New Economics Papers
on Efficiency and Productivity
Issue of 2008‒08‒31
fourteen papers chosen by

  1. Productivity growth in the US and the EU By Mary O'Mahony; Ana Rincon-Aznar; Catherine Robinson
  2. Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries By Niels Bosma; Erik Stam; Veronique Schutjens
  3. Industrial Agglomeration, Geographic Innovation and Total Factor Productivity: The Case of Taiwan By Chia-Lin Chang; Les Oxley
  4. Labour Productivity and Firm Entry and Exit in Manufacturing By Anni Nevalainen
  5. "Domestic Innovation and Chinese Regional Growth, 1991-2004" By William Latham; Hong Yin
  6. Intra-firm Technology Transfer and R&D in Foreign Affiliates: Substitutes or Complements? Evidence from Japanese Multinational Firms By Belderbos, René; Ito, Banri; Wakasugi, Ryuhei
  7. Organizational Redesign, Information Technologies and Workplace Productivity By Leonard J. Mirman; Benoit Dostie; Rajshri Jayaraman
  8. Entrepreneurship, Spillovers and Productivity Growth in the Small Firm Sector of UK Manufacturing By Hany El Shamy; Paul Temple
  9. Productivity and Labour Demand Effects of Inward and Outward FDI on UK Industry By Nigel Driffield; James Love; Karl Taylor
  10. Diversification, Productivity, and Financial Constraints Empirical Evidence from the US Electric Utility Industry By Goto, Mika; Low, Angie; Makhija, Anil K.
  11. Technology Adoption, Productivity and Specialization of Uruguayan Breeders: Evidence from an Impact Evaluation By Fernando Lopez; Alessandro Maffioli
  12. Technological Capabilities and Firm Performance: The Case of Small Manufacturing Firms in Japan By Montgomery, David B.; Isobe, Takehiko; Makino, Shige; Lee, Kong Chian
  13. Geographic Deregulation and Commercial Bank Performance in US State Banking Markets By YongDong Zou; Stephen M. Miller; Bernard Malamud
  14. Banking in transition countries By Bonin, John; Hasan, Iftekhar; Wachtel, Paul

  1. By: Mary O'Mahony; Ana Rincon-Aznar; Catherine Robinson
    Abstract: This paper provides an overview of sectoral productivity in Europe for the period 1995-2004. In an earlier discussion paper, we considered the trends in output and employment, however, taken separately, these may reflect differences in size and input intensities. Productivity measures performance and efficiency more accurately than output or employment since it incorporates inputs and outputs into a single measure. As such, we are able to consider a number of research questions more directly.
    Date: 2008–02
  2. By: Niels Bosma; Erik Stam; Veronique Schutjens
    Abstract: Do processes of firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, measured by Total Factor Productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities.
    Keywords: entrepreneurship, entry & exit, turbulence, creative destruction, regional competitiveness, total factor productivity
    JEL: L10 M13 O18 R11
    Date: 2008–08
  3. By: Chia-Lin Chang; Les Oxley (University of Canterbury)
    Abstract: The paper analyses the impact of geographic innovation on Total Factor Productivity (TFP) in Taiwan. Using 242 four-digit standard industrial classification (SIC) industries in Taiwan in 2001, we compute TFP by estimating Translog production functions with K, L, E and M inputs, and measure the geographic innovative activity using both Krugman's Gini coefficients and the location Herfindahl index. We also consider the geographic innovation variable as an endogenous variable and use 2SLS to obtain a consistent, albeit inefficient, estimator. The empirical results show a significantly positive effect of geographic innovation, as well as R&D expenditure, on TFP. These results are robust for the Gini coefficients and location Herfindahl index, when industry characteristics and heteroskedasticity are controlled. Moreover, according to the endogeneity of geographic innovation, the Hausman test shows that the geographic innovation variable should be treated as endogenous, which supports the modern theory of industrial clustering about innovation spillovers within clusters.
    Keywords: Industry agglomeration; Geographic innovation; Total factor productivity; Cluster; Research and Development
    JEL: O32 O33 L60 R12
    Date: 2008–07–01
  4. By: Anni Nevalainen
    Abstract: ABSTRACT : This paper investigates the connection between firm entry and exit and labour productivity growth. The study has its theoretical foundations in modern Schumpeterian growth theory, distance to frontier model and vintage capital models. The importance of productivity enhancing restructuring has been increasingly acknowledged and all these theories depict the productivity enhancing effects that external restructuring - in particular firm entry and exit – may have. Despite the vast theoretical discussion there is only a little empirical research on the subject. Thus, this study aims at contributing to the existing empirical literature by utilizing panel data that contain information on all manufacturing subsectors from eight EU member states between 1997 and 2004. Empirical analysis is conducted with fixed effects panel regression. It is noted that firm turnover, especially firm entry enhances productivity growth, but the effects appear with a lag. Productivity enhancing effects of firm entry are the strongest three years after the initial entry. The effects of firm exit on labour productivity growth are also positive but more modest than the effects of firm entry. Results of the analysis suggest that the population of firm entrants is extremely heterogeneous.
    Keywords: labour productivity, manufacturing, firm entry, firm exit, modern Schumpeterian growth theory
    JEL: L6 O4
    Date: 2008–08–25
  5. By: William Latham (Department of Economics,University of Delaware); Hong Yin (Department of Economics,University of Delaware)
    Abstract: We examine the return to innovation in terms of economic growth at the provincial level to assess whether or not policies that promote R&D, such as China’s Science and Technology Policy, have been productive for all of China’s regions. The return to innovation at the provincial level is estimated using a value-added Cobb-Douglas production function. The measure of the effect of innovation (patenting activity) is valued-added industrial output. The data are a balanced panel for 30 provinces for the period 1991-2004. We find that the production function including innovation fits the Chinese provincial level data well. These estimates indicate that technology plays a positive role in industrial growth at the provincial level; however, the contribution of technology is far too small, which indicates that China’s economic growth is largely driven by the factor inputs. The results support the views that the linkages between innovation activity and commercialization of new technology are weak within Chinese domestic firms which have difficulties in exploiting and adopting the new technologies. The results also indicate that the inter-regional technology spillovers are positive but relatively small and weak, compared to the European regions and the states in the US. The estimated results further confirm that the impact of industrial reforms during the period of 1994-99 on China’s technological development is negative, as there seems to be neither exogenous technical progress nor technology’s contribution to the value-added industrial output during those years.
    Keywords: China, patents, productivity, innovation, regions
    JEL: O33 R11 O47 O55
  6. By: Belderbos, René (Katholieke Universiteit Leuven, UNU-MERIT, and University of Maastricht); Ito, Banri (Research Institute of Economy Trade and Industry (RIETI)); Wakasugi, Ryuhei (Kyoto University, Institute of Economic Research)
    Abstract: R&D in foreign affiliates and technology transferred from their parent firms are important potential drivers of productivity in host countries. In this paper we examine the simultaneous impact of local R&D and intra-firm international technology transfer on productivity growth in foreign affiliates. We estimate a dynamic productivity model on a large sample of Japanese manufacturing affiliates worldwide in 1996-1997 and 1999-2000. We find that both affiliate R&D and intra-firm technology transfer contribute to productivity growth, while technology transfer exhibits decreasing marginal returns. The two sources of technology are complements: use of one source of technology increases the marginal impact of the other.
    Keywords: R&D, technology transfer, multinational firms
    JEL: F23 O32 O33
    Date: 2008
  7. By: Leonard J. Mirman; Benoit Dostie (IEA, HEC Montréal); Rajshri Jayaraman
    Abstract: Using a large longitudinal, nationally representative workplace-level dataset, we explore the productivity gains associated with computer use and organizational redesign. The empirical strategy involves the estimation of a production function, augmented to account for technology use and organizational design, correcting for unobserved heterogeneity. We find large returns associated with computer use. We also find that computer use and organizational redesign may be complements or substitutes in production, and that the productivity gains associated with organizational redesign are industry-specific.
    JEL: D20 L20 M54 O33
    Date: 2008–07
  8. By: Hany El Shamy (University of Surrey); Paul Temple (University of Surrey)
    Abstract: This paper considers the sources of technological change and productivity growth in the small firm sector of UK manufacturing over the period 1973- 2002, focusing on the mechanisms by which spillovers occur between the large firms which perform the bulk of R&D and smaller firms which are the recipients. It is argued that the current volume of domestic R&D generates profitable and high productivity opportunities for smaller firms. However this mechanism ignores the ways in which R&D also contributes to the more general knowledge base available to small firms as codified information which frequently takes the measurable form of industrial standards. A simple model of labour demand among small manufacturing is developed which employs two measures of technological activity intended to capture both these channels. A co-integrating relationship based upon an augmented labour demand equation is established for UK manufacturing, showing the relevance of both channels for the explanation of productivity growth in the small firm sector.
    Keywords: Key Words: Small firms; productivity; technological change; R&D; standards.
    JEL: J23 L25 L26 O32
    Date: 2008–08
  9. By: Nigel Driffield; James Love; Karl Taylor (Department of Economics, The University of Sheffield)
    Abstract: We relate the technological and factor price determinants of inward and outward FDI to its potential productivity and labour market effects on both host and home economies. This allows us to distinguish clearly between technology sourcing and technology exploiting FDI, and to identify FDI which is linked to labour cost differentials. We then empirically examine the effects of different types of FDI into and out of the United Kingdom on domestic (i.e. UK) productivity and on the demand for skilled and unskilled labour at the industry level. Inward investment into the UK comes overwhelmingly from sectors and countries which have a technological advantage over the corresponding UK sector. Outward FDI shows a quite different pattern, dominated by investment into foreign sectors which have lower unit labour costs than the UK. We find that different types of FDI have markedly different productivity and labour demand effects, which may in part explain the lack of consensus in the empirical literature on the effects of FDI. Our results also highlight the difficulty for policy makers of simultaneously improving employment and domestic productivity through FDI.
    Keywords: Foreign Direct Investment
    JEL: F21
    Date: 2008–01
  10. By: Goto, Mika (Central Research Institute of Electric Power Industry); Low, Angie (Nanyang Technological U); Makhija, Anil K. (Ohio State U)
    Abstract: We examine the real effects of parent firm diversification on their electric utility operating companies over the period, 1990-2003. Since electric utility operating companies produce a single homogenous product, we can better measure their Total Factor Productivity and make valid comparisons of productivity across firms. We find that, consistent with a diversification discount, greater parent diversification is associated with lower productivity across electric utility operating companies. However, the productivity of the electric utility operating companies improves with greater parent diversification over time. Diversification appears to provide an alternative channel to divert investment dollars away from overinvestment in the core electric business. Finally, we find that the improvement in the productivity of the electric utility operating companies from greater parent firm diversification over time is limited to financially constrained firms. This suggests that when managers have no resources to waste, it is more likely that any diversification activities are carefully planned and undertaken for strategic purposes that can help to increase productivity of the core business.
    JEL: L25
    Date: 2008–02
  11. By: Fernando Lopez (Zahler & Co.); Alessandro Maffioli (Office of Evaluation and Oversight at the Interamerican Development Bank.)
    Abstract: In this paper, we analyzed the effectiveness of the Component 1 of the Livestock Pilot Project (LPP-1) in fostering the efficiency of the Uruguayan livestock producers. We found that the LPP-1 had an overall positive impact on the adoption of managerial practices, but it had not significant impact on both productivity and specialization. We found positive effects of the LPP-1 also on productivity when we restricted the analysis to the sub-sample of producers specialized in the breeding stage. We also found that the project is only partially successful in fostering the breeders’ rate of specialization, probably due to a still too high risk aversion towards complete specialization. Finally, we found that the LPP-1 had no differentiated effects depending on the size of subsidy received by the producers. Therefore we could not identify any threshold in the subsidy intensity that significantly affects the project effectiveness. We estimated these effects through a quasi-experimental approach that combines difference-in-difference and propensity score matching techniques, in order to control for potential selection bias in the absence of a randomized experiment. We used a unique panel dataset of 520 beneficiary and 470 non-beneficiary producers, dataset that we constructed by merging information from the Uruguayan livestock Survey of 2001 and 2003 with information collected by the LPP’s Coordinating Unit.
    Keywords: Technology Adoption, Productivity, Livestock Sector, Policy Evaluation
    JEL: Q12 Q16 H43
    Date: 2008–07
  12. By: Montgomery, David B. (Stanford U); Isobe, Takehiko (Keio U); Makino, Shige (Chinese U of Hong Kong); Lee, Kong Chian
    Abstract: The purpose of this study is to investigate the relationship between technological capabilities and firm performance. We divide technological capabilities into two types – refinement capability, which involves the improvement of the existing asset portfolio, and reconfiguration capability, which involves the restructuring of the asset portfolio through the integration of new assets. The results of an analysis of a sample of 302 small and medium-sized manufacturing firms in Japan suggest that refinement capability relates more positively to operational efficiency than does reconfiguration capability, and that reconfiguration capability relates more positively to strategic performance than does refinement capability. The results also suggest that firms with superior refinement capability tend to possess superior reconfiguration capability. Our findings show that both external and internal factors, such as technological volatility, inter-firm collaboration, and firm age and size, are significantly associated with the level of refinement and reconfiguration capabilities possessed by a firm.
    Date: 2007–12
  13. By: YongDong Zou (Sany Group); Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas); Bernard Malamud (University of Nevada, Las Vegas)
    Abstract: This paper examines the effects of geographical deregulation on commercial bank performance across states. We reach some general conclusions. First, the process of deregulation on an intrastate and interstate basis generally improves bank profitability and performance. Second, the macroeconomic variables -- the unemployment rate and real personal income per capita -- and the average interest rate affect bank performance as much, or more, than the process of deregulation. Finally, while deregulation toward full interstate banking and branching may produce more efficient banks and a healthier banking system, we find mixed results on this issue.
    Keywords: commercial banks, geographic deregulation, bank performance
    JEL: E5 G2
    Date: 2008–08
  14. By: Bonin, John (BOFIT); Hasan, Iftekhar (BOFIT); Wachtel, Paul (BOFIT)
    Abstract: Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By 2005, the banking sectors in many transition countries had developed sufficiently to provide a wide range of services with solid bank performance. Recently, banks have switched their focus from lending to enterprises in a somewhat underdeveloped institutional environment to new collateralized lending to households, which accounts for much of the recent growth of credit in many transition countries.
    Keywords: transition banking; bank privatization; foreign banks; bank regulation; credit growth
    JEL: G21 P30 P34 P52
    Date: 2008–08–27

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.