New Economics Papers
on Efficiency and Productivity
Issue of 2008‒03‒25
24 papers chosen by

  1. Measuring Intangibles' Productivity. Empirical Evidence from Spanish Firms By Ester Oliveras; David Castillo
  2. Be productive or face decline. On the sources and determinants of output growth in Italian manufacturing firms By Angelo Zago; Francesco Aiello; Camilla Mastromarco
  3. ICT-specific technological change and productivity growth in the US 1980-2004 By Diego Martínez López; Jesús Rodríguez López; José Luis Torres Chacón
  4. Technical Efficiency in the Informal Manufacturing Enterprises: Firm level evidence from an Indian state By Seethamma Natarajan, Rajesh Raj S.N.
  5. Changes in the Terms of Trade and Canada's Productivity Performance By Diewert, Erwin
  6. Analysis of the Efficiency and Profitability of the Japanese Banking System By Elena Loukoianova
  7. Productivity growth and economic reform : evidence from Rwanda By Duffy, Neal; Ezemenari, Kene; Coulibaly, Kalamogo
  8. ICT-specific technological change and productivity growth in the US 1980-2004 By Diego Martínez; Jesús Rodríguez; José L. Torres
  9. Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry By Elina Berghäll
  10. Efficiency of Finnish Upper Secondary Schools: An Application of Stochastic Frontier Analysis with Panel Data By Tanja Kirjavainen
  11. Total factor productivity and the role of entrepreneurship By Hugo Erken; Piet Donselaar; Roy Thurik
  12. The Role of the Local Business Environment in Banking Consolidation By Luca Colombo; Gilberto Turati
  13. Secessions of Municipal Health Centre Federations: Expenditure and Productivity Effects By Juho Aaltonen; Antti Moisio; Kalevi Luoma
  14. Equity and efficiency in private and public education: a nonparametric comparison By Laurens Cherchye; Kristof De Witte; Erwin Ooghe
  15. Production and productivity of Bulgarian agriculture in post war years By Bachev, Hrabrin
  16. Capturing the environment, a metafrontier approach to the drinking water sector By Kristof De Witte; Rui C. Marques
  17. Productivity effects of innovation, stress and social relations By Weehuizen, Rifka; Sanditov, Bulat; Cowan, Robin
  18. ICT Penetration and Aggregate Production Efficiency: Empirical Evidence for a Cross-Section of Fifty Countries By Repkine, Alexandre
  19. Effects of social interactions on scientists' productivity By Carillo, Maria Rosaria; Papagni, Erasmo; Capitanio, Fabian
  20. Cost implications of agricultural land degradation in Ghana: By Diao, Xinshen; Sarpong, Daniel B.
  21. Gender Diversity in the Boardroom and Financial Performance of Commercial Banks: Evidence from Bangladesh By Dutta, Probal; Bose, Sudipta
  22. Do waiting times reduce hospital costs? By Luigi Siciliani, Anderson Stanciole, Rowena Jacobs
  23. Productivity Growth and the Phillips Curve: A Reassessment of the US Experience By Marika Karanassou; Hector Sala
  24. Efficiency Gain from Ownership Deregulation: Estimates for the Radio Industry By Howard Smith; Catherine O'Gorman

  1. By: Ester Oliveras; David Castillo
    Abstract: As companies and shareholders begin to note the potential repercussions of intangible assets upon business results, the inability of the traditional financial statement model to reflect these new ways of creating business value has become evident. Companies have widely adopted new management tools, covering in this way the inability of the traditional financial statement model to reflect these new ways of creating business value. However, there are few prior studies measuring on a quantifiable manner the level of productivity unexplained in the financial statements. In this study, we measure the effect of intangible assets on productivity using data from Spanish firms selected randomly by size and sector over a ten-year period, from 1995 to 2004. Through a sample of more than 10,000 Spanish firms we analyse to what extent labour productivity can be explained by physical capital deepening, by quantified intangible capital deepening and by firm’s economic efficiency (or total factor productivity –PTF). Our results confirm the hypothesis that PTF weigh has increased during the period studied, especially on those firms that have experienced a significant raise in quantified intangible capital, evidencing that there are some important complementary effects between capital investment and intangible resources in the explanation of productivity growth. These results have significant differences considering economic sector and firm’s dimension.
    Keywords: Intangibles, Accounting, Spain
    JEL: M41
    Date: 2008–03
  2. By: Angelo Zago (Corresponding author, Dipartimento di Scienze Economiche (Università di Verona)); Francesco Aiello; Camilla Mastromarco
    Abstract: This paper investigates the sources and determinants of output growth of Italian manufacturing firms. Applying stochastic frontier techniques, we decompose output growth into factor accumulation and TFP growth from 1998 to 2003. TFP growth is further decomposed into technological change, efficiency change, and scale effects. We find that both input accumulation and TFP growth are important in explaining output growth. In addition, efficiency change (technological catch-up) is the most significant component of TFP growth. Finally, using a specific formulation of the asymmetric error component, we find that R&D spillovers, banking efficiency and public infrastructures have statistically significant and economically relevant effects on the technological catch-up.
    Keywords: growth accounting, stochastic frontiers, TFP, R&D spillovers, banking efficiency, infrastructure, Italian manufacturing firms.
    JEL: O47 C23 G21 H54
    Date: 2008–03
  3. By: Diego Martínez López (Department of Economics, Universidad Pablo de Olavide); Jesús Rodríguez López (Department of Economics, Universidad Pablo de Olavide); José Luis Torres Chacón (Departamento de Teoría e Historia Económica, Universidad de Málaga)
    Abstract: This paper studies the impact of the information and communication technologies (ICT) on U.S. economic growth using a dynamic general equilibrium approach. We use a production function with six different capital inputs, three of them corresponding to ICT assets and other three to non-ICT assets. We find that the technological change embedded in hardware equipment is the main leading non-neutral force of the U.S. productivity growth and accounts for about one quarter of it during the period 1980-2004. As a whole, ICT-specific technological change accounts for about 35% of total labor productivity growth.
    Keywords: New economy, information and communication technologies, specific-technological change, neutral-technological change.
    JEL: E22 O30 O40
    Date: 2008–03
  4. By: Seethamma Natarajan, Rajesh Raj S.N.
    Abstract: The small and medium enterprise sector plays a pivotal role in the socio-economic development and growth of nations. But there is evidence that the firms in this sector are less efficient than those in the large enterprise sector. Hence it is imperative to examine their efficiency levels in order to identify the factors that contribute inefficiency in these firms and to generate information for designing support policies for them. In this study, level and sources of technical efficiency in the unorganised manufacturing sector in the Indian state of Kerala is examined using translog stochastic frontier production function. The analysis is conducted for five broad industry groups and the sector as a whole using firm level data. The findings show that high levels of technical inefficiency, which reduce their potential levels significantly, characterize the unorganised manufacturing enterprises in Kerala. Regarding the factors contributing to inefficiencies, it is observed that size, ownership, region (location) and nature of seasonality of operation significantly influence technical efficiency level in most of the industry groups. We also find that credit availability and employment of hired labour play an important role in explaining technical efficiency levels.
    Keywords: Technical Efficiency; Stochastic Frontier Production Function; Unorganised Manufacturing Sector; Kerala
    JEL: O17 O14
    Date: 2007–11–11
  5. By: Diewert, Erwin
    Abstract: Using new data from Statistics Canada, the paper shows that the productivity performance of the business sector of the Canadian economy has been reasonably satisfactory over the past 46 years. In particular, traditional gross income Total Factor Productivity (TFP) growth averaged 1.14 percentage points per year over the period 1961-2006 and when a net income framework was used, TFP growth averaged 1.26 percentage points per year. The focus of the study is on the real income generated by the business sector of the Canadian economy. Two concepts of income are used: a gross concept that includes depreciation as a part of income and a more appropriate net concept where depreciation is excluded from income. In both the gross and net income frameworks, the growth of quality adjusted labour input growth was the main driver of growth in real income followed by TFP growth, followed by growth in capital input and then by falling real import prices. However, in recent years, the contribution of falling real import prices turned out to be more than twice as important as capital deepening. The study encountered many data problems which should be addressed in future work on Canadian business sector productivity performance.
    JEL: C43 C67 C82 D24 E22 E43
    Date: 2008–03–11
  6. By: Elena Loukoianova
    Abstract: The paper analyzes the efficiency and profitability of Japanese banks from 2000-06. It uses a non-parametric approach, the data envelopment analysis (DEA) to analyze banks' cost and revenue efficiency. The results show that the performance of Japanese banks has steadily improved since 2001, but there are significant differences within the banking sector, with regional banks being less cost and revenue efficient relative to both City and Trust banks. While Japanese bank profitability is low compared to that in other advanced countries, there is considerable potential for efficiency gains, particularly through increased cost-sharing arrangements among regional banks, consolidation of regional banks with major or other regional banks, and the creation of bank consortia to pool resources for asset and risk management.
    Date: 2008–03–19
  7. By: Duffy, Neal; Ezemenari, Kene; Coulibaly, Kalamogo
    Abstract: Trade, financial, and exchange rate reforms are shown to have exerted a positive impact on the growth of total factor productivity in Rwanda during the period 1995-2003. Based on a constant returns-to-scale Cobb-Douglas production function, this paper regresses total factor productivity on indices of trade, financial, and exchange rate reforms. The analysis determines that trade reforms and financial reforms each contributed positively to improvements in total factor productivity. The data also suggest that the allocation of official development assistance to human capital made a significant contribution to productivity. In contrast, the appreciation of the real exchange rate of the late 1980 ' s hindered productivity or the growth of TFP. Taken together, the findings for Rwanda presented in this paper show that the strong growth of the past decade has not just been due to a " bounce back " effect followi ng the genocide. The results support the notion that policies favorable to trade development, a deepening of the financial sector, and formation of human capital have been effective for increasing aggregate productivity of the economy and stimulating growth in Rwanda. For sustained growth, the Rwandan authorities should continue to build on these policies, while also taking care to maintain an appropriate exchange rate.
    Keywords: Economic Theory & Research,Emerging Markets,Debt Markets,Currencies and Exchange Rates,Access to Finance
    Date: 2008–03–01
  8. By: Diego Martínez (Universidad Pablo de Olavide); Jesús Rodríguez (Universidad Pablo de Olavide); José L. Torres (Universidad de Málaga)
    Abstract: This paper studies the impact of the information and communication technologies (ICT) on U.S. economic growth using a dynamic general equilibrium approach. We use a production function with six different capital inputs, three of them corresponding to ICT assets and other three to non-ICT assets. We find that the technological change mbedded in hardware equipment is the main leading non-neutral force of the U.S. roductivity growth and accounts for about one quarter of it during the period 1980-2004. As a whole, ICT-specific technological change accounts for about 35% of total labor productivity growth.
    Keywords: New economy, information and communications technologies, specific-technological change, neutral-technological change
    JEL: E22 O30 O40
    Date: 2008–03
  9. By: Elina Berghäll
    Abstract: Agglomeration economies are sought with stochastic frontier methodology to analyse their role in the extraordinary productivity growth of the knowledge-intensive information and communication technology (ICT) equipment industry in Finland. Results suggest that the method, though imprecise, is useful for identifying developments in agglomeration economies. The main empirical result is that the highly increasing scale elasticities (i.e., relative to firm size) found in the sector are more industry and firm size related, than location related external economies of scale. Policy-wise, there are two neglected concerns: (i) Agglomeration economies have weakened with the industry life cycle, and the maturing of the underlying technology towards mass production is well under way in the industry, with R&D saving and labour using technical change. (ii) The deployment of R&D subsidies as instruments of regional policy may harm long term competitiveness in dispersing innovation intensive activities to low spillover areas and by disrupting the creation of persistent location-specific advantages.
    Keywords: Agglomeration, productivity, scale, technical change, efficiency
    Date: 2008–01–14
  10. By: Tanja Kirjavainen
    Abstract: In this study the efficiency of Finnish upper secondary schools is evaluated with stochastic frontier analysis. Different stochastic frontier models for panel data are used to estimate education production functions. The results in matriculation examination are explained with comprehensive school grade point average, parents? socioeconomic background, resources, length of studies and decentralization of test taking on matriculation examination. Controls for schools with specialized curriculum are also included. The heterogeneity across schools is allowed by estimating both true random and true fixed effects models. The results show that the effect of teaching resources on examination results is even negative when the heterogeneity across schools is taken into account. Length of studies and decentralization of test taking affected negatively on student achievement. The inefficiency and the rankings of schools based on inefficiency score varied quite considerably depending on the type of stochastic frontier model. The lowest estimates for inefficiency were obtained with true random and true fixed effects models that separate time constant random or fixed effects from inefficiency.
    Keywords: Efficiency, stochastic frontier analysis, secondary schools
    Date: 2007–11–08
  11. By: Hugo Erken (Ministry of Economic Affairs, Erasmus University Rotterdam); Piet Donselaar (Ministry of Economic Affairs); Roy Thurik (Erasmus University Rotterdam; Max Planck Institute of Economics; EIM Business and Policy Research)
    Abstract: Total factor productivity of twenty OECD countries for a recent period (1971-2002) is explained using six different models based on the established literature. Traditionally, entrepreneurship is not dealt with in these models. In the present paper it is shown that - when this variable is added - in all models there is a significant influence of entrepreneurship while the remaining effects mainly stay the same. Entrepreneurship is measured as the business ownership rate (number of business owners per workforce) corrected for the level of economic development (GDP per capita).
    Keywords: Total factor productivity, research and development, entrepreneurship, OECD
    JEL: E20 L26 M13 O10 O30 O40 O50
    Date: 2008–03–14
  12. By: Luca Colombo (DISCE, Università Cattolica); Gilberto Turati (DISCE, Università Cattolica)
    Abstract: We study whether local economic conditions in different areas have an impact on the magnitude and direction of the concentration process of a banking industry. By using probit and count data (ZIP) models to study the consolidation of the Italian banking sector in the second half of the 1990s, we document a significant direct impact of the local ‘business environment’ on the concentration of the industry at the regional level. This effect complements the well known indirect effect of macroeconomic characteristics on the profitability and efficiency of banks. We also show that institutional and organizational variables affect the likelihood and number of M&A deals, and help explaining differences in performance. Our results appear to be robust to different specifications, and to a number of robustness checks, including alternative sets of variables defining local ‘business environment conditions’.
    Keywords: Banking M&As, local business environment, profitability, efficiency, credit policies, count data models
    JEL: G21 G34 L16
    Date: 2007–11
  13. By: Juho Aaltonen; Antti Moisio; Kalevi Luoma
    Abstract: We examine the expenditure and efficiency effects of secessions of health centre federations between 1990 and 2003. Using both regression and matching techniques we find statistically significant effects. According to results, the per capita primary health care expenditure growth is approximately five percent higher in seceded health centres compared to all non-seceded health centres. Using nearest neighbour matching, we find that the average secession effect is eight percent on per capita primary health care expenditures. We find no effect on specialised health care expenditures. Using an indicator of health centre service volume, we find that secessions had no positive effects on the productivity development in the long term. The rapid expenditure growth of seceded health centres can thus be explained both by increasing service volume and decreasing productivity. Key words: Health care expenditures, health centre secessions, economies of scale
    Keywords: Health care expenditures, health centre secessions, economies of scale
    Date: 2007–09–13
  14. By: Laurens Cherchye; Kristof De Witte; Erwin Ooghe
    Abstract: We present a nonparametric approach for the equity and efficiency evaluation of (private and public) primary schools in Flanders. First, we use a nonparametric (Data Envelopment Analysis) model that is specially tailored to assess educational efficiency at the pupil level. The model accounts for the fact that minimal prior structure typically available for the behavior (objectives and feasibility set) under evaluation, it reckons with outlier behavior in the available data, while it corrects for ‘environmental’ characteristics that are specific to each pupil. Second, we propose first- and second-order stochastic dominance (FSD and SSD) criteria as naturally complementary aggregation criteria for comparing the performance of different school types (private and public schools) in Flanders. While FSD only accounts for (Pareto) efficiency, SSD also takes (Pigou-Dalton) equality into consideration. We find that private schools outperform public schools in terms of SSD.
    Keywords: equity; efficiency; private versus public education; non-parametric analysis; data envelopment analysis; stochastic dominance
    Date: 2008–03
  15. By: Bachev, Hrabrin
    Abstract: This study is a first attempt to clarify major trends and factors of changes in production and productivity in Post-Second World War Bulgarian agriculture. It incorporates an interdisciplinary approach and specifies crucial institutional, economic, organizational, technological etc. factors affecting development of agricultural production and productivity. Firstly, evolution of agricultural production and productivity is analyzed, and effect of labor, land and livestock productivity on different productions assessed. Secondly, evolution and impact of main technological factors (application of chemicals, mechanization, irrigation, introduction of new varieties etc.) are examined. Third, stages in property rights development and restructuring of farms are presented, and their effects on production and productivity evaluated. Forth, paces in modernization of public policy, its key elements (central planning, price and trade regulations, support programs etc.) and implications for agriculture are identified. Fifth, evolution and role of the demands for farm products is assessed. Next, changes in labor quantity and composition, and their impact on agricultural production and productivity are scrutinized. Finally, effects of climate changes and weather extremes on agriculture are underlined.
    Keywords: evolution of agricultural production; productivity; political; institutional; economic; organizational; international; technological; natural factors; post-second world war agriculture; Bulgaria
    JEL: N54 Q10
    Date: 2008–03
  16. By: Kristof De Witte; Rui C. Marques
    Abstract: Environmental factors add complexity to the comparison between specific activities or entire entities. Decision making units with an inferior performance are tempted to invoke that their organization is different from the others in the data set. By reinterpreting and extending the metafrontier literature, we propose an all-embracing concept to fully capture the operational environment. We suggest the ‘Group Specific Technical Efficiency’ as a new measure to assess the overall efficiency of a utility while allowing for environmental differences. A real-world example of drinking water utilies out of 5 different countries illustrates the concept.
    Keywords: Free Disposal Hull, Efficiency Measurement, Environmental Variables, Metafrontier, Water Industry
    JEL: C14 C61 D24 L95
    Date: 2008–03
  17. By: Weehuizen, Rifka (UNU-MERIT, Maastricht University); Sanditov, Bulat (UNU-MERIT, Maastricht University); Cowan, Robin (UNU-MERIT, Maastricht University)
    Abstract: Innovation is a source of increasing productivity, but it is also a source of stress. Psychological research shows that moderate stress increases the productivity of an actor, but above a certain level, additional stress decreases productivity. Stress is reduced by coping behaviour of the actor, and in addition it is buffered by social relations. However, high levels of stress negatively affect social relations, causing social erosion. In a formal model including inter-agent dynamics, we show that the variables moderating stress levels are of crucial importance for identifying the overall effects of different rates of innovation on productivity. The model shows among other things that the existence and nature of relationships of people determine the extent to which a certain rate of innovation effectively results in increasing productivity. In addition, it shows the possibility of multiple equilibria - under some parameter values both high- and low-stress steady states exist; and the dynamics exhibit hysteresis. At very high levels of stress, innovation can result in a dissolution of social relations, and has a negative relationship with the rate of economic growth.
    Keywords: innovation, work-related stress, social relationships
    JEL: O4 J28 C61
    Date: 2008
  18. By: Repkine, Alexandre
    Abstract: This study investigates the impact of telecommunications penetration on the aggregate production efficiency in a large cross-section of fifty countries. We show that higher levels of ICT capital stock penetration increase technical efficiency levels in the aggregate production function. However, depending on the geographical location the effects of ICT penetration are different. Our empirical findings suggest that increasing the per capita telecommunications capital in the form of land line and mobile telephones, computers, Internet access and the like is likely to considerably increase productive efficiency in case of the poorest nations, while in the more developed countries such gains have been largely exhausted. In the end we offer several avenues for more research based on the caveats discovered while working on this study.
    Keywords: economic growth; technical efficiency; telecommunications investment
    JEL: O3 O4
    Date: 2008–02–28
  19. By: Carillo, Maria Rosaria; Papagni, Erasmo; Capitanio, Fabian
    Abstract: Recent economic research has focused on the economic effects of the social environment. In the economic literature, important phenomena are considered, at least in part, as results of the individual's social environment. There is a similar revival of interest among economists who analyse the world of science and basic research. In this case as well, the environment plays a key role in the agent's behaviour. This paper makes an an empirical analysis of the influence of social interactions on scientists' productivity. In the econometric analysis we investigate the aggregate importance of this phenomenon through the analysis of data on publications in four scientific fields of seven advanced countries. We find that social interactions among researchers have positive effects on a scientist's productivity and that there is a U-shaped relation between the size of a scientific network and individual productivity. We interpret this result as providing evidence for threshold externalities and increasing returns to scale.
    Keywords: Keywords: scientists' productivity; increasing returns in science; social interactions.
    JEL: O41 H41 Z13
    Date: 2007–11
  20. By: Diao, Xinshen; Sarpong, Daniel B.
    Abstract: "An economywide, multimarket model is constructed for Ghana and the effects of agricultural soil erosion on crop yields are explicitly modeled at the subnational regional level for eight main staple crops. The model is used to evaluate the aggregate economic costs of soil erosion by taking into account economywide linkages between production and consumption, across sectors and agricultural subsectors. To fill a gap in the literature regarding economic cost analysis of soil erosion, this paper also analyzes the poverty implications of land degradation. The model predicts that land degradation reduces agricultural income in Ghana by a total of US$4.2 billion over the period 2006–2015, which is approximately five percent of total agricultural GDP in these ten years. The effect of soil loss on poverty is also significant at the national level, equivalent to a 5.4 percentage point increase in the poverty rate in 2015 compared to the case of no soil loss. Moreover, soil loss causes a slowing of poverty reduction over time in the three northern regions, which currently have the highest poverty rates in the country. Sustainable land management (SLM) is the key to reducing agricultural soil loss. The present findings indicate that through the adoption of conventional SLM practices, the declining trend in land productivity can be reversed, and that use of a combination of conventional and modern SLM practices would generate an aggregate economic benefit of US$6.4 billion over the period 2006–2015. SLM practices would therefore significantly reduce poverty in Ghana, particularly in the three northern regions." Authors' Abstract
    Keywords: Land degradation, Costs, Agricultural soil loss, Economywide modeling, Modeling cost of land degradation,
    Date: 2007
  21. By: Dutta, Probal; Bose, Sudipta
    Abstract: In today’s corporate world, board diversity is a much talked-about topic and gender diversity is an important aspect of board diversity. Gender diversity refers to the presence of women on corporate boards of directors. In this paper, an effort has been made to examine whether an association exists between the financial performance of commercial banks in Bangladesh and presence of women on the boards of directors of these banks and in order to examine the existence of this association, a non-parametric test, namely Kruskal-Wallis H test has been conducted. But the test has yielded conflicting results at different significance levels.
    Keywords: Gender diversity; Board of Directors; Financial Performance and Commercial Banks.
    JEL: M14 M0 M41 M1 M12
    Date: 2007–12
  22. By: Luigi Siciliani, Anderson Stanciole, Rowena Jacobs
    Abstract: Using a sample of 137 hospitals over the period 1998-2002 in the English National Health Service, we estimate the elasticity of hospital costs with respect to waiting times. Our cross-sectional and panel-data results suggest that at the sample mean (103 days), waiting times have no significant effect on hospital, costs or, at most, a positive one. If significant, the elasticity of cost with respect to waiting time from our cross-sectional estimates is in the range 0.4-1. The elasticity is still positive but lower in our fixed-effects specifications (0.2-0.4). In all specifications, the effect of waiting time on cost is non-linear, suggesting a U-shaped relationship between hospital costs and waiting times: the level of waiting time which minimises total costs is always below ten days.
    JEL: I11 I18
    Date: 2008–02
  23. By: Marika Karanassou (Queen Mary, University of London); Hector Sala (Universitat Autonoma de Barcelona)
    Abstract: In this paper we analyse a new Phillips curve (NPC) model and demonstrate that (i) frictional growth, i.e. the interplay of wage-staggering and money growth, generates a nonvertical NPC in the long-run, and (ii) the Phillips curve (PC) shifts with productivity growth. On this basis we estimate a dynamic system of macrolabour equations to evaluate the slope of the PC and explain the evolution of inflation and unemployment in the US from 1970 to 2006. Since our empirical methodology relies heavily on impulse response functions, it represents a synthesis of the traditional structural modelling and (structural) vector autoregressions (VARs). We find that the PC is downward-sloping with a slope of -3.58 in the long-run. Furthermore, during the stagflating 70s, the productivity slowdown contributed substantially to the increases in both unemployment and inflation, while the monetary expansion was quite ineffective and led mainly to higher inflation. Finally, the monetary expansion and productivity speedup of the roaring 90s were both responsible for the significant lowering of the unemployment rate.
    Keywords: New Phillips curve; frictional growth; productivity growth; stagflating seventies; roaring nineties; impulse response functions
    JEL: E24 E31
    Date: 2008–03
  24. By: Howard Smith; Catherine O'Gorman
    Abstract: Reducing fixed cost duplication - a common justification for concentrated market structure - motivated the US government to relax the number of radio stations a firm could operate in any local market. After deregulation the number of firms per market decreased. The implied cost saving depends on the per market fixed costs incurred by each firm. Using data from 140 markets we estimate upper and lower bounds to fixed costs using (i) an empirical model of gross profit and (ii) the assumption that the observed post-deregulation market structure is a Nash equilibrium. The estimates suggest that the efficiency savings were significant.
    Keywords: Moment Inequalities, Deregulation
    JEL: L10 L40 L82
    Date: 2008

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