New Economics Papers
on Efficiency and Productivity
Issue of 2007‒09‒02
ten papers chosen by

  1. Mind the gap! International Comparisons of Productivity in Services and Goods Production By Inklaar, Robert; Timmer, Marcel; van Ark, Bart
  2. A Monte Carlo Study of Efficiency Estimates from Frontier Models By William C. Horrace; Seth O. Richards
  3. Intermediate goods and total factor productivity By Alessio Moro
  4. Productivity Levels in Transport, Storage and Communication: A New ICOP 1997 Data Set By Ypma, Gerard
  5. An Information Theoretic Approach to Flexible Stochastic Frontier Models By Douglas Miller
  6. Handling losses in translog profit models By Bos, J.W.B.; Koetter, M.
  7. Censuses compared. A New Benchmark for British and German Manufacturing 1935/1936 By Fremdling, Rainer; de Jong, Herman; Timmer, Marcel P.
  8. The Evolution of Inequality in Productivity and Wages: Panel Data Evidence By Giulia Faggio; Kjell Salvanes; John Van Reenen
  9. Innovation Policy as cargo cult: Myth and Reality in knowledge-led Productivity Growth By Alan Hughes
  10. PPPs for Industry Output: A New Dataset for International Comparisons By Timmer, Marcel; Ypma, Gerard; van Ark, Bart van

  1. By: Inklaar, Robert; Timmer, Marcel; van Ark, Bart (Groningen University)
    Abstract: In this paper, we make a comparison of industry output, inputs and productivity growth and levels between seven advanced economies (Australia, Canada, France, Germany, Netherlands, UK and U.S.). Our industry-level growth accounts make use of input data on labour quantity (hours) and composition (schooling levels), and distinguish between six different types of capital assets (including three ICT assets). The comparisons of levels rely on industry-specific purchasing power parities (PPPs) for output and inputs, within a consistent input-output framework for the year 1997. Our results show that differences in productivity growth and levels can mainly be traced to market services, not to goods-producing industries. Part of the strong productivity growth in market services in Anglo-Saxon countries, such as Australia and Canada, may be related to relatively low productivity levels compared to the U.S. In contrast, services productivity levels in continental European countries were on par with the U.S. in 1997, but growth in Europe was much weaker since then. In terms of factor input use, the U.S. is very different from all other countries, mostly because of the more intensive use of ICT capital in the U.S.
    Date: 2006
  2. By: William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Seth O. Richards
    Abstract: Parametric stochastic frontier models yield firm-level conditional distributions of inefficiency that are truncated normal. Given these distributions, how should one assess and rank firm-level efficiency? This study compares the techniques of estimated (a) the conditional means of inefficiency and (b) probabilities that firms are most or least efficient. Monte Carlo experiments suggest that the efficiency probabilities are more reliable in terms of mean absolute percent error when inefficiency has large variation across firms. Along the way we tackle some interesting problems associated with simulating and assessing estimator performance inthe stochastic frontier environment.
    Keywords: Truncated normal, stochastic frontier, efficiency, multivariate probabilities.
    JEL: C12 C16 C44 D24
    Date: 2007–08
  3. By: Alessio Moro
    Abstract: The share of intermediate goods in gross output has declined in the U.S. over the 1958-2004 period. I present a model of gross output production in which the intermediate goods share (IGS) in gross output appears as an explicit part of total factor productivity (TFP) in the value added production function. In particular, a larger IGS implies a smaller TFP level. Therefore, the decline in the IGS can contribute to the observed TFP growth in the U.S. during the period considered. A simple growth accounting exercise shows that when the production function for gross output is Cobb-Douglas in capital, labor and intermediate goods, the IGS accounts for at least 1/4 of TFP growth. With a CES gross output production function, the IGS accounts for up to 61% of TFP growth. Using this accounting procedure, I also find that intermediate goods are responsible for the most part of the productivity slowdown occurred during the seventies.
    Date: 2007–07
  4. By: Ypma, Gerard (Groningen University)
    Abstract: This working paper provides industry-specific purchasing power parities for gross output in the transportation and communication sector. The calculation of these output PPPs builds on earlier work by the International Comparisons of Output and Productivity (ICOP) project in this field. The paper reviews the existing methods and develops a new system which takes full advantage of the improved data situation. The study captures the transportation and communication sectors of 32 countries (EU-25, Australia, Canada, Japan, Korea, New Zealand, Taiwan and United States). The second part of the paper applies the PPPs to productivity measures obtained from the EU KLEMS database and the 60-industry Database of the Groningen Growth and development Centre. This results in a consistent and comparable set of productivity levels at detailed industry level. We find that differences in productivity between the United States and other industrialized countries are only partly due to differences in industry structure. The United States especially outperform the EU-15 and Asia on productivity levels in land transport. Eastern European countries are still showing much lower productivity levels, except for land transport where they can become a though competitor for the former EU-15.
    Date: 2007
  5. By: Douglas Miller (Department of Economics, University of Missouri-Columbia)
    Abstract: Parametric stochastic frontier models have a long history in applied production eco- nomics, but the class of tractible parametric models is relatively small. Consequently, researchers have recently considered nonparametric alternatives such as kernel den- sity estimators, functional approximations, and data envelopment analysis (DEA). The purpose of this paper is to present an information theoretic approach to constructing more flexible classes of parametric stochastic frontier models. Further, the proposed class of models nests all of the commonly used parametric methods as special cases, and the proposed modeling framework provides a comprehensive means to conduct model specification tests. The modeling framework is also extended to develop information theoretic measures of mean technical efficiency and to construct a profile likelihood estimator of the stochastic frontier model.
    Keywords: KullbackLeibler information criterion, output distance function, profile likelihood, stochastic frontier, technical efficiency
    JEL: C13 C21 C51
    Date: 2007–07–16
  6. By: Bos, J.W.B.; Koetter, M. (Groningen University)
    Abstract: Abstract In this paper, we compare standard approaches used to handle losses in logarithmic stochastic profit frontier models with a simple novel approach. We discuss discriminatory power, rank stability and precision of profit efficiency scores. Our new method enhances rank stability and discriminatory power, and improves the precision of profit efficiency scores
    Date: 2007
  7. By: Fremdling, Rainer; de Jong, Herman; Timmer, Marcel P. (Groningen University)
    Abstract: We present a new estimate of Anglo-German manufacturing output and productivity levels by industry for 1935/36. It is based on newly explored archival data on German manufacturing together with published British census data. We calculate comparative levels of value added, correcting for differences in prices for outputs and inputs. This so-called double deflation procedure provides new insights into productivity comparisons because output- and input price structures differed greatly between the two countries. Although the new calculations confirm existing results at an aggregate level, they reveal important differences at the industry level and show how Germany was striving for autarky as it prepared its economy for war.
    Date: 2007
  8. By: Giulia Faggio; Kjell Salvanes; John Van Reenen
    Abstract: There has been a remarkable increase in wage inequality in the US, UK and many other countries over the past three decades. A significant part of this appears to be within observable groups (such as age-gender-skill cells). A generally untested implication of many theories rationalizing the growth of within-group inequality is that firm-level productivity dispersion should also have increased. The relevant data for the US is problematic, so we utilize a UK panel dataset covering the manufacturing and non-manufacturing sectors since the early 1980s. We find evidence that productivity inequality has increased. Existing studies have underestimated this increased dispersion because they use data from the manufacturing sector which has been in rapid decline. Most of the increase in individual wage inequality has occurred because of an increase in inequality between firms (and within industries). Increased productivity dispersion appears to be linked with new technologies as suggested by models such as Caselli (1999) and is not primarily due to an increase in transitory shocks, greater sorting or entry/exit dynamics.
    JEL: D24 J24 J31 O31
    Date: 2007–08
  9. By: Alan Hughes
    Abstract: This paper questions the current emphases in innovation policy on a particular interpretation of US performance which emphasises R&D intensive high technology producing sectors, spin-offs from the science base and private sector venture capital. Whilst recognizing the important role they may play it is argued that it has been greatly exaggerated to the neglect of other key factors. One is the importance of the diffusion and use of ICT as a general purpose technology beyond the ICT and other R&D intensive high-tech producing sectors. A second is the dominant role which performance transformation in existing firms plays in driving industry level productivity compared with the direct role of new entrants. A third is the diversified role played by universities in knowledge exchange which extends beyond a narrow focus on spin offs and licensing to encompass the creation of human capital and a wide range of formal and informal business interactions. Finally there is the major role that public R&D procurement policy has played in the US in the effective provision of public rather than private sector venture capital. The paper provides a broad overview of evidence on each of these factors and considers some broad implications for innovation policy which might be drawn on the basis of that review. In particular it concludes by arguing that the crafting of innovation policy in the context of any specific national innovation system requires a careful consideration of the structural features of that context and the particular opportunities and challenges facing policy practitioners in it. An imperfect interpretation of the experience of one country's system is unlikely to be an appropriate guide to innovation system failure or success elsewhere.
    Keywords: Innovation Policy, University-Industry Links, Productivity Growth
    JEL: O31 O33 O38
    Date: 2007–06
  10. By: Timmer, Marcel; Ypma, Gerard; van Ark, Bart van (Groningen University)
    Abstract: International comparisons of output, prices and productivity have been hampered by the unavailability of comprehensive sets of PPPs at the industry level. Existing expenditure PPPs and production PPPs both have their limitations. This paper proposes to use a mix of both for industry level comparisons. On the basis of a supply-use framework, the paper identifies how expenditure prices and output prices are conceptually related. It developscriteria on the basis of which an optimal mix of expenditure PPPs and production PPPs can be chosen. The paper then shows a PPP dataset for gross output for 45 industries (capturing the total economy) and 25 advanced countries. This dataset is the first comprehensive dataset of PPPs covering this large number of industries and countries. We illustrate its potential for research purposes by analysing patterns of relative prices in manufacturing and services.
    Date: 2007

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