New Economics Papers
on Efficiency and Productivity
Issue of 2007‒07‒07
fifteen papers chosen by

  1. Technological Spillovers and Productivity in Italian Manufacturing Firms By Claudio A. Piga; Giuseppe Medda
  2. Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
  3. ICT Externalities: Evidence from cross country data By Meijers, Huub
  4. Measuring Potential Gains from Mergers among Electricity Distribution Companies in Turkey using a Non-Parametric Model By Necmiddin Bagdadioglu; Catherine Waddams Price; Thomas Weyman-Jones
  5. Productivity Effects of International Outsourcing: Evidence from Plant Level Data By Görg, Holger; Hanley, Aoife; Strobl, Eric
  6. On the Sensitivity of Aggregate Productivity Growth Rates to Noisy Measurement By Frank T. Denton
  7. Business services and the changing structure of European economic growth By Kox, Henk L.M.; Rubalcaba, Luis
  8. Productivity Growth, Knowledge Flows and Spillovers By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel; Matthew Slaughter
  9. Americans Do I.T. Better: US Multinationals and the Productivity Miracle By Nick Bloom; Raffaella Sadun; John Van Reenen
  10. The Guy at the Controls: Labor Quality and Power Plant Efficiency By James B. Bushnell; Catherine Wolfram
  11. A new approach to measuring competition in the loan markets of the euro area By Michiel van Leuvensteijn; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel; Christoffer Kok Sørensen
  12. Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy By Roberto Antonietti; Giulio Cainelli
  13. Industry Diversity and Its Impact on the Innovation Performance of Firms: An Empirical Analysis Based on Firm-level Panel Data By Martin Wörter
  14. Fundamental Determinants of School Efficiency and Equity: German States as a Microcosm for OECD Countries By Ludger Wößmann
  15. Dynamic effects of European services liberalisation: more to be gained By Kox, Henk L.M>; Lejour, Arjan

  1. By: Claudio A. Piga (Dept of Economics, Loughborough University); Giuseppe Medda (DEIR, University of Sassari, Italy.)
    Abstract: We study whether a firm’s total factor productivity dynamics is positively influenced by its own R&D activity and by the technological spillovers generated at the intra- and inter-sectorial level. Our approach corrects simultaneously for the endogeneity and the selectivity biases introduced by the use of a firm’s own R&D as a regressor. A firm’s involvement in R&D activities accounts for significant productivity gains. Firms also benefit from spillovers originating from their own industries, as well as from innovative upstream sectors.
    Keywords: R&D, TFP, selectivity, treatment effect
    JEL: C21 C80 D24 O30
    Date: 2007–07
  2. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
    Abstract: We examine the relationships between productivity growth, IT investment and organisational change(??) using UK firm data. Consistent with the small number of other micro studies we find (a) ITappears to have high returns in a growth accounting sense when ?? is omitted; when ?? is includedthe IT returns are greatly reduced, (b) IT and ?? interact in their effect on productivity growth, (c)non-IT investment and ?? do not interact in their effect on productivity growth. Some new findingsare (a) ? ? is affected by competition; (b) US-owned firms are much more likely to introduce ??relative to foreign owned firms who are more likely still relative to UK firms; (c) our predictedmeasured TFP growth slowdown for firms who are not doing ?O and/or are in the early stages of ITinvestment compare well with the macro numbers documenting a UK measured TFP growthslowdown.
    Keywords: information technology, productivity growth, organisational change
    JEL: D24 E22 L22
    Date: 2007–03
  3. By: Meijers, Huub (UNU-MERIT)
    Abstract: This paper reports the findings of an empirical study on the external effects of Information and Communication Technologies (ICT) on economic growth and productivity at an aggregate level. It focuses on possible network effects and spillovers emerging as externalities from investments in ICT. The existence of externalities is well described in theoretical work however empirical evidence is scarce. By using time series at the macro level for a panel of 15 countries I find positive externalities for investments in IT software and in telecommunication equipment, but not for IT hardware. The analysis, which accounts for cyclical effects and also takes external effects from non-ICT factors into account, points at considerable lags between the time of investing in these technologies and the time at which the externalities arise. Taking these externality effects into account, the paper shows that the impact of ICT on productivity is almost twice as high as compared to a model that does not include such effects.
    Keywords: Productivity, Network Effects, Spillovers, Information and Communication Technologies, Total Factor Productivity
    JEL: D24 D85 O11 O47
    Date: 2007
  4. By: Necmiddin Bagdadioglu (Department of Public Finance, Hacettepe University and Centre for Competition Policy, University of East Anglia); Catherine Waddams Price (Centre for Competition Policy, University of East Anglia); Thomas Weyman-Jones (Department of Economics, Loughborough University)
    Abstract: Turkish electricity reform is entering a new phase through the Turkish Government's proposal to create 21 new distribution companies, 18 of them through merger. Two aspects of merger analysis are the operational cost savings and the potential production efficiency gains. This paper concentrates on the second aspect and uses a recently developed methodology to assess the potential effect of these mergers and whether these mergers are efficiency enhancing. This is performed by comparing the actual efficiency levels of observed distribution companies with the merger of proposed aggregated companies. The model is calibrated on panel data from 1999 to 2003 which include measures of physical capital and labour inputs, as well as customer and energy related outputs. The results indicate potential for considerable efficiency gains from the proposed mergers.
    Keywords: Efficiency and productivity analysis, data envelopment analysis, electricity distribution
    JEL: G34 C14 L5 L94
    Date: 2006–09
  5. By: Görg, Holger; Hanley, Aoife; Strobl, Eric
    Abstract: We investigate the impact of international outsourcing on productivity using plant level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either domestic- or foreign-owned. By contrast, we find no statistically significant evidence of an impact of international outsourcing of services on productivity for firms not operating on the export market.
    Keywords: exporting; International outsourcing; multinational enterprises; productivity
    JEL: F14 F23 L23
    Date: 2007–06
  6. 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.
    Keywords: productivity; growth rates; measurement error
    JEL: O47
    Date: 2007–05
  7. By: Kox, Henk L.M.; Rubalcaba, Luis
    Abstract: A pervasive trend that characterised the past two decades of European economic growth is that the share in the economy of commercial services, and particularly business services, grows monotonically, and this mainly to the expense of the manufacturing sector. The structural shift reflects a changing and increasingly complex social division of labour between economic sectors. The fabric of inter-industry relations is being woven in a new way due to the growing specialisation in knowledge services, the exploitation of scale economies for human capital, lowered costs of outsourcing in-house services, and the growing encapsulation of manufacturing products in a ‘service jacket’. Business services, which inter alia includes the software industry and other knowledge-intensive business services (KIBS), play a key role in many of these processes. We argue that in recent decades business services contributed heavily to European economic growth, in terms of employment, productivity and innovation. A direct growth contribution stems from the business-services sector’s own remarkably fast growth, while an indirect growth contribution was caused by the positive knowledge and productivity spill-overs from business services to other industries. The spill-overs come in three forms: from original innovations, from speeding up knowledge diffusion, and from the reduction of human capital indivisibilities at firm level. The external supply of knowledge and skill inputs exploits positive external scale economies and reduces the role of internal (firm-level) scale (dis)economies associated with these inputs. The relatively low productivity growth that characterises some business-services sectors may be a drag on the sector's direct contribution to overall economic growth. The paper argues that there is no reason to expect a “Baumol disease” effect as long as the productivity and growth spill-overs from KIBS to other economic sectors are large enough. Finally, the paper pinpoints some policy 'handles' that could be instrumental in boosting the future contribution of business services to overall European economic growth.
    Keywords: economic growth; human capital; specialisation; business services; Europe
    JEL: L8 O52 O4 O3
    Date: 2007–07
  8. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel; Matthew Slaughter
    Abstract: This paper explores the role of knowledge flows and TFP growth by using direct survey data onknowledge flows linked to firm-level TFP growth data. Our knowledge flow data correspond to thekind of information flows often argued, especially by policy-makers, as important, such as within thefirm, or from suppliers, purchasers, universities and competitors. We examine three questions (a)What is the source of knowledge flows? (b) To what extent do such flows contribute to productivitygrowth? (c) Do such flows constitute a spillover flow of free knowledge? Our evidence show that themain sources of knowledge are competitors; suppliers; plants that belong to the same group anduniversities. We conclude that the main "free" information flow spillover is from competitors and thatmulti-national presence may be a proximate source of this spillover.
    Keywords: business services, structural change, economic growth, productivity
    JEL: O11 M2
    Date: 2007–04
  9. 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 sectorsthat intensively use information technologies (IT). This has not occurred in Europe. If the US "productivitymiracle" is due to a natural advantage of being located in the US then we would not expect to see any evidenceof it for US establishments located abroad. This paper shows in fact that US multinationals operating in the UKdo have higher productivity than non-US multinationals in the UK, and this is primarily due to the higherproductivity of their IT. Furthermore, establishments that are taken over by US multinationals increase theproductivity of their IT, whereas observationally identical establishments taken over by non-US multinationalsdo not. One explanation for these patterns is that US firms are organized in a way that allows them to use newtechnologies more efficiently. A model of endogenously chosen organizational form and IT is developed toexplain these new micro and macro findings.
    Keywords: Productivity, Information Technology, multinationals, organization
    JEL: E22 O3 O47 O52
    Date: 2007–04
  10. By: James B. Bushnell; Catherine Wolfram
    Abstract: This paper examines the impact of individual human operators on the fuel efficiency of power plants. Although electricity generation is a fuel and capital intensive enterprise, anecdotal evidence, interviews, and empirical analysis support the hypothesis that labor, particularly power plant operators, can have a non-trivial impact on the operating efficiency of the plant. We present evidence to demonstrate these effects and survey the policies and practices of electricity producing firms that either reduce or exacerbate fuel efficiency differences across individual plant operators.
    JEL: J24 L51 L94 M54
    Date: 2007–07
  11. By: Michiel van Leuvensteijn (Netherlands Bureau for Economic Policy Analysis (CPB), P.O. Box 80510, 2508 GM, The Hague, The Netherlands.); Jacob A. Bikker (De Nederlandsche Bank (DNB), Supervisory Policy Division, Strategy Department, P.O. Box 98, NL-1000 AB Amsterdam, The Netherlands.); Adrian A.R.J.M. van Rixtel (International Economics and International Relations Department, Banco de España (BdE), Alcalá 48, 28014 Madrid, Spain.); Christoffer Kok Sørensen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: This paper is the first that applies a new measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major EU countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks. JEL Classification: D4, G21, L1.
    Keywords: Banking industry, competition, loan markets, marginal costs, market shares.
    Date: 2007–06
  12. By: Roberto Antonietti (University of Bologna); Giulio Cainelli (University of Bari)
    Abstract: Aim of this paper is to study whether and how the firm’s decision to outsource production activities affects its technological performance. In particular, we look at how the alignment between the firm’s governance strategy and the underlying attributes of the transactions affects the capacity of the firm to introduce new products and processes. Using microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003, we develop a two-stage approach: first, we estimate the determinants of the firm’s organizational governance (production outsourcing); second, we incorporate a measure of governance misalignment into a technological performance relation. We find (i) that firms not aligned with the optimal organizational governance perform less well in terms of process innovation than more aligned competitors, but (ii) that misalignment has a positive effect on product innovation. However, this counterintuitive result is strongly characterized by non-linear effects that reverse the latter correlation for high values of governance misfit.
    Keywords: Production Outsourcing, Organizational Governance, Misalignment, Technological Performance, Non-Linearity
    JEL: L23 L24 L25 O31
    Date: 2007–05
  13. By: Martin Wörter (KOF Swiss Economic Institute, ETH Zurich)
    Abstract: This paper investigates empirically the impact of diversity on the innovation performance of a firm. We created a measure for diversity that mirrors differences in the resource base of firms within an industry and tested its impact on innovation in addition to more traditional factors like technology-push, demand-pull, and firm-size, based on panel data stemming from three representative cross sectional surveys carried out in the years 1996, 1999, and 2002 respectively. In fact, diversity has a significant positive impact on the innovation intensity of firms and thus supports more theoretical findings in this area. We also find empirical evidence for the technology push and the demand pull hypotheses as well as the importance of competition for innovation.
    Keywords: Diversity, Innovation Performance, Evolution of Industries, Jacobs Externalities, Panel data,
    JEL: O30
    Date: 2007–05
  14. By: Ludger Wößmann (University of Munich, Ifo Institute, CESifo and IZA)
    Abstract: Cross-country evidence on student achievement might be hampered by omitted country characteristics such as language or legal differences. This paper uses cross-state variation in Germany, whose sixteen states share the same language and legal system, but pursue different education policies. The same results found previously across countries hold within Germany: Higher mean student performance is associated with central exams, private school operation, and socio-economic background, but not with spending, while higher equality of opportunity is associated with reduced tracking. In a model that pools German states with OECD countries, these fundamental determinants do not differ significantly between the two samples.
    Keywords: student performance, PISA, Germany, education production function, institutional effects in schooling
    JEL: I28 L38 L33 H52 D02 D63 J24
    Date: 2007–06
  15. By: Kox, Henk L.M>; Lejour, Arjan
    Abstract: Europe’s market for services is fragmented by many regulatory barriers. The Services directive proposed by the European Commission aims to integrate national services markets by reducing these barriers. Several studies indicate that bilateral trade and foreign direct investment in services could boost substantially. GDP and consumption could increase by 0.5% to about 1% on average in Europe. The effects for the Member States vary depending on the size of the barriers in their services markets and specialization. These results take account of scale effects, and forward and backward linkages in the economy, but ignore the effects of more competition on productivity and innovation in the long term. This paper assesses the channels though which an integrated European services market may generate these dynamic gains. Improved market access will stimulate competitive selection and productivity growth. Through trade and investment, knowledge spillovers will increase and innovation will be fostered. These channels are illustrated with quantitative evidence.
    Keywords: trade openess; services; dynamic effects; European Union
    JEL: F4 L8 F43 F15 O4 L11
    Date: 2006–09

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