New Economics Papers
on Efficiency and Productivity
Issue of 2008‒07‒20
twelve papers chosen by

  1. The Effects of Liberalization and Deregulation on the Performance of Financial Institutions: The Case of the German Life Insurance Market By Lucinda Trigo Gamarra
  2. Evolution and sources of manufacturing productivity growth - evidence from a panel of European countries By Silvia Giannangeli; Ram?n G?mez-Salvador
  3. Exports and Productivity in the German Business Services Sector. First Evidence from the Turnover Tax Statistics Panel By Alexander Vogel
  4. Does Open Innovation Foster Productivity? Evidence from Open Source Software(OSS) Firms By Elad Harison; Heli Koski
  5. Are private banks more efficient than public banks? Evidence from Russia By A. KARAS; K. SCHOORS; L. WEILL
  7. Environmental Factors Affecting Hong Kong Banking: A Post-Asian Financial Crisis Efficiency Analysis By Maximilian J. B. Hall; Karligash A. Kenjegalieva; Richard Simper
  8. Trade,Tariffs and Total Factor Productivity: The Case of Spanish Firms By Juliette Milgram; Marion Dovis
  9. The implications of latent technology regimes for competition and efficiency in banking By Koetter, Michael; Poghosyan, Tigran
  10. The success of bank mergers revisited : an assessment based on a matching strategy By Behr, Andreas; Heid, Frank
  11. Medium run redux - technical change, factor shares and frictions in the euro area By Peter McAdam; Alpo Willman
  12. German engineering firms during the 1990’s. How efficient are export champions? By Alexander Schiersch

  1. By: Lucinda Trigo Gamarra (University of Rostock)
    Abstract: The German insurance market was liberalized in 1994 by the introduction of the ‘single passport’ allowing European insurers to operate throughout the entire European Union. The European directive put also an end to price and insurance contract terms regulation. These measures were meant for removing the obstacles to competition within and between the insurance markets of the member states aiming at an increased efficiency of the European insurance markets. We analyze to which extent this aim has been achieved in the German life insurance market. The development of market performance is measured by changes in technical cost and profit efficiency levels since the liberalization, as well as a measurement of technological change. Technical cost efficiency levels are estimated by applying a stochastic “true” fixed effects distance frontier (Greene, 2005). Non-standard profit efficiency is derived in a second step following Kumbakhar (2006). According to our results, the industry experienced positive total factor productivity (TFP) growth during the observation period, which is mainly driven by substantial positive technological change. Technical cost efficiency and profit efficiency remained stable on average, but significant positive scale efficiency change can be found indicating that market consolidation in the presence of increasing returns to scale led to efficiency gains of the firms.
    Keywords: Insurance markets, Total factor productivity growth, Stochastic Frontier Analysis
    JEL: D24 G22 G28
    Date: 2008
  2. By: Silvia Giannangeli (Sant’Anna School of Advanced Studies, Martiri della Libertà, 33, 56127 Pisa, Italy.); Ram?n G?mez-Salvador (Corresponding author: Directorate General Economics, Directorate General Research, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The study aims at describing productivity growth in the manufacturing sector for a selected panel of five European countries using firm-level data. The paper explores the empirical regularities of firm productivity distribution across countries. In particular, we assess the degree of persistence of firm relative productivity and consider its effect on aggregate productivity improvements. Moreover, the paper analyses the impact of the competitive forces on aggregate productivity growth by disentangling the role of firm learning and market selection. Finally, we estimate the relationship between labour productivity growth and firm-specific factors such as size, age and capital intensity across countries. The paper uses annual account data over the period 1993-2003 from Amadeus dataset (Bureau van Dijk) for a balanced panel of manufacturing firms. In line with previous evidence, our analysis shows that firm relative productivity levels are both highly heterogeneous across firms and very persistent over time in all the countries in the sample. With reference to aggregate productivity growth, we find that both labour productivity and total factor productivity changes are mostly driven by firm learning, i.e. within-firm productivity improvements, in most European countries. Conversely, the reallocation of resources spurred by the competitive selection process is found to play a minor role in fostering aggregate productivity growth. Finally, in line with macroeconomic trends, gains in productivity seem to be associated with capital deepening, but also with employment losses. JEL Classification: D24, L11, L60.
    Keywords: Productivity growth, microdata, cross-country comparison.
    Date: 2008–06
  3. By: Alexander Vogel (Leuphana Universität Lüneburg)
    Abstract: A wide range of empirical studies has analysed the relationship between exports and productivity in the manufacturing sector. By contrast, a detailed investigation of the services sector has remained neglected. To close this gap, this paper provides first evidence about export and productivity in the German business services sector. The database used is the German turnover tax statistics panel, which allows for the first time a detailed longitudinal analyses of exporting business services enterprises. Similar to the manufacturing sector, these enterprises are more productive than non-exporters, and more productive business services enterprises self-select into export markets. However, no evidence is found concerning the hypotheses that exporting increases productivity.
    Keywords: export; productivity; business services; panel data
    JEL: F14 F23 L89
    Date: 2008–07
  4. By: Elad Harison; Heli Koski
    Abstract: ABSTRACT : The primary findings of our study suggest that software firms that adopt the OSS-based business model are notably less productive than companies that merely offer proprietary software solutions. Our estimation results further show that the OSS business model adopters have not become notably less productive after beginning to supply OSS. Therefore, its seems that not the use of the OSS business model as such has reduced the OSS firms’ labour productivity but the firms that employed the OSS business model during the sampled years were, on average, of lower labour productivity type. Though the OSS business model use has not substantially improved the performance of software firms, we find that the OSS business model adopters strategically using the source code made available by the OSS community as part of their new software products, have performed better in terms of labour productivity than other adopters of the OSS business model.
    Date: 2008–07–07
    Abstract: We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and – surprisingly – that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank’s environment, management’s risk preferences, the bank’s activity mix or size, the econometric approach, or the introduction of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization.
    Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia
    JEL: G21 P30 P34 P52
    Date: 2008–06
    Abstract: The aim of this study is to confirm empirically the implications of the theory about the law-finance-growth nexus. In order to verify the predictions of the theory, a panel data including three different types of data is used. All the data are referred to Italian provinces. The empirical analysis shows that between firms’ growth and financial development there is a first-order relationship, while between firms’ growth and legal enforcement as measured by the efficiency of the judicial system there is a second-order relationship.
    Keywords: enforcement; judicial efficiency; financial development; firm’s growth
    JEL: G20 K4
    Date: 2008
  7. By: Maximilian J. B. Hall (Loughborough University, Hong Kong Institute for Monetary Research); Karligash A. Kenjegalieva (Loughborough University); Richard Simper (Loughborough University, Hong Kong Institute for Monetary Research)
    Abstract: Within the banking efficiency analysis literature there is a dearth of studies which have considered how banks have 'survived' the Asian financial crisis of the late 1990s. Considering the profound changes that have occurred in the region's financial systems since then, such an analysis is both timely and warranted. This paper examines the evolution of Hong Kong's banking industry's efficiency and its macroeconomic determinants through the prism of two alternative approaches to banking production based on the intermediation and services-producing goals of bank management over the post-crisis period. Within this research strategy we employ Tone's (2001) Slacks-Based Model (SBM) combining it with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007) and Simar and Zelenyuk's (2007) group-wise heterogeneous sub-sampling approach. We find that there was a significant negative effect on Hong Kong bank efficiency in 2001, which we ascribe to the fallout from the terrorist attacks in America in 9/11 and to the completion of deposit rate deregulation that year. However, post 2001 most banks have reported a steady increase in efficiency leading to a better 'intermediation' and 'production' of activities than in the base year of 2000, with the SARS epidemic having surprisingly little effect in 2003. It was also interesting to find that the smaller banks were more efficient than the larger banks, but the latter were also able to enjoy economies of scale. This size factor was linked to the exportability of financial services. Other environmental factors found to be significantly impacting on bank efficiency were private consumption and housing rent.
    Keywords: Finance and Banking, Productivity, Efficiency
    JEL: C23 C52 G21
    Date: 2008–12
  8. By: Juliette Milgram (Universidad de Granada); Marion Dovis (Centre d'Economie et de Finances Internationales (France))
    Abstract: The aim of this paper is to examine the sensitivity of total factor productivity (TFP) to foreign competition in the case of a European country. Using the Olley and Pakes (1996) method, we calculate the TFP of Spanish manufacturing firms and study the impact of EU tariffs, foreign competition and imports on TFP at the firm level. Applying the System-GMM method, we find that TFP is negatively impacted by European tariffs, whereas the competition, in the form of increased presence of foreign products in the domestic market and firms' imports, leads to improvements of the TFP. Moreover, these two effects are complementary. We also find evidence of important asymmetries among firms depending on their involvement in foreign markets. El objetivo de este artículo es estudiar la sensibilidad de la productividad total de los factores (PTF) a la competencia extranjera en el caso de un país europeo. Calculamos la PTF de las empresas manufactureras españolas con el método de Olley y Pakes (1996) y estudiamos el impacto de los aranceles europeos, de la competencia extranjera y de las importaciones sobre la PTF de las empresas. Utilizando el método System-GMM, obtenemos que la PTF se ve negativamente afectada por los aranceles europeos, mientras la competencia, bajo la forma de una presencia mayor de productos extranjeros en el mercado domestico o en términos de importaciones de las empresas, contribuye a mejorar la PTF. Además, estos dos efectos son complementarios. Encontramos también pruebas de importantes asimetrías entre las empresas, dependiendo de su grado de implicación en los mercados internacionales.
    Keywords: productividad total de los factores, España, comercio, aranceles, heterogeneidad de las empresas. Total factor productivity, Spain, trade, tariffs, heterogeneity of firms.
    JEL: F12
    Date: 2008–05
  9. By: Koetter, Michael; Poghosyan, Tigran
    Abstract: Banks continue to differ in many ways, for instance with respect to business models, growth strategies, or nancial health. Neglecting these differences confuses inefficiency with heterogeneity while sub-sample estimation prohibits efficiency comparisons across different samples. We use a latent class stochastic frontier model to estimate simultaneously multiple technology regimes and group membership probabilities. The latter are conditioned on six bank traits of German banks and we identify four signifficantly different technology regimes. Only small, retail focused banks exhibit cost inefficiencies, which are 5.4% on average and thus substantially lower compared to previous studies. We use technology regime specific cost parameters to measure competition with Lerner indices. Large, national universal banks and the smallest, most specialized banks exhibit the lowest level of competition. In turn, medium sized universal banks are both efficient and exhibit the lowest Lerner margins between 1994 and 2004. Das deutsche Bankwesen wird oft als Drei-Säulen-System bezeichnet, welches aus Sparkassen, Geschäfts-, und Genossenschaftsbanken besteht. Diese Systematik wird oft als geradezu natürliche Marktsegmentierung verstanden. Banken können sich jedoch auch zwischen und innerhalb der drei Säulen hinsichtlich anderer Kriterien unterscheiden, zum BeispielWachstumsstrategien, Stabilitätseigenschaften oder Geschäftsmodellen. Viele vergleichenden Studien definieren oftmals vorab Teilstichproben, um diese Unterschiede zu berücksichtigen. Jede Bildung von Bankengruppen beinhaltet jedoch unweigerlich eine zum Teil willkürliche Komponente und verhindert außerdem den Vergleich relativer Effizienzmaße zwischen Teilstichproben. In dieser Studie benutzen wir ein latent class frontier model (LCFM), um unterschiedliche Technologiegruppen empirisch zu schätzen anstatt sie zu definieren. Wir ermitteln die Wahrscheinlichkeit der Gruppenzugehörigkeit (GZW) je Bank in Abhängigkeit von sechs individuellen Charakteristika. Für jede Technologiegruppe leiten wir Wettbewerbsmaÿe ab und untersuchen deren Entwicklung zwischen 1994 und 2004.
    Keywords: Banks, competition, efficiency, latent class frontier, strategy
    JEL: G21 L1
    Date: 2008
  10. By: Behr, Andreas; Heid, Frank
    Abstract: The question of whether or not mergers and acquisitions have helped to enhance banks’ efficiency and profitability has not yet been conclusively resolved in the literature. We argue that this is partly due to the severe methodological problems involved. In this study, we analyze the effect of German bank mergers in the period 1995-2000 on banks’ profitability and cost efficiency. We suggest a new matching strategy to control for the selection effects arising from the fact that predominantly under-performing banks engage in mergers. Our results indicate a neutral effect of mergers on profitability and a positive effect on cost efficiency. Comparing our results with those obtained from a naive performance comparison of merging and non-merging banks indicates a severe negative selection bias with regard to the former.
    Keywords: Bank mergers, performance measurement, propensity score matching
    JEL: G21 G34
    Date: 2008
  11. By: Peter McAdam (Corresponding author: Directorate General Research, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alpo Willman (Directorate General Research, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: We develop a framework for analyzing “medium-run” departures from balanced growth, and apply it to the economies of continental Europe. A time-varying factor-augmenting production function (mimicking “directed” technical change) with a below-unitary substitution elasticity coupled with supporting short-run factor demands (and price setting) is shown to account for the observed dynamics of factor incomes shares, capital deepening and the capital-output ratio. Based on careful data accounting, we also identify a rising mark-up, which we ascribe to the rise of Services. The balanced growth path emerges as a special (and testable) case of our framework, as do existing strands of medium-run debates. JEL Classification: C22, E23, E25, O30, O51.
    Keywords: Medium Run, Euro Area, Elasticity of Substitution, Factor-Augmenting Technical Progress, Productivity, Income Distribution, Adjustment Costs, Effective Labor Hours.
    Date: 2008–06
  12. By: Alexander Schiersch
    Abstract: This paper investigates the efficiency of German engineering firms and its change over time. As these firms had been successful in the past in terms of being market-leader, it is expected that the majority of the firms works efficiently. To analyze this question Farrell’s technical efficiency is estimated using DEA. The results contradict these expectations. The engineering firms proved to operate quite inefficiently. Moreover, the results indicate that the efficiency of the firms is almost normally distributed and differs with company sizes. Besides, the measured efficiency changes are not consistent with the expectation of essentially small changes over time.
    Date: 2008–03

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