New Economics Papers
on Efficiency and Productivity
Issue of 2007‒08‒27
nine papers chosen by

  1. Parallel Development? Productivity Growth Following Electrification and the ICT Revolution By Edquist, Harald
  2. Productivity Growth in Telecommunications: The Case of Tennessee. By Christopher C. Klein
  3. Total Factor Productivity and Income Distribution: A Critical Review By Yongbok Jeon
  4. Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules By David Greenstreet
  5. On the Long run Determinants of Industry TFP Growth Rates By Ngai, Liwa Rachel; Samaniego, Roberto
  6. Sectoral Agglomeration Economies in a Panel of European Regions By Marius BRÜLHART; Nicole A. MATHYS
  7. Productivity Spillovers from Foreign Direct Investment: Indonesian Manufacturing Industry’s Experience 1975-2000 By Della Temenggung
  8. The Impact of Patenting on New Product Introductions in the Pharmaceutical Industry By Stuart, Graham; Matthew, Higgins
  9. A new approach to measuring competition in the loan markets of the euro area By Michiel van Leuvensteijn; Jacob Bikker; Adrian van Rixtel; Christoffer Kok-Sorensen

  1. By: Edquist, Harald (Research Institute of Industrial Economics (IFN))
    Abstract: This paper investigates labor productivity growth and the contribution to labor productivity growth in Swedish manufacturing during electrification and the ICT revolution. The paper distinguishes between technology-producing, intensive and less intensive technology-using industries during these technological breakthroughs. The results show that labor productivity growth and the overall contribution to labor productivity growth was considerably higher in technology-producing industries following the ICT revolution. Moreover, the results presented here show no evidence that industries that were early adopters of electric motors and ICT, on average would have contributed more to productivity growth in Swedish manufacturing.
    Keywords: Electrification; ICT Revolution; Productivity Growth; Technological Change
    JEL: N64 O33 O47
    Date: 2007–08–17
  2. By: Christopher C. Klein
    Abstract: A divisia index of total factor productivity (TFP) growth is calculated for each of 16 regulated local telephone companies operating in Tennessee over the years 1989 through 1993. Year over year changes in TFP, in Tornqvist form, yield a growth in total factor productivity estimate for each company. These growth rates, however, contain the effects of both scale and technical change. Using the method suggested by Caves and Christensen, the effects are decomposed indirectly by regressing the annual percentage changes in TFP growth against measures of scale, service density, and network size. The results are consistent with the findings of economies of density and nearly constant returns to scale prevalent in the telecommunications literature.
    Keywords: total factor productivity, telecommunications, network size
    JEL: L96 L51 O30
    Date: 2007–08
  3. By: Yongbok Jeon
    Abstract: The aim of the present paper is to critically reappraise the validity and the relevance of the notion of total factor productivity (TFP) as a measure of technological progress. Placing the focus on the role that the neoclassical distribution theory plays in measuring technological progress, we take up the recent revival of the tautology argument (Felipe & McCombie 2003) and the simple results of the capital controversies. First, I argue that the measure of TFP exclusively relies on the marginal productivity theory of distribution through which factors’ income shares are linked to their technological progress. Second, it will be shown that the marginal productivity theory of distribution is based on extremely limited theoretical and empirical grounds. Third, therefore, it is concluded that the measure of TFP as a measurement of the contribution made by technical progress to the economic growth has very little to do with the reality.
    Keywords: Total Factor Productivity, Marginal Productivity Theory of Distribution, Income Accounting Identity, Capital Controversies
    JEL: B41 O11 O47
    Date: 2007–04
  4. By: David Greenstreet
    Abstract: This paper develops a sequential learning estimator of production functions and productivity dynamics for unbalanced establishment panels. Extending an idea from the literature on dynamic industry models, establishments are uncertain about their own idiosyncratic productivities and update productivity beliefs using information revealed by their production experience. The estimator relies on the structure of this iterative learning process and thereby avoids placing any restriction on establishment strategic behavior. Consequently, the estimator is suitable for comparative studies of the behavioral sources of technological change across all types of industry. Estimation of productivity dynamics and of behavioral decision rules are separated into recursive stages. Using sequential learning estimates of productivity beliefs from the first stage, decision rules for exit, investment, and innovation effort can be estimated in a second stage. A test application with four Chilean industries confirms that the estimator produces plausible estimates with small standard errors. Decision rule estimates show that productivity beliefs affect investment and exit hazards in the expected direction.
    Keywords: Microeconomic Productivity Dynamics, Unbalanced Panels, Sequential Learning, Exit Hazard, Investment Rates, Chilean Manufacturing.
    JEL: D24 L25 C23 D83 L60
    Date: 2007
  5. By: Ngai, Liwa Rachel; Samaniego, Roberto
    Abstract: We develop a multi-sector general equilibrium model in which productivity growth is driven by the generation of knowledge. In the model, firms allocate resources towards the production of goods and the production of new knowledge, in response to industry-specific factors of demand and technology. In equilibrium, we find that long run differences in research intensity and productivity growth are primarily driven by the parameters of the production function for knowledge -- particularly the extent to which the production of new knowledge benefits from prior knowledge, which we term receptivity. Conditional on receptivity, whether the production of knowledge relies on prior knowledge that is internally generated by the firm or whether it instead "spills over" from its competitors does not appear to be quantitatively important. The results are consistent with a number of empirical findings on the relationship between research intensity and rates of technical change.
    Keywords: Multi-sector growth; R&D Intensity; Technological Opportunity; Total Factor Productivity
    JEL: D24 O31 O41 O47
    Date: 2007–07
  6. By: Marius BRÜLHART; Nicole A. MATHYS
    Abstract: We estimate agglomeration economies, defined as the effect of density on labour productivity in European regions. The analysis of Ciccone (2002) is extended in two main ways. First, we use dynamic panel estimation techniques (system GMM), thus offering an alternative methodological treatment of the inherent endogeneity problem. Second, the sector dimension in the data allows for disaggregated estimation. Our results confirm the presence of significant agglomeration effects at the aggregate level, with an estimated long-run elasticity of 13 percent. Repeated crosssection regressions suggest that the strength of agglomeration effects has increased over time. At the sector level, the dominant pattern is of cross-sector "urbanisation" economies and own-sector congestion diseconomies. A notable exception is financial services, for which we find strong positive productivity effects from own-sector density.
    Keywords: employment density; productivity; european regions; dynamic panel GMM
    JEL: R10
    Date: 2007–04
  7. By: Della Temenggung
    Abstract: In recent decades, foreign direct investment (FDI) played an important role in achieving economic growth and development especially for developing countries. FDI bring capital and introduced new technology. Moreover, the new technology can also spill over to the local firms in the host country. For this reason, FDI often considered as the most significant channel for technology transfer. However, the empirical studies provide mixed evidence on the role of foreign investment in generating technology transfer to local firms. This paper attempts to provide some evidence to help reconcile the difference in empirical evidence by examining Indonesian manufacturing industries’ experienced from 1975-2000. This would provide an opportunity to examine the effect of host country economic development and policy environment to the technology spillovers process. In general, the result found positive and significant productivity spillovers in Indonesian manufacturing industry for the whole period. Interestingly, the estimation result for each economic episodes support the hypothesis on the effect of local firm absorptive capacity and host country economic policy. We found negative and significant spillovers during the pre-liberalization period (1975-1986) and found positive and significant spillovers in the post-liberalization period (1987-2000). This study also found that the spillovers effect is different between each 2-digit ISIC industry, proving that the sectoral characteristics do affect the local firm ability to learn and adopt new technology.
    Keywords: Foreign direct investment, Productivity spillovers, Economic Policy, Manufacturing
    JEL: F23 O30 L60
    Date: 2007–06
  8. By: Stuart, Graham; Matthew, Higgins
    Abstract: Since Comanor and Scherer (1969), researchers have been using patents as a proxy for new product development. In this paper, we reevaluate this relationship by using novel new data. We demonstrate that the relationship between patenting and new FDA-approved product introductions has diminished considerably since the 1950s, and in fact no longer holds. Moreover, we also find that the relationship between R&D expenditures and new product introductions is considerably smaller than previously reported. While measures of patenting remain important in predicting the arrival of product introductions, the most important predictor is the loss of exclusivity protection on a current product. Our evidence suggests that pharmaceutical firms are acting strategically with respect to new product introductions. Finally, we find no relationship between firm size and new product introductions.
    Keywords: Patenting; Pharmaceutical industry; New product management; Research productivity
    JEL: O30
    Date: 2007–08–08
  9. By: Michiel van Leuvensteijn; Jacob Bikker; Adrian van Rixtel; Christoffer Kok-Sorensen
    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. 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. 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.
    Keywords: Banking industry; competition; loan markets; marginal costs; market shares.
    JEL: C33 G3
    Date: 2007–08

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.