New Economics Papers
on Efficiency and Productivity
Issue of 2008‒01‒26
fifteen papers chosen by

  1. Economies of scale and efficiency measurement in Switzerland's Nursing homes By Medhi Farsi; Massimo Filippini; Diego Lunati
  2. Exports and Productivity: Comparable Evidence for 14 Countries By Flora Bellone; Liza Jabbour; Patrick Musso; Lionel Nesta; Stefano Schiavo
  3. Does Technological Diffusion Explain Australia's Productivity Performance? By Thierry Tressel
  4. The Measurement of Nonmarket Sector Outputs and Inputs Using Cost Weights By Diewert, Erwin
  5. The Measurement of Output and Productivity in the Health Care Sector in Canada: An Overview By Andrew Sharpe, Celeste Bradley, and Hans Messinger
  6. Measuring Multifactor Productivity Growth By Anita Wölfl; Dana Hajkova
  7. Three Policies to Improve Productivity Growth in Canada By Andrew Sharpe
  8. Cost Allocation and Convex Data Envelopment By Jens Leth Hougaard; Jørgen Tind
  9. Testing for Economies of Scope in European Railways: An Efficiency Analysis By Christian Growitsch; Heike Wetzel
  10. Profitability Analysis in the Egyptian Banking Sector By Christian Kalhoefer; Rania Salem
  11. Foreign Ownership and Economic Performance in Italy: Not all is Cherry-Picking!. By Rosario Crinò; Fabrizio Onida
  12. The Impact of Interprovincial Migration on Aggregate Output and Labour Productivity in Canada, 1987-2006 By Andrew Sharpe, Jean-Francois Arsenault, and Daniel Ershov
  13. Performance measures of retail banking networks: a decision support tool By Aude Hubrecht-Deville; Hervé Leleu
  15. The Impact of Financial Constaints on Firm Survival and Growth By Patrick Musso; Stefano Schiavo

  1. By: Medhi Farsi (Department of Management, Technology and Economics, ETH Zurich, Switzerland); Massimo Filippini (Istituto microeconomia e economia pubblica (MecoP), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera); Diego Lunati (Istituto microeconomia e economia pubblica (MecoP), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera)
    Abstract: This paper examines the cost efficiency in the nursing home industry, an issue of concern to Swiss policy makers because of the explosive growth of national expenditure on elderly care and the aging of the population. A stochastic cost frontier model with a translog function has been applied to a balanced panel data of 1780 observations from 356 nursing homes operating over five years (1998-2002) in Switzerland. We compare the estimation results from different panel data econometric techniques focusing on the various methods of specification of unobserved heterogeneity across firms. In particular, the potential effects of such unobserved factors on the estimation results and their interpretation have been discussed. The paper eventually addresses three empirical issues: (1) the measurement of economies of scale in the nursing home sector, (2) the assessment of the economic performance of the firms by estimating their cost efficiency scores, and (3) the role of unobserved heterogeneity in the estimation process. The findings suggest that the economies of scale are an important potential source of cost reduction in a majority of Swiss nursing homes. Taking the size as given the efficiency performance of most individual units is practically very close to the estimated best practice. Nevertheless, the efficiency estimates suggest that some of the nursing homes can significantly reduce their costs by improving their operations.
    JEL: C13 C21 D24 H70 I11 I18 L30
    Date: 2008–01
  2. By: Flora Bellone; Liza Jabbour; Patrick Musso; Lionel Nesta; Stefano Schiavo
    Abstract: We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.
    Keywords: Exports, productivity, micro data, international comparison
    JEL: F14 D21
    Date: 2007
  3. By: Thierry Tressel
    Abstract: This paper analyzes the impact of product and labor market policies on technological diffusion and multi-factor productivity (MFP) in a panel of industries in 15 OECD countries over the period 1980 to 2003, with a special focus on Australia. We use a simple convergence empirical framework to show that, on average, convergence of MFP within industries across countries has slowed-down in the 1990s. In contrast, Australian industries have significantly caught-up with industry productivity best practices over the past 16 years, and have benefited from the diffusion of Information and Communication Technologies (ICTs). We show that reforms of both the labor and product markets since the early 1990s can explain Australia's productivity performance and adoption of ICTs.
    Keywords: Productivity , Australia , Labor markets ,
    Date: 2008–01–10
  4. By: Diewert, Erwin
    Abstract: In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The System of National Accounts 1993 recommends valuing these nonmarket outputs at their costs of production but it does not give much guidance on exactly how to do this. In this paper, an explicit methodology is developed that enables one to construct these marginal cost prices. However, in the main text, an activity analysis approach is taken in order to simplify the analysis, so in particular, constant returns to scale, no substitution production functions for the specific activities in the nonmarket sector are assumed. It is shown that it is possible to obtain meaningful measures of Total Factor Productivity growth in this framework. An Appendix relaxes some of the restrictive assumptions that are used in the main text.
    JEL: C43 D24 D57 E23 H40 H51 H52 I10 I20 O47
    Date: 2008–01–18
  5. By: Andrew Sharpe, Celeste Bradley, and Hans Messinger
    Abstract: To achieve efficient allocation of resources in the health care sector, accurate measures of health care output and productivity are essential. According to official estimates of productivity produced by Statistics Canada, labour productivity in the business sector of the health care (excluding hospitals) and social assistance industry declined 0.28 per cent per year between 1994 and 2003. Estimates of productivity produced by the CSLS, based on official Statistics Canada employment and real GDP figures, show that labour productivity in the health care and social assistance industry declined by 0.69 per cent per year between 1987 and 2006. It is widely recognized that official output and productivity figures may seriously underestimate the true contribution of the health care sector to real output, and more importantly to the economic well-being of Canadians. Alternative approaches show that price indices for health care output may be overestimated and, therefore, quality improvements may not be accurately captured by estimates of real health care output. More resources are needed to further investigate the alternative approaches discussed in this report and develop better output measures that adjust for outcomes directly related to health care spending.
    Keywords: Health sector, Productivity, Measurement, Canada, Outcomes.
    JEL: E20 C40 C80 C82 O47
    Date: 2007–12
  6. By: Anita Wölfl; Dana Hajkova
    Abstract: This paper quantifies and examines the contribution of capital, labour and multifactor productivity (MFP) to GDP growth and analyses the role of measurement of capital and labour inputs for the MFP estimate, using a comprehensive growth accounting exercise for 14 OECD countries. For most OECD countries, the strongest contributions to GDP growth over the past decade have come from growth in total capital input and MFP. This is to some extent related to an increasing role of information and telecommunication technologies in economic growth, particularly over the 1995-2003 period. The importance of measurement issues varies substantially with the type of measurement issue being considered. Substantial differences are observed between employment and hours worked based MFP growth rates. Also, the respective weights with which capital and labour enter the growth accounting equation, and thus, the assumptions concerning the efficiency of production and competition in product markets, significantly influence the resulting MFP estimate. Finally, the results suggest that policy conclusions on the basis of different empirical studies should be made very carefully, in particular as regards the time period for which the respective studies have been undertaken, as well as whether actual or trended time series are being considered. <BR>Ce document évalue et examine la contribution du capital, de la main-d'oeuvre et de la productivité globale des facteurs (PGF) à la croissance du PIB, et analyse le rôle de la mesure des apports de capital et de travail dans l'estimation de la PGF, par un travail complet de quantification comptable de la croissance portant sur 14 pays de l'OCDE. Dans la plupart des cas, c'est la croissance des apports totaux de capital et celle de la PGF qui ont contribué le plus fortement à la croissance du PIB ces dix dernières années. Cette évolution est liée dans une certaine mesure au rôle de plus en plus grand des technologies de l'information et de la communication dans la croissance économique, en particulier pendant la période 1995-2003. L'importance des questions de mesure varie beaucoup en fonction de leur type. On observe des différences considérables entre les taux de croissance de la PGF fondés sur l'emploi et sur les heures travaillées. En outre, la part relative du capital et du travail dans l'équation comptable de la croissance et, par conséquent, les hypothèses concernant l'efficacité de la production et la concurrence sur les marchés de produits, influent sensiblement sur l'estimation de la PGF obtenue. Enfin, il semble qu'on ne puisse tirer de conclusions des différentes études empiriques qu'en exerçant la plus grande prudence, en particulier en vérifiant la période à laquelle ces études ont été effectuées, et en déterminant si les séries chronologiques considérées sont des séries réelles ou des séries de tendances.
    Date: 2007–10–15
  7. By: Andrew Sharpe
    Abstract: This paper makes the case that productivity is Canada’s economic destiny and that Canada’s dismal productivity performance, both from a historical and international perspective, therefore represents our biggest economic challenge. It then puts forward three specific policies to improve Canada’s productivity performance: foster the diffusion of best-practice technologies; remove the provincial sales tax on purchases of machinery and equipment; and promote interprovincial movement of workers by improving labour market information, removing professional barriers to labour mobility, and establishing a tax credit for interprovincial job search. It finds that the short-term costs of these policies would be greatly outweighed by the long-term benefits associated with their implementation.
    Keywords: Productivity growth in Canada, Policy, Diffusion, Provincial sales tax, Interprovincial migration.
    JEL: O20 O33 O38 O47
    Date: 2007–12
  8. By: Jens Leth Hougaard (Department of Economics, University of Copenhagen); Jørgen Tind (Department of Mathematical Sciences, University of Copenhagen)
    Abstract: This paper considers allocation rules. First, we demonstrate that costs allocated by the Aumann-Shapley and the Friedman-Moulin cost allocation rules are easy to determine in practice using convex envelopment of registered cost data and parametric programming. Second, from the linear programming problems involved it becomes clear that the allocation rules, technically speaking, allocate the non-zero value of the dual variable for a convexity constraint on to the output vector. Hence, the allocation rules can also be used to allocate inefficiencies in non-parametric efficiency measurement models such as Data Envelopment Analysis (DEA). The convexity constraint of the BCC model introduces a non-zero slack in the objective function of the multiplier problem and we show that the cost allocation rules discussed in this paper can be used as candidates to allocate this slack value on to the input (or output) variables and hence enable a full allocation of the inefficiency on to the input (or output) variables as in the CCR model.
    Keywords: cost allocation; convex envelopment; data envelopment analysis; slack allocation
    Date: 2008–01
  9. By: Christian Growitsch (Halle Institute for Economic Research); Heike Wetzel (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: In this paper, we conduct a pan-European effciency analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realize economies of scope and, thus, produce railway services with a higher level of effciency. To determine whether joint or separate production is more effcient, we apply a Data Envelopment Analysis super-effciency bootstrapping model which relates the ef- ficiency for integrated production to a reference set consisting of separated firms which use a dierent production technology. We find that for a majority of European railways economies of scope exist.
    Keywords: Efficiency, Vertical Integraton, Railway Industry
    JEL: L22 L43 L92
    Date: 2007–12
  10. By: Christian Kalhoefer (Faculty of Management Technology, The German University in Cairo); Rania Salem (Faculty of Management Technology, The German University in Cairo)
    Abstract: The paper is analyzing current problems of the Egyptian banking sector, which is dominated by public banks. The reported problems include a massive proportion of non-performing loans in the banks’ credit portfolios as well as significant profitability problems, especially in the public banks. Some empirical data is gathered using a bank-specific Return on Equity-Analysis. Results support the reported problems and also show some structural weaknesses of both public and private banks.
    Keywords: Privatization, non-performing loans, return on equity analysis, banks, Egypt
    JEL: G21 G32 O16
    Date: 2008–01
  11. By: Rosario Crinò (Università degli Studi di Milano and CESPRI - Bocconi University, Milan, Italy.); Fabrizio Onida (CESPRI, Bocconi University, Milan, Italy.)
    Abstract: This paper studies the effects of foreign participation on economic performance in Lombardy, a Northern Italian region accounting for more than 40% of Foreign Direct Investment inflows in Italy. We employ a large database consisting of balance sheet and foreign ownership information for more than 13,000 firms and analyze different dimensions of economic performance: capital and knowledge-intensity, productivity, wages, returns to investments and financial structure. We find that foreign multinationals are more knowledge-intensive, more productive, pay higher wages and show a more solid financial structure than national firms; at the same time, foreign multinationals show lower returns to investments. Propensity score estimation results show that this difference implies a true effect from foreign participation in the manufacturing sector; in the services sector, instead, the difference in favour of multinationals is mostly accounted for by a differential pattern of industry location between the two types of firms, by the larger size of multinationals and by the likely tendency of the latter to invest in already high-performing national firms.
    Keywords: Multinational Firms, Performance Indicators, Propensity Score Estimation
    JEL: F1 F2
    Date: 2007–11
  12. By: Andrew Sharpe, Jean-Francois Arsenault, and Daniel Ershov
    Abstract: The Impact of Interprovincial Migration on Aggregate Output and Labour Productivity in Canada, 1987-2006
    Abstract: Interprovincial migration has increased significantly in Canada since 2003. This article develops a methodology to estimate total output gains due to interprovincial migration from two sources: gains due to increased employment, and gains due to re-allocation of workers between provinces with different productivity levels. It estimates that in 2006 the net output gains arising from interprovincial migration were $883.1 million (1997 constant prices), or 0.074 per cent of GDP. Higher employment rates in provinces experiencing a net positive balance of interprovincial migrants were responsible for $398.0 million of the gains and higher output per worker in these provinces was responsible for $485.0 million.
    Keywords: Interprovincial migration, Canada, Labour Productivity, Economic Growth.
    JEL: J61 E20 O20 O47 O51
    Date: 2007–07
  13. By: Aude Hubrecht-Deville (Université de Bourgogne); Hervé Leleu (CNRS-LEM, Université Catholique de Lille)
    Abstract: In this paper, we apply a standard model of performance evaluation to the retail banking industry. In this framework, the global economic performance is broken down into technical efficiency related to the optimal use of resources and price efficiency related to the optimal choice of a product-mix. Our main contribution is twofold. First we adapt this traditional framework to the retail banking network by giving a relevant interpretation of the efficiency measures at the branch manager and at the regional top management levels. Second, we relate explicitly the product-mix efficiency to the market environment and to the size of branches. We postulate that branches in different environments could face different production technologies and that optimal product-mixes could vary with the size of the branches. We take a sample size of 1585 branches from a single bank brand breaking down in 17 French regions. We use a nonparametric approach to model the production technologies and to identify optimal benchmarks. Our main objective is to end up with a decision support tool for the top bank management in order to plan product-mix strategies and to give the right incentives to branches’ managers. This tool should prove useful since, in retail banking networks, such tools have to be simple, robust, easy to control, and adapted to the vertical organization of the banking network.
    Date: 2007–12
  14. By: Priya BHAGOWALIA; Susan E. CHEN; Gerald SHIVELY (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: Most developing countries strive to improve agricultural productivity by relaxing credit constraints, supplying better inputs, and improving marketing and distribution. However the efficacy of these reforms needs to be examined in the context of the behavioral responses of farming households. This study examines gender biases within households that affect short-term decisions with immediate and long-term implications. This study utilizes data from ICRISAT's village level studies in India (1975-85) to highlight the effects of child gender on the use of agricultural inputs. The main finding is that households with boys tend to use purchased inputs such as fertilizers and insecticides more intensively compared with households with girls. In general, household with boys also tend to have larger land holdings, and use animal and human labor to a greater extent than household with girls.
    Keywords: gender bias, agricultural economics, inputs, village level studies, son
    JEL: J16 Q12
    Date: 2007
  15. By: Patrick Musso (University of Nice-Sophia Antipolis); Stefano Schiavo (Observatoire Français des Conjonctures Économiques)
    Abstract: We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996-2004 period, we find that (i) financial constraints significantly increase the probability of exiting the market, (ii) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (iii) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets.
    Keywords: Financial constraints; Firm growth; Firm survival
    JEL: E44 G32 L25
    Date: 2007

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