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on Efficiency and Productivity |
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Issue of 2008‒04‒12
fifteen papers chosen by |
| By: | Adam Gersl; Ieva Rubene; Tina Zumer |
| Abstract: | The paper discusses the inflows of foreign direct investment into the CEE countries and focuses on analysis of productivity spillovers. An overview of the relevance of foreign firms in the CEE economies is presented. Using firm-level data on manufacturing industries for the period 2000–2005, the total factor productivity of domestic firms is estimated using the Petrin and Levinsohn (2003) method and subsequently related within a panel data model to foreign presence in the same industry and in industries linked via the production chain. The presence of productivity spillovers is tested for across several sub-samples to detect possible conditionalities. |
| Keywords: | Foreign direct investment, productivity, spillovers. |
| JEL: | F21 D24 L60 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2007/8&r=eff |
| By: | Doraszelski, Ulrich; Jaumandreu, Jordi |
| Abstract: | We develop a simple estimator for production functions in the presence of endogenous productivity change that allows us to retrieve productivity and its relationship with R\&D at the firm level. By endogenizing the productivity process we build on the recent literature on structural estimation of production functions. Our dynamic investment model can be viewed as a generalization of the knowledge capital model (Griliches 1979) that has remained a cornerstone of the productivity literature for more than 25 years. We relax the assumptions on the R\&D process and examine the impact of the investment in knowledge on the productivity of firms. We illustrate our approach on an unbalanced panel of more than 1800 Spanish manufacturing firms in nine industries during the 1990s. Our findings indicate that the link between R&D and productivity is subject to a high degree of uncertainty, nonlinearity, and heterogeneity across firms. By accounting for uncertainty and nonlinearity, we extend the knowledge capital model. Moreover, capturing heterogeneity gives us the ability to assess the role of R&D in determining the differences in productivity across firms and the evolution of firm-level productivity over time. |
| Keywords: | production function estimation; productivity; R&D |
| JEL: | D2 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6636&r=eff |
| By: | Konings, Jozef; Vandenbussche, Hylke |
| Abstract: | This paper uses EU firm-level panel data to estimate the effect of Antidumping (AD) protection on the productivity of EU domestic firms in import-competing industries. We find that firms with relatively low initial productivity - laggard firms - have productivity gains during AD protection, while firms with high initial productivity - frontier firms - experience productivity losses. While the productivity of the average firm is moderately improved during AD protection, productivity remains below that of firms never involved in AD cases, thus questioning the desirability of protection. Our empirical results are consistent with recent theoretical work supporting the view that trade policy can have a differential effect on firms depending on their initial productivity. |
| Keywords: | antidumping protection; firm heterogeneity; total factor productivity |
| JEL: | C2 F13 L41 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6724&r=eff |
| By: | Lach, Saul; Shiff, Gil; Trajtenberg, Manuel |
| Abstract: | There is widespread agreement about the important role played by Information and Communication Technologies (ICTs) in the US productivity revival and in the evolving US-EU productivity gap. In Israel, the ICT sector grew very rapidly during the 1990s and became a hotbed of innovation and technological advance by worldwide standards. Yet, Israel's overall productivity growth remained sluggish, with traditional sectors both in manufacturing and services seemingly unable to benefit from the success of the ICT sector. The main goal of this paper is to shed light on these twin developments. We use newly constructed data on industry-level ICT investments between 1990 and 2003 and estimate production functions for manufacturing industries augmented to include ICT capital. We find a significant elasticity of value-added with respect to ICT capital, which increases considerably with the technological sophistication of the industry. We also find that ICT capital deepening is the most important factor contributing to value added growth in manufacturing during 1995-2000, before the burst of the dot.com bubble. Because most ICT capital is concentrated in high tech industries, growth in manufacturing has been mostly confined to the high-tech sector. Facilitating the adoption of ICT in traditional industries is therefore crucial to achieving economy-wide growth. The Israeli experience described here - although restricted to the manufacturing sector - provides a useful example of the benefits and limitations associated with a growth strategy centred on a local ICT producing sector, however successful it might be. |
| Keywords: | GPT; ICT; productivity growth |
| JEL: | O3 O4 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6732&r=eff |
| By: | Gatti, Roberta; Love, Inessa |
| Abstract: | Although it is widely accepted that financial development is associated with higher growth, the evidence on the channels through which credit affects growth at the microeconomic level is scant. Using data from a cross section of Bulgarian firms, we estimate the impact of access to credit, as proxied by indicators of whether firms have access to a credit line or overdraft facility on productivity. To overcome potential omitted variable bias of OLS estimates, we use information on firms’ past growth to instrument for access to credit. We find credit to be positively and strongly associated with TFP. These results are robust to a wide range of robustness checks. |
| Keywords: | access to credit; productivity; transition |
| JEL: | D24 G21 G32 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6676&r=eff |
| By: | Oleg Badunenko; Michael Fritsch; Andreas Stephan |
| Abstract: | This paper investigates the factors that explain the level and dynamics of manufacturing firm productive efficiency. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. We find that (1) about half the model's explanatory power is due to industry effects, (2) firm size accounts for another 20 percent, and (3) location of headquarters explains approximately 15 percent. Interestingly, most other firm characteristics, such as R&D intensity, outsourcing activities, or the number of owners, have extremely little explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firm's efficiency over time. |
| Keywords: | Frontier analysis, determinants of efficiency, firm performance, industry effects, regional effects, firm size |
| JEL: | D24 L10 L25 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp775&r=eff |
| By: | Rajeev Dhawan; Karsten Jeske; Pedro Silos |
| Abstract: | We study how total factor productivity (TFP), energy prices, and the Great Moderation are linked. First we estimate a joint stochastic process for the energy price and TFP and establish that until the second quarter of 1982, energy prices negatively affected productivity. This spillover has since disappeared. Second, we show that within the framework of a dynamic stochastic general equilibrium model, the disappearance of this energy-productivity spillover generates the significantly lower volatility of output and its components. Specifically, the change in the joint stochastic process accounts for close to 70 percent of the moderation in output volatility. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2008-11&r=eff |
| By: | INUI Tomohiko; KAWAKAMI Atsushi; MIYAGAWA Tsutomu |
| Abstract: | Going all the way back to Schumpeter (1934), economists have long discussed whether market competition stimulates innovation. To reconcile conflicting earlier empirical evidence, Aghion and Griffith (2005) developed a model showing that competition can have both a positive and a negative effect on innovation, depending on the degree of competition in the market. Following Aghion and Griffith's work, this paper empirically examines the effect of market competition - measured either by the Herfindahl Index or the Lerner Index - on productivity growth and R&D intensity using micro data for Japan's manufacturing sector. We found evidence of an inverted U-shaped relationship between competition and innovation when we use the Herfindahl Index as a measure of competition in the market. Especially for the period since 2000, the data lend strong support for the hypothesis of an inverted U-shaped curve. In addition, we examined the effect of new entrants on the innovative activity of incumbents. The results of our estimation using a regulation index as our measure of entry barriers suggest that the effect on incumbents' TFP growth depends on their technology level. When incumbents' technology level is close to the technology frontier in their industry, competition from new entrants induces these firms to make efforts to increase their productivity in order to escape from competition. On the other hand, such competition discourages innovation in firms far from the industrial technology frontier. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:08012&r=eff |
| By: | Bauwens, Luc; Mion, Giordano; Thisse, Jacques-François |
| Abstract: | Using a data set of highly cited researchers in all fields of science, we show that the gap in scientific performance between Europe, especially continental Europe, and the USA is large. We model the number of highly cited researchers in a sample of countries as a function of physical and human capital and a country-specific, factor-augmenting Hicks-neutral productivity term. We find that differences in productivity between Anglo-Saxon countries and other countries are not solely due to differences in the levels of inputs. Not surprisingly, our results reveal the importance of English proficiency. However, they also show that the governance and design of research institutions that characterize Anglo-Saxon countries, as well as a few other countries that have similar institutions, is another critical factor for research output. |
| Keywords: | citations; knowledge economics; research performance; university governance |
| JEL: | C25 I23 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6625&r=eff |
| By: | Anca Pruteanu-Podpiera; Laurent Weill; Franziska Schobert |
| Abstract: | Banking competition is expected to provide welfare gains by reducing monopoly rents and cost inefficiencies, favoring a reduction of loan rates and then investment. These expected gains are a major issue for transition countries, in which bank credit represents the largest source of external finance for companies. With the use of exhaustive quarterly data for Czech banks, this paper aims to provide evidence on the effects of banking competition in the Czech Republic. First, we measure the level and evolution of banking competition between 1994 and 2005. Competition is measured by the Lerner index on the loan market, using data on loan prices. The results do not show a clear-cut trend in the evolution of the Lerner index. Second, we investigate the relationship and causality between competition and efficiency. We perform a Granger-causality-type analysis. This supports the ‘banking specificities’ hypothesis, according to which heightened competition can lead to an increase in monitoring costs through a reduction in the length of the customer relationship and due to the presence of economies of scale in the banking sector, in this way reducing the cost efficiency of banks. Therefore, our results reject the intuitive ‘quiet life’ hypothesis and indicate a negative relationship between competition and efficiency in banking. |
| Keywords: | Banks, competition, efficiency, transition countries. |
| JEL: | G21 L12 P20 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2007/6&r=eff |
| By: | Jiri Podpiera; Laurent Weill |
| Abstract: | A large number of bank failures occurred in transition countries during the 1990s and at the beginning of the 2000s. These failures were related to increases in non-performing loans and deteriorated cost efficiency of banks. This paper addresses the question of the causality between non-performing loans and cost efficiency in order to examine whether either of these factors is the deep determinant of bank failures. We extend the Granger causality model developed by Berger and DeYoung (1997) by applying GMM dynamic panel estimators on a panel of Czech banks between 1994 and 2005. Our findings support the “bad management†hypothesis, according to which deteriorations in cost efficiency precede increases in non-performing loans, and reject the “bad luck†hypothesis, which predicts the reverse causality. |
| Keywords: | Bank failures, cost efficiency, non-performing loans, transition countries. |
| JEL: | G21 G28 D21 P20 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2007/5&r=eff |
| By: | Paul De Grauwe; Frauke Skudelny |
| Abstract: | The aim of this paper is to find out whether the Balassa-Samuelson effect is important in EMU. We use panel data going from 1970 to 1995 for the current EU members in order to estimate the long run effect of bilateral differences in productivity growth differential between the traded and non-traded goods sector on bilateral inflation differentials. The regression results indicate a significant effect of the productivity differential, as proposed by the theory. According to our regression results, the impact of a productivity shock on the inflation differential can be quite substantial, going up to an 8% increase in the inflation differential. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0015&r=eff |
| By: | Vivien Lewis |
| Abstract: | This paper analyses empirically how changes in productivity affect the real eurodollar exchange rate. We consider the two-sector new open macro model in Benigno and Thoenissen (2003). The model predictions are used, in the form of sign restrictions, to identify productivity shocks in a structural vector autoregression. We estimate economy-wide and traded sector productivity shocks, controlling for demand and nominal factors. Our results show that productivity shocks are much less important in explaining the variation in the euro-dollar exchange rate than are demand and nominal shocks. In particular, productivity can explain part of the appreciation of the dollar in the late 1990s only to the extent that it created a boost to aggregate demand in the US. We find an insignificant contribution of the Balassa-Samuelson effect. |
| Keywords: | real exchange rate, productivity, VAR, sign restrictions |
| JEL: | F41 F31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0406&r=eff |
| By: | Dew-Becker, Ian; Gordon, Robert J |
| Abstract: | Throughout the post-war era until 1995 labour productivity grew faster in Europe than in the United States. Since 1995, productivity growth in the EU-15 has slowed while that in the United States has accelerated. But Europe’s productivity growth slowdown was largely offset by faster growth in employment per capita, leaving little difference in growth of output per capita between the EU and US going back to 1980. This paper is about the strong negative trade-off between productivity and employment growth within Europe. We document this trade-off in the raw data, in regressions that control for the two-way causation between productivity and employment growth, and we show that there is a robust negative correlation between productivity and employment growth across countries and time. Our primary explanatory variables to explain both the revival of EU employment growth and the slowdown in productivity growth include six policy and institutional variables. We find that several of these variables have significant negative effects on employment per capita, with policy changes that raised labour costs reducing employment both before and after 1995. These variables, together with employment per capita, are then used to explain productivity growth, using several alternative treatments with instrumental variables. We also find a significant time effect, and we link this to an increase in labour force participation by women, particularly in southern European countries. We find that the negative effect of changes in employment per capita on changes in productivity is robust to alternative instruments and to the inclusion or exclusion of particular countries like the US or Spain. We conclude by suggesting that evaluations of alternative policy reforms in Europe should take into account any offsetting effects on employment and productivity by examining the ultimate impact on changes in income per capita. |
| Keywords: | Effects of tax wedge on employment; Employment protection legislation; European employment growth; European productivity growth; labour force participation of women; Product market regulation |
| JEL: | D24 E20 E23 J20 J30 N34 O47 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6722&r=eff |
| By: | Schivardi, Fabiano; Viviano, Eliana |
| Abstract: | The 1998 reform of the Italy's retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on firms' performance for a representative sample of retailers. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and substantially lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT. Consistently, more stringent entry regulation results in higher inflation: lower productivity coupled with larger margins results in higher consumer prices. |
| Keywords: | entry barriers; productivity growth; technology |
| JEL: | L11 L5 L81 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6637&r=eff |