New Economics Papers
on Efficiency and Productivity
Issue of 2008‒03‒08
twelve papers chosen by

  1. The Technical Efficiency of UK Airports By Carlos Pestana Barros
  2. Measuring Productivity - Finland in an International Comparison (in Finnish with an English abstract/summary) By Ville Kaitila; Anni Nevalainen; Mika Maliranta; Reijo Mankinen
  3. Aggregate Productivity Loss and the Theil Index of Inequality By Aoki, Shuhei
  4. Firms’ International Status and Heterogeneity in Performance: Evidence From Italy By Alfredo Minerva; Lorenzo Casaburi; Valeria Gattai
  5. Understanding Productivity: A Review of Recent Technical Research By Richard Dion and Robert Fay
  6. Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia By Kugler, M., Verhoogen, E.A.
  7. Environmentally-Oriented Innovative Strategies and Firm Performances in Services. Micro-Evidence from Italy By Massimiliano Mazzanti; Giulio Cainelli; Roberto Zoboli
  9. Does IT Outsourcing Increase Firm Success? An Empirical Assessment using Firm-Level Data By Ohnemus, Jörg
  10. Heterogeneous technology and panel data : the case of the agricultural production function By Larson, Donald F.; Butzer, Rita; Mundlak, Yair
  11. Identification of Segments of Thermo Energy Plants with a Latent Class Model By Carlos Pestana Barros
  12. Firm Productivity and the Foreign-Market Entry Decision By Raff, Horst; Ryan, Michael; Stähler, Frank

  1. By: Carlos Pestana Barros
    Abstract: In this paper, the innovative random stochastic frontier model is used to estimate the technical efficiency of UK airports. These airports are ranked according to their total productivity for the period 2000-2005 and homogenous and heterogeneous variables in the cost function are disentangled, which leads us to advise the implementation of common policies as well as policies by segments. Economic implications arising from the study are also considered.
    Keywords: Airports; UK; efficiency; random frontier models; policy implications.
    Date: 2008–02
  2. By: Ville Kaitila; Anni Nevalainen; Mika Maliranta; Reijo Mankinen
    Abstract: ABSTRACT : We compare the levels and development of labour productivity in different countries, especially in the private sectors of the economies. We use several data sources, including the Eurostat Structural Business Statistics and Labour Costs Survey databases as well as the data available from the EU KLEMS project. This combination of data allows for a comparison of alternative productivity indicators. The calculations give us a better understanding of the uncertainties in productivity comparisons than if only one data source were used. The results indicate that Finland has joined the top league of countries in many sectors of manufacturing. There have also occurred favourable developments in many sectors of private services relative to other countries. On the other hand, Finland has thus by now lost most of its earlier source of productivity growth, i.e. its position as a catching-up country. Consequently, it will be more difficult to raise productivity faster than other industrialised countries in the future. Meanwhile, our separate analysis of available data sources indicates that cross-country comparisons of productivity involve a lot of uncertainties, especially when using data at very disaggregated sectoral levels.
    Keywords: productivity, measurement of productivity
    JEL: O47
    Date: 2008–02–27
  3. By: Aoki, Shuhei
    Abstract: This paper suggests that the difference in the Theil indices of inequality between two economies approximately measures the relative loss of aggregate productivity caused by distortions in labor allocation. Moreover, the Theil index itself can be interpreted approximately as the possible maximum loss of aggregate productivity caused by these distortions.
    Keywords: inequality; marginal productivity theory; misallocation; productivity; Theil index
    JEL: E25 D33 D61 D24
    Date: 2008–03–01
  4. By: Alfredo Minerva (Università di Bologna); Lorenzo Casaburi (Università di Bologna); Valeria Gattai (Università di Bologna, ISESAO, Università Commerciale “L. Bocconi”)
    Abstract: This paper revisits the empirical evidence about the link between firms’ performance and their international status, based on a large sample of Italian enterprises. To this purpose, we merged two waves of the Capitalia survey (1998-2000, and 2001-2003) retrieving firm level data for roughly 7,000 units. Three results stand out from our empirical exercise. First, firms that engage in the foreign production of final goods, in addition to export activities, are more productive than firms that only export abroad. Second, firms that engage in final goods off-shoring are more productive than firms that engage in inputs off-shoring. Third, in terms of the productivity dynamics over the period 1998-2003, exporters’ performance in Italy was not any better than the non-exporters’ one. Our results support the view that the better performance (in static terms) of globally engaged firms is chiefly due to the selection caused by the fixed costs associated to international operations.
    Keywords: Export, Heterogeneous Firms, Italy, Off-shoring, Productivity
    JEL: F10 F20 L10 L20 L60
    Date: 2008–01
  5. By: Richard Dion and Robert Fay
    Abstract: The authors provide an extensive review of the rapidly expanding research on productivity, both at the macro and micro levels. They focus primarily on papers written about Canada, but also draw on selected studies from other countries, especially the United States, where such work sheds important light on particular aspects of productivity growth. The authors extract the key results of the studies and signal important methodological features that underpin those results. They also identify areas for further research.
    Keywords: Productivity
    JEL: D24 O31 O40 O47
    Date: 2008
  6. By: Kugler, M., Verhoogen, E.A. (Wilfrid Laurier University)
    Abstract: This paper uses uniquely rich and representative data on the unit values of “outputs” (products) and inputs of Colombian manufacturing plants to draw inferences about the extent of quality differentiation at the plant level. We extend the Melitz (2003) framework to include heterogeneity of inputs and a complementarity between plant productivity and input quality in producing output quality and we show that the resulting model carries distinctive implications for two simple reduced-form correlations – between output prices and plant size and between input prices and plant size – and for how those correlations vary across sectors. We then document three plant level facts: (1) output prices are positively correlated with plant size within industries, on average; (2) input prices are positively correlated with plant size within industries, on average; and (3) both correlations are more positive in industries with more scope for quality differentiation, as measured by the advertising and R&D intensity of U.S. firms. The correlations between export status and input and output prices are similar to those for plant size. These facts are consistent with our model of quality differentiation of both outputs and inputs, and difficult to reconcile with models that assume homogeneity or symmetry of either set of goods. Beyond recommending an amendment of the Melitz (2003) model, the results highlight shortcomings of standard methods of productivity estimation, generalize and provide an explanation for the well-known employer size-wage effect, and suggest new channels through which liberalization of trade in output markets may affect input markets and vice-versa.
    Keywords: Quality upgrading; plant capability; exports
    JEL: O30 F10
    Date: 2008–01
  7. By: Massimiliano Mazzanti; Giulio Cainelli (University of Bari and CERIS-CNR); Roberto Zoboli (Catholic University of Milan and CERIS-CNR)
    Abstract: This paper aims at analysing the role of the environment in innovative strategies based on firm economic performance indicators such as employment, turnover, and labour productivity growth. We exploit a unique dataset of 773 Italian service firms with 20 or more employees comprising 1993-1995 CIS II data on firm innovation strategic motivations and 1995-1998 data on employment, turnover, and labour productivity from the System of the Enterprise Account (SEA). We specify a Gibrat-like empirical model in which the covariates include firm strategies (innovation and environmental), and a set of other explanatory variables and controls. Our econometric findings show a negative link between environmental motivations and growth in employment and turnover and a consequent not significant effect on labour productivity growth. The effect on employment is partly in line with past evidence and may derive from efficiency improvements (dematerialization processes) which also impact on efficiency by reducing workforce number. It is plausible that the net effect derives from the absence of low skilled employment and a creation of high skilled jobs, as a consequence of increased environmental awareness. The effect on turnover shows a negative impact from environmental innovation strategy, implying either a short-medium effect, possibly balanced in the long run by net benefits in terms of higher added value, or a real negative impact, which may be contingent on the observed period, when environmental strategies where not at the heart of strategic management policies. However, productivity-related effects (the core of performance indicators) are not significant. Mainstream hypotheses related to eventual negative impacts are thus not confirmed, although Porter-like effects and virtuous circles between environmentally strategies and performance do not seem to be present.
    Keywords: Services, Firm Environmental Strategies, Firm Growth, CIS Survey, Innovation
    JEL: C23 D21 O32 Q55
    Date: 2007–12
  8. By: Henrekson, Magnus (Dept. of Economics, Stockholm School of Economics); Waldenström, Daniel (Research Institute of Industrial Economics (IFN))
    Abstract: Billions of euros are allocated every year to university research. Increased specialisation and international integration of research and researchers has sharply raised the need for comparisons of performance across fields, institutions and individual researchers. However, there is still no consensus regarding how such rankings should be conducted and what output measures are appropriate to use. We rank all full professors in a particular discipline, economics, in one European nation using seven established, and some of them commonly used, measures of research performance. Our examination shows both that the rank order can vary greatly across measures, and that depending on the measure used the distribution of total research out-put is valued very differently. The renowned KMS measure in economics stands out among the measures analysed here. It exhibits the weakest correlation with the others used in our study. We conclude by giving advice to funding councils and others assessing research quality on how to think about the use of both quantitative and qualitative measures of performance.
    Keywords: Impact of research; Ranking; Research productivity; Bibliometrics; Impact Factor
    JEL: A11 A14 B41
    Date: 2008–03–04
  9. By: Ohnemus, Jörg
    Abstract: Using German firm-level data, an endogenous switching regression model within a production function framework is estimated in order to explore differences in labor productivity between IT outsourcing and non-IT outsourcing firms. This approach takes possible complementarities between IT outsourcing and production input factors into account and further allows IT outsourcing to affect any factor of the production function. Estimation results show that IT outsourcing firms produce more efficiently than non-IT outsourcing firms. Furthermore, they have a significantly larger output elasticity with respect to computer workers. Therefore computer workers and IT outsourcing can be interpreted as complementary factors positively affecting firms’ labor productivity. An additional analysis indicates that IT outsourcing, in the medium-term, has a positive effect on firms’ employment growth rate.
    Keywords: IT Outsourcing, Productivity, Endogenous Switching Regression, Employment Growth
    JEL: C21 D24 J21 J24
    Date: 2007
  10. By: Larson, Donald F.; Butzer, Rita; Mundlak, Yair
    Abstract: The paper presents empirical analysis of a panel of countries to estimate an agricultural production function using a measure of capital in agriculture absent from most studies. The authors employ a heterogeneous technology framework where implemented technology is chosen jointly with inputs to interpret information obtained in the empirical analysis of panel data. The paper discuss es the scope for replacing country and time effects by observed variables and the limitations of instrumental variables. The empirical results differ from those reported in the literature for cross-country studies, largely in augmenting the role of capital, in combination with productivity gains, as a driver of agricultural growth. The results indicate that total factor productivity increased at an average rate of 3.2 percent, accounting for 59 percent of overall growth. Most of the remaining gains stem from large inflows of fixed capital into agriculture. The results also suggest possible constraints to fertilizer use.
    Keywords: Economic Theory & Research,Labor Policies,Economic Growth,E-Business,Rural Development Knowledge & Information Systems
    Date: 2008–02–01
  11. By: Carlos Pestana Barros
    Abstract: This paper identifies different groups in a cost function framework of thermo energy plants belonging to EDP-Electricity of Portugal. In particular, we have clustered the sample - comprising data for years 1987 to 2006 - into two groups. To do so, we have implemented a stochastic frontier latent class model, a procedure that also permits us to analyze also the efficiency of the thermo energy plants with respect to their own frontiers. The results reveal that some of the plants could improve their efficiency levels substantially.
    Keywords: cost efficiency; latent class model; thermo energy plants; stochastic frontier.
    Date: 2008–02
  12. By: Raff, Horst; Ryan, Michael; Stähler, Frank
    Abstract: We use Japanese firm-level data to examine how a firm’s productivity affects its choice of foreign-market entry strategy. We study a sequence of decisions, starting with the choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm faces two options: greenfield investment or merger and acquisition (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture. Controlling for industry- and country-specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting, greenfield investment rather than M&A, and whole ownership rather than a joint venture. We also find that the assumed sequence of decisions fits the data better than alternative specifications.
    Keywords: Foreign direct investment, merger and acquisition, joint venture, greenfield investment, firm heterogeneity, productivity
    JEL: F12 F15
    Date: 2008

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