New Economics Papers
on Efficiency and Productivity
Issue of 2007‒06‒30
eleven papers chosen by

  1. Technology, automation, and productivity of stock exchanges: International evidence By Hasan, Iftekhar; Malkamäki, Markku; Schmiedel, Heiko
  2. Multifactor Productivity and its Determinants: Al Empirical Analysis for Mexican Manufacturing. By Héctor Salgado Banda; Lorenzo E. Bernal Verdugo
  3. How to Estimate Public Capital Productivity? By Christophe Hurlin
  4. Export Entry, Export Exit, and Productivity in German Manufacturing Industries By Joachim Wagner
  5. The Relationship among innovative Output, Productivity, and Profitability. A test comparing USPTO and EPO data By Enrico Santarelli; Francesca Lotti
  6. Productivity and Trade Orientation in UK Manufacturing By Marian Rizov; Patrick Paul Walsh
  7. The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania By Msuya, Elibariki
  8. Translog Cost Functions: An Application for Mexican Manufacturing. By Héctor Salgado Banda; Lorenzo E. Bernal Verdugo
  9. Linkages Between Performance and Institutions in the Primary and Secondary Education Sector By Douglas Sutherland; Robert Price
  10. Dynamic Aspects of Productivity Spillovers, Terms of Trade and The "Home Market Effects" By Ippei Fujiwara; nd Naohisa Hirakata
  11. Ownership Structure, Financial Constraints and Investment Decisions: Evidence from a Panel of Italian Firms By Crespi Francesco; Scellato Giuseppe

  1. By: Hasan, Iftekhar (Rensselaer Polytechnic Institute and Bank of Finland Research); Malkamäki, Markku; Schmiedel, Heiko
    Abstract: The paper stresses on the importance of understanding the operational choices, strategies, and performances of stock exchanges as regular operating firms (Arnold et al (1999), and Pirrong (1999)) Using unbalanced panel data on 49 stock exchanges over the period 1989–1998, the paper traces the productivity of stock exchanges over time and across different types and groups of exchanges. We find significant variability in respect of the productivity – revenue and cost efficiency – across these exchanges. On average, North American exchanges are found to be most cost and revenue efficient. However, our findings also indicate that European exchanges have improved the most, in respect of cost efficiency, while exchanges in South America and Asia-Pacific regions are found to be lagging as regards both cost and revenue estimations. The evidence also indicates that investment in technology-related developments effectively influenced cost and revenue efficiency. Moreover, organisational structure and market competition are found to be significantly associated with both cost and revenue efficiency for the exchanges studied, whereas market size and quality are related only to revenue efficiency.
    Keywords: stock exchanges; technological progress; technical efficiency
    JEL: C23 G20 L20 O50
    Date: 2007–02–27
  2. By: Héctor Salgado Banda; Lorenzo E. Bernal Verdugo
    Abstract: We use data from the Annual Industrial Survey for 1996-2003. First, we estimate production functions by means of growth accounting exercises and panel data econometrics for the whole sector and for 14 comprehensive groups. Various measures of Multifactor Productivity (MFP) are constructed, as we consider diverse combinations of inputs with capital, labour, electricity and transport. This allows us to compare MFP growth rates between groups. Second, we analyse econometrically some of the determinants of MFP and Labour Productivity (LP) growth. We find that, on the one hand, there is some evidence of a positive relationship between market concentration and technology adoption; on the other hand, both technology adoption and human capital seem to be promoting productivity, whilst market concentration is exerting a negative influence on it. In sum, our results suggest that, once controlling for the effect on technology adoption, more concentration (conversely, less competition) has a negative impact on productivity.
    Keywords: Panel data, Productivity, Manufacturing, Competition
    JEL: C33 D24 L11
    Date: 2007–05
  3. By: Christophe Hurlin (LEO - Laboratoire d'économie d'Orleans - [CNRS : UMR6221] - [Université d'Orléans])
    Abstract: We propose an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors' productivity. Our analysis is based on the replication of these approaches on pseudo-samples generated using a stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data. <br />The results suggest that the production function approach may not be reliable to estimate this contribution. In our model, this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs
    Keywords: Infrastructures, Public capital, Cointegrated regressors..
    Date: 2007–06–22
  4. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: This paper contributes to the flourishing literature on exports and productivity by using a unique newly available panel of exporting establishments from the manufacturing sector of Germany from 1995 to 2004 to test three hypotheses derived from a theoretical model by Hopenhayn (Econometrica 1992): (H1) Firms that stop exporting in year t were in t-1 less productive than firms that continue to export in t. (H2) Firms that start to export in year t are less productive than firms that export both in year t-1 and in year t. (H3) Firms from a cohort of export starters that still export in the last year of the panel were more productive in the start year than firms from the same cohort that stopped to export in between. While results for West Germany support all three hypotheses, this is only the case for (H1) and (H2) in East Germany.
    Keywords: Export entry, export exit, productivity
    JEL: F14 L60
    Date: 2007–06
  5. By: Enrico Santarelli (University of Bologna, Department of Economics; ENCORE, Amsterdam; Max Planck Institute of Economics Jena, Entrepreneurship, Growth and Public Policy); Francesca Lotti (Bank of Italy, Economic Research Department)
    Abstract: The aim of this paper is to test whether patent-based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already under way respectively at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high-tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique data set which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Our findings show that only patents with the EPO, along with larger firm size, have a statistically significant relationship with productivity growth and profitability. This suggests that firms pursue different strategies when patenting with the USPTO and the EPO, and that this difference reflects statutory changes made to the former during the relevant period.
    Keywords: IP Protection, Productivity, Profitability, Italy
    JEL: L25 L65 O34
    Date: 2007–06–25
  6. By: Marian Rizov (Middlesex University Business School and Trinity College Dublin); Patrick Paul Walsh (Trinity College Dublin and IZA)
    Abstract: Within a structural model we explicitly allow for the trade orientation of companies to estimate productivity dynamics within 4-digit UK manufacturing industries. We use the FAME data on UK companies over the period 1994-2003. Following Ackerberg et al. (2005) we adjust the algorithm in Olley and Pakes (1996) by augmenting investment and exit decisions to allow for exogenous demand shocks by trade orientation, assuming that labour and capital are state variables, and productivity follows a first-order Markov process. We extend the framework further by allowing exporting to be an additional control variable that is driven by lagged productivity as in Melitz (2003), leading productivity to follow a second-order Markov process. We find that over the period of introduction of the Euro improvements in aggregate productivity were driven by exporters - mainly by market share reallocations away from inefficient and towards efficient export companies. Aggregate productivity also benefited from improvements in productivity of non-exporters but was driven by improvements within companies rather than by market share reallocations. In a period of sustained real exchange rate appreciation both export cleansing and competitive pressure on non-exporters seem to have contributed to improvements of productivity in the UK manufacturing.
    Keywords: productivity dynamics, structural model, trade orientation, manufacturing companies, UK
    JEL: F14 D24
    Date: 2007–05
  7. By: Msuya, Elibariki
    Abstract: In this paper, the impact of Foreign Direct Investment (FDI) on agricultural productivity and poverty reduction are examined. Factors that hinder FDI flow to agriculture in Tanzania are assessed. Specifically, the role of FDI in improving an agricultural firm’s efficiency in Tanzania and reforms required for more effective investment promotion in agriculture are examined. The study uses literature review to draw its conclusions and policy recommendations. It is observed that FDI has a positive impact on productivity especially to smallholder farmers who are linked in integrated producer schemes. The study recommends rethinking of the smallholder institutional setup for increasing productivity and FDI flow to the agricultural sector. An important implication of the results is that FDI to Tanzania and specifically to agriculture, has a much more far- reaching economic and social impact than in other sectors.
    Keywords: FDI; Smallholders; Integrated Producer Schemes; Agricultural Productivity; Poverty Reduction; Tanzania
    JEL: Q01 F21 Q13
    Date: 2007
  8. By: Héctor Salgado Banda; Lorenzo E. Bernal Verdugo
    Abstract: We use translog cost functions to estimate own-price and substitution elasticities of input demands, economies of scale and average costs in Mexican manufacturing. Data from the Mexican Annual Industrial Survey is used for 1996, 2000 and 2003. We show that a model that allows for nonhomotheticity and nonunitary elasticities of substitution is appropriate to represent the production structure. Allen-Uzawa elasticities indicate the existence of substitution possibilities amongst inputs. The demand for electricity is essentially unitary elastic. All cross-price elasticities are less than one. Both scale economies and average costs diminish as the size of activity class increases. Economies of scale increased for any level of output. The differences in average costs between small and large activity classes were reduced and some disparities prevail in a number of manufacturing groups.
    Keywords: Simultaneous equation models, Translog cost function, Manufacturing
    JEL: C3 D24 L60
    Date: 2007–04
  9. By: Douglas Sutherland; Robert Price
    Abstract: The efficiency of schools diverges dramatically across countries in the OECD and can also vary markedly within countries. These differences in levels of efficiency can be traced to policy and institutional settings. As such, moving to best practice could boost educational attainment and reduce pressure on budgetary resources. This paper assesses empirically the relationship between institutional and policy settings and the efficiency of public spending on primary and secondary education across OECD countries. The analysis builds on two previous papers, which respectively developed OECD-area indicators of educational efficiency based on PISA score data and institutional indicators based on questionnaire responses. The results identify a number of institutional and policy settings that appear conducive to raising efficiency, as well as policies that appear to be detrimental to achieving higher levels of efficiency. <P>Liens entre les indicateurs d'efficacité et les indicateurs institutionnels dans le secteur de l'enseignement primaire et secondaire <BR>L'efficacité des établissements scolaires varie énormément dans les pays de la zone OCDE et peut aussi varier sensiblement à l'intérieur d'un même pays. Ces différences de niveaux d'efficience peuvent être attribuées aux politiques publiques et aux structures institutionnelles. De ce fait, s'orienter vers les meilleures pratiques pourrait stimuler les performances des systèmes scolaires. Cet article évalue de manière empirique la relation entre les structures institutionnelles, les politiques gouvernementales et l'efficacité des dépenses publiques consacrées à l'éducation primaire et secondaire dans les pays de l'OCDE. Cette analyse s'appuie sur deux précédentes études, l'une qui a élaboré des indicateurs au niveau de la zone OCDE de l'efficacité des systèmes éducatifs à partir des scores PISA, l'autre des indicateurs des structures institutionnelles à partir des réponses à un questionnaire. Ceci conduit à identifier un certain nombre de structures institutionnelles et de politiques publiques qui semblent induire une efficience accrue, mais aussi des politiques qui semblent nuire à une amélioration des niveaux d'efficacité.
    Keywords: education, dépenses publiques, éducation, public spending, efficiency, efficience, Institutional indicators, Indicateurs institutionnels, efficacité
    JEL: H52 I21 I22 I28
    Date: 2007–06–11
  10. By: Ippei Fujiwara (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:; nd Naohisa Hirakata (Financial Systems and Bank Examination Department, Bank of Japan (E-mail:
    Abstract: In this paper, we first set up a model that incorporates firm dynamics into the Global Economy Model (henceforth, GEM) developed by the IMF Research Department. Then, we show how the economic variables respond to the shocks that shift the production frontier outwards, namely productivity gains in manufacturing, efficiency gains in creating new firms, and an increase in the labor force. Contrary to the model used in previous research on the same topic by Corsetti, Martin and Pesenti (2007, henceforth, CMP), our model contains rich and realistic dynamics embedded in the GEM such as a time-to-build constraint for firm dynamics, and nominal price and wage stickiness. We show that (1) the analytical results of CMP are dependent on the elasticity of substitution between domestic and foreign goods, (2) short-run responses could be different from those in CMP because of the existence of price and wage stickiness, and (3) persistence of shocks also alters the direction of responses via the wealth effect. These results suggest that it is of great importance for policy institutions to acknowledge the dynamic aspects of productivity spillovers by simulating a model with richer dynamics like the GEM.
    Keywords: New Keynesian Model, Monetary Policy, Transparency, Productivity Growth, Learning
    JEL: E52
    Date: 2007–06
  11. By: Crespi Francesco; Scellato Giuseppe
    Date: 2007–03

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