang, Yijiang
  17. Locational determinants of the ICT sector across Italy By A. Lasagni; F. Sforzi
  18. Foreign aid and export performance: a panel data analysis of developing countries By Jonathan Munemo; Subhayu Bandyopadhyay; Arabinda Basistha

  1. By: Ertugrul Deliktas (Department of Economics, Ege University); Mehmet Candemir (Odemis Vocational Studies, Ege University)
    Abstract: This paper examines the productivity performance of Turkish State Agricultural Enterprises using Data Envelopment Analysis approach. Regarding this, the paper mainly focuses on production efficiency or technical efficiency and total factor productivity growth of the enterprises over the 1999-2003 period. In the second stage of the study, we use a regression analysis to estimate the affects of potential factors influencing the production efficiency of the enterprises. The empirical results indicate that during this period, the agricultural enterprises experienced technical regress, on average, while the technical efficiency improved 1.5 percent. On the other hand,, the total factor productivity decreased 1.2 percent due to 2.7 percent technical regress over the study period. Also, the results of regression estimation indicate that irrigation rate, tractor as an indicator of existing technology, and the geographic regions of enterprises are important determinants of production efficiency.
    Keywords: State agricultural enterprises in Turkey, total factor productivity growth, data envelopment analysis
    JEL: C43 D24 Q12
    Date: 2007–04
  2. By: Gachino, Geoffrey (United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology)
    Abstract: This paper uses panel data to examine the effect of foreign presence on firm level productivity in the Kenyan manufacturing industry employing "traditional" and "recent" methodologies both based on production function framework. A detailed comparative behaviour between foreign and local indigenous firms showed that foreign firms dominated in virtually all the economic activities including productivity performance. Analysis of productivity determinants following traditional approach indicated a statistically significant role played by foreign presence on firm level total factor productivity thus, supporting spillover occurrence argument. However, results based on recent methodologies showed no effect of foreign presence on firm level total factor productivity hence failing to support spillover occurrence dictum. These results indicate that use of different methodologies even within the same theoretical framework can result in divergent findings. This notwithstanding, the paper further argues that use of productivity based methodologies largely masks the nature, actual processes and mechanisms through which spillovers occur. The paper therefore advocates for a "paradigm shift" in the spillover analysis techniques and recommends a broader approach with particular emphasis on technological innovations which takes into consideration learning, capability building and innovation.
    Keywords: International Economic Relations, Foreign Direct Investment, Technology Transfer, Total Factor Productivity, Technological Change, Innovations, Kenya
    JEL: O33 F21 C33 O16 D24 O55
    Date: 2007
  3. By: Yoruk, Baris
    Abstract: Why have Latin American and Caribbean countries (LAC countries) not replicated Western economic success? We investigate the reasons behind the economic stagnation of LAC countries for the past four decades. We utilize a nonparametric Malmquist productivity index for relevant cross-country and over time productivity growth, technological change, and technical efficiency change comparisons. We document that productivity growth differences between LAC countries and Western countries can only partially be attributed to human capital differences. We argue that along with inefficient production, differences in civil, political, and economic policies and institutions are promising factors in explaining the long-run economic performance of LAC countries.
    Keywords: Caribbean; Latin America; Institutions; Malmquist productivity index
    JEL: O40 N26 P52
    Date: 2007–05–15
  4. By: Baldwin, John R.; Beckstead, Desmond; Brown, W. Mark; Rigby, David
    Abstract: Productivity levels and productivity growth rates vary significantly over space. These differences are perhaps most pronounced between countries, but they remain acutely evident within national spaces as economic growth favors some cities and regions and not others. In this paper, we map the spatial variation in productivity levels across Canadian cities and we model the underlying determinants of that variation. We have two main goals. First, to confirm the existence, the nature and the size of agglomeration economies, that is, the gains in efficiency related to the spatial clustering of economic activity. We focus attention on the impacts of buyer-supplier networks, labour market pooling and knowledge spillovers. Second, we identify the geographical extent of knowledge spillovers using information on the location of individual manufacturing plants. Plant-level data developed by the Micro-economic Analysis Division of Statistics Canada underpin the analysis. After controlling for a series of plant and firm characteristics, analysis reveals that the productivity performance of plants is positively influenced by all three of Marshall's mechanisms of agglomeration (Marshall, 1920). The analysis also shows that the effect of knowledge spillovers on productivity is spatially circumscribed, extending, at most, only 10 km beyond individual plants. The reliance of individual businesses on place-based economies varies across the sectors to which the businesses are aggregated. These sectors are defined by the factors that influence the process of competition'access to natural resources, labour costs, scale economies, product differentiation, and the application of scientific knowledge. Neither labour market pooling, buyer-supplier networks nor knowledge spillovers are universally important across all sectors. This paper provides confirmation of the importance of agglomeration, while also providing evidence that external economies are spatially bounded and not universally im
    Keywords: Business performance and ownership, Manufacturing, Regional and urban profiles
    Date: 2007–06–18
  5. By: Carol Corrado; Paul Lengermann; Eric J. Bartelsman; J. Joseph Beaulieu
    Abstract: This paper introduces new estimates of recent productivity developments in the United States, using an appropriate theoretical framework for aggregating industry MFP to sectors and the total economy. Our work sheds light on the sources of the continued strong performance of U.S. productivity since 2000. We find that the major sectoral players in the late 1990s pickup were not contributors to the more recent surge in productivity. Rather, striking gains in MFP in the finance and business service sector, a resurgence in MFP growth in the industrial sector, and an end to drops elsewhere more than account for the aggregate acceleration in productivity in recent years. Further, some evidence is found for a link between IT intensity and the recent productivity acceleration.
    Date: 2007
  6. By: Servaas Storm (Department of Economics, Delft University of Technology, The Netherlands.); C.W.M. Nastepaad
    Abstract: The impact of labour market regulation on labour productivity growth is ambiguous: on the one hand, regulation raises labour adjustment costs, which negatively affects productivity; but on the other hand, regulation may (for various reasons) raise worker motivation and commitment and (by means of wage bargaining co-ordination) stimulate labour-saving technological progress, thus raising productivity. We present empirical evidence for a cross-section of 20 OECD countries (1984-1997) that relatively rigid (i.e. regulated and co-ordinated) labour markets promote long-run labour productivity growth. This conclusion is reinforced when we differentiate between (three) categories of labour markets in the OECD countries and test for differences in productivity performance.
    Keywords: labour productivity, employment security, labour flexibility, measurement, OECD countries
  7. By: Hyeog Ug Kwon
    Abstract: This paper employs nonparametric tests and Japanese firm level data to examine the hypothesis put forward by Helpman, Melitz and Yeaple (2003) and Head and Ries (2003) that firms engaging in FDI are more productive than other firms. We find that the productivity distribution of foreign firms operating in Japan dominates that of Japanese multinationals, which dominates that of exporters, which in turn dominates that of non-exporters, thus confirming the theoretical predictions.
    Keywords: Export, FDI, TFP, nonparametric Kolmogorov-Smirnov test
    JEL: F14 F23 D21
    Date: 2007–06
  8. By: Houpt, Stefan
    Abstract: This paper would like to analyse how Swedish iron and steel entrepreneurs reacted to the strains of increasing competition on world markets which affected the industry between 1870 and 1940. It implicitly searches for readjustments taken by the sector as a whole in order to increase productivity. A first part of the paper presents the breakdown into periods and the background to the transitions we are going to examine. We then go on to describe the data we have assembled for the contrast both from national accounts and complementary sources. We contrast the coherence of the data series by estimating total factor productivity with a primal and a dual approach and by looking at factor substitution and relative prices. Next we examine the contribution to growth of the different inputs: labour, capital, resources and TFP. We find evidence for the industry reacting to competitive strains and overall we find TFP as the main responsible force.
    Date: 2007–06
  9. By: Del Gatto, Massimo; Ottaviano, Gianmarco I P; Pagnini, Marcello
    Abstract: We use Italian firm-level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm-level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.
    Keywords: Cost dispersion; firm selection; firm-level data; openness to trade; total factor productivity
    JEL: F12 F15 R13
    Date: 2007–06
  10. By: Fabrice Murtin (LSE, London; PSE and CREST, GREDI); Damien Echevin (GREDI, Département d'économique, Université de Sherbrooke)
    Abstract: This paper presents evidence concerning the determinants of productivity in Senegal. Using an original data set that combines data on both employers and their employees, we bring to light significant gaps between the formal and informal sectors. These differences are analyzed both at the aggregate and at the individual level. As a result, we find that differences in human and physical capital account for about two thirds (30% for physical capital and 40% for human capital) of the gap in output per worker between the two sectors. Our results also document considerable heterogeneity between branches of activity: in the formal sector, some activities such as the textile or the paper industries boast increasing returns due to large elasticity; in the informal sector, trade and services firms have the same patterns as in formal ones. Two other important findings concern the informal sector. First, older firms have high capital elasticity. Second, overall capital elasticity increases. Those results thus support the idea that a real potential for growth exists in the informal sector. Finally, adopting a development policy perspective, we emphasize that public policies should focus on infrastructures that impact significantly on both sectors, as well as on schooling that triggers considerable externality, especially in the informal sector.
    Keywords: : formal and informal sectors; productivity; externalities
    JEL: O17 O47 J24
    Date: 2007
  11. By: Frank T. Denton
    Abstract: Aggregate rates of productivity growth are among the most closely watched indicators of economic performance. They are also among the most difficult to measure accurately. This paper explores the sensitivity of such rates to random measurement error using a simple generic model. The model allows for errors in the input and output components of the productivity ratio, with different variances, and for serial and cross correlation of the errors. The effects of the errors are considered from the point of view of growth rates themselves, changes in growth rates, and comparisons between rates in different countries.
    Date: 2007–05
  12. By: Rasyad A. Parinduri (Singapore Center for Applied and Policy Economics (SCAPE) Department of Economics, National University of Singapore); Yohanes E. Riyanto (Department of Economics, National University of Singapore)
    Abstract: We examine the effect of strategic sale—the sale of banks to strategic foreign investors—on banks’ performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.
    Keywords: banking crisis, recapitalized banks, the sale of assets, difference- in-difference models, matching estimator
    JEL: C21 C23 G21 G28
    Date: 2007–05
  13. By: Holger Floerkemeier; Era Dabla-Norris
    Abstract: Despite far-reaching banking sector reforms and a prolonged period of macroeconomic stability and strong economic growth, financial intermediation in Armenia has lagged behind other transition countries, and interest rate spreads have remained higher than in most Central and Eastern European transition countries. This paper examines the determinants of interest rate spreads and margins in Armenia using a bank-level panel dataset for the period 2002 to 2006. We find that bank-specific factors, such as bank size, liquidity, and market power, as well as the market structure within which banks operate, explain a large proportion of crossbank, cross-time variation in spreads and margins. The results suggest that there is a large potential to increase cost efficiency and competition in the banking system.
    Keywords: Working Paper , Banking systems , Armenia , Interest rates ,
    Date: 2007–06–12
  14. By: Jesus Crespo Cuaresma; Neil Foster; Johann Scharler
    Abstract: Panel data is used to investigate the extent of R&D spillovers between OECD countries, and the importance of barriers to technology adoption in affecting the benefits of such spillovers. Our results indicate that countries with less regulated goods and labour markets benefit more from foreign R&D.
    Keywords: R&D Spillovers, Technology Adoption, Economic Growth
    JEL: O30 O40 C33
    Date: 2007–06
  15. By: Johannes Van Biesebroeck
    Abstract: International comparisons of productivity have used exchange rates or purchasing power parity (PPP) to make output comparable across countries. While aggregate PPP holds well in the long run, sectoral deviations are very persistent. It raises the need for a currency conversion factor at the same level of aggregation as the output that is compared. Mapping prices from household expenditure surveys into the industrial classification of sectors and adjusting for taxes and international trade, I obtain an expenditure-based sector-specific PPP. Using detailed price data for 1985, 1990, 1993, and 1996, I test whether the sectoral PPPs adequately capture differential changes in relative prices between countries. For agriculture and the majority of industrial sectors, but not for most service sectors, sectoral PPP is preferred over aggregate PPP. Using the most appropriate conversion factor for each industry, productivity convergence is found to be taking place in all but a few industries for a group of 14 OECD countries. The results are robust to the base year used for the currency conversion.
    Keywords: PPP; sectoral comparison; base year
    JEL: D24 F14 F31 O47
    Date: 2007–06–18
  16. By: Chi, Wei; Wang, Yijiang
    Abstract: To more thoroughly study the effect of ownership on management turnover, firms are classified by ownership simultaneously along two dimensions: types of owners and concentration of ownership. Under this new framework, a unique data set is used to study the sensitivity of management turnover to a company’s performance. The study confirms some of the results from previous studies. It also obtained interesting and important new results. It finds evidence that the sensitivity of management turnover to performance is curvilinear in ownership concentration, but in opposite directions under state and private ownership. It also provides evidence allowing us to rank firms in different categories of ownership by their sensitivity of management turnover to performance: Concentrated private ownership has the highest sensitivity, concentrated state ownership the lowest, and the two categories of dispersed ownership, one with a private investor and the other with the state as the largest shareholder, in between. Important policy implications of these findings are discussed.
    Keywords: state ownership; ownership concentration; performance; executive turnover;
    JEL: M51
    Date: 2007–05
  17. By: A. Lasagni; F. Sforzi
    Abstract: Is the rapid growth of the Information and Communication Technology (ICT) activities shaping new local specialization and industrial concentration? Does the analysis of local economic conditions help to explain the formation of “places” specialized in ICT? We use 2001 Census data by Local Labour Systems (LLS) to investigate the characteristics of ICT specialization in Italy. Our investigation is based on a cross-sectional regression model using data for 686 LLS in which the dependent variable is an index of ICT local employment concentration. The measure of concentration we adopted is the location quotient (LQ) index. The LLS specialized in ICT activities in Italy account for 7.3% of total LLS. They are distributed all over the country, although those with highest LQ values are mainly in North-west and Central-south Italy. Our regression analysis provides the following results. The general econometric specification, i.e. that applied to all LLS, supports a positive and significant relationship between LLS specialized in some manufacturing industries (machinery, equipment and instruments; petrochemicals, rubber and plastic products; transport equipment; and paper, publishing and printing) or business services and relatively high localization of ICT employment. Besides, the model indicates that for LLS characterized by manufacturing SMEs there is a low probability of attaining a greater-than-the-national-average ICT employment specialization. These econometric results are in line with the general opinion that product specialization of Italian industries (the so-called “Made in Italy”) and SMEs are less likely to be involved in ICT diffusion to business. Nevertheless, this pattern of results does not justify the interpretation that the industrial districts (where SMEs employment has the largest share) are at the origin of inadequate ICT diffusion to business in Italy. In fact, when the analysis is focused on industrial districts the results are slightly different. In particular, the variable SMEs does not produce a significant coefficient, while textile and clothing industries show a positive association with ICT, even though significant only at 10% level. What is the main policy implication of these empirical findings? National government’s policy makers should become aware that industrial districts are an appropriate instrument to promote the development of the ICT sector, although so far they have been neglected. "
    Keywords: Information and Communication Technologies, Local Labour Systems, geographical concentration, local specialization
    JEL: L60 O14 R12 O52
    Date: 2007
  18. By: Jonathan Munemo; Subhayu Bandyopadhyay; Arabinda Basistha
    Abstract: The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.
    Keywords: Developing countries - Economic conditions ; Exports
    Date: 2007

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