New Economics Papers
on Efficiency and Productivity
Issue of 2008‒09‒20
fifteen papers chosen by

  1. Essays on Labour Productivity in Northern Ireland By José Luis Iparraguirre D’Elia
  2. How Does FDI in East Asia Affect Performance at Home?: Evidence from Electrical Machinery Manufacturing Firms By MATSUURA Toshiyuki; MOTOHASHI Kazuyuki; HAYAKAWA Kazunobu
  3. Are private banks more efficient than public banks ? Evidence from Russia By Alexei Karas; Koen Schoors; Laurent Weill
  4. The Innovation and Productivity Effect of Foreign Take-Over of National Assets By Johansson, Börje; Lööf, Hans; Ebersberger, Bernd
  5. Training, Job Satisfaction and Workplace Performance in Britain: Evidence from WERS 2004 By Jones, Melanie K.; Jones, Richard J.; Latreille, Paul L.; Sloane, Peter J.
  6. Do domestic firms benefit from geographic proximity with FDI? Evidence from the privatization of the Czech glass industry By Elisa Gaelotti
  7. Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy By Li, Zhe
  8. Is Entrepreneurship the Salvation for Enhanced Economic Growth? By Nyström, Kristina
  9. The Impact of Workplace Conditions on Firm Performance By Sebastian Buhai; Elena Cottini; Niels Westergård-Nielsen
  10. The elasticity of substitution: evidence from a UK firm-level data set By Barnes, Sebastian; Price, Simon; Sebastia Barriel, Maria
  11. Generating Economic Growth: An Analytical Survey By Maria Thompson
  12. The impact of human capital on firm-level input use: Argentine agriculture By Marcos Gallacher
  13. Operational Risk Management and Implications for Bank’s Economic Capital – a Case Study By Radovan Chalupka; Petr Teplý
  14. Trade, Wages, and Productivity By Kristian Behrens; Giordano Mion; Yasusada Murata; Jens Sudekum
  15. Financial Structure and Corporate Growth: Evidence from Italian Panel Data By Silvia Giannangeli; Giorgio Fagiolo; Massimo Molinari

  1. By: José Luis Iparraguirre D’Elia (Economic Research Institute of Northern Ireland)
    Abstract: Labour productivity is at the heart of economic performance and prosperity. For that reason, the Economic Research Institute of Northern Ireland (ERINI) has embarked on a research programme on regional labour productivity in Northern Ireland in order to study what drives labour productivity at a regional level and to recommend policies to boost its levels and growth. These essays put together the main findings of this research programme. Some of the published papers in this programme have been updated, so they have to be considered as superseded by this monograph.
    Keywords: Regions, Economic Performance
    Date: 2008–01
  2. By: MATSUURA Toshiyuki; MOTOHASHI Kazuyuki; HAYAKAWA Kazunobu
    Abstract: This paper pinpoints the impact of Japanese electronic machinery FDIs on productivity at home. Our analysis is based on the activity level of firms and not on their ready-made level. For example, if a firm has more than two kinds of activities such as upstream activity and downstream activity, we treat these activities as different. Our empirical results are consistent with their theoretical predictions: the horizontal FDI of an activity does not necessarily have the same significant positive impact on the productivity of domestic activities as the invested activity. On the other hand, the vertical FDI of an activity significantly enhances both the level and growth of productivity in domestic activities that have an input-output relationship with the invested activity.
    Date: 2008–09
  3. By: Alexei Karas; Koen Schoors; Laurent Weill (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)
    Abstract: We study whether bank ownership is related to bank efficiency 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 the production process, the bank’s environment, the management’s risk preferences, the bank’s activity mix, size or the econometric approach. The evidence in fact suggests that domestic public banks are more efficient than domestic private banks and that the efficiency gap between these two types of banks is not lower after the introduction of deposit insurance in 2004. This may be due to increased switching costs or to the moral hazard effects of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and higher access of foreign banks than from bank privatization.
    Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia.
    JEL: G21 P30 P34 P52
    Date: 2008
  4. By: Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Ebersberger, Bernd (MCI)
    Abstract: Over the past decades, there has been a dramatic increase in the foreign-ownership of firms in the four Nordic countries Denmark, Finland, Norway and Sweden. This increase has generated interest in the welfare effect of foreign take-over of national assets. In this paper we ask: how would a firm’s behaviour and performance have been if a foreign owner had not acquired the firm? The analysis is based on a sample of 5 186 firm-level observations in four Nordic countries, of which close to 30 percent are owned by foreign companies. Using an empirical approach that accounts for both selection bias and simultaneity bias, we establish some new findings regarding foreign ownership. First, no robust difference in the propensity to be innovative can be established. Second, among the group of innovative firms, foreign-owned multinationals are generally outperformed by domestic multinationals in R&D and innovation engagement. Third, despite the fact that domestic multinationals are considerably more involved in national innovation systems than other firms, they are not producing more innovation per R&D-dollar, controlling for firm size, human capital and industry. Finally, we find that foreign take-over of firms is neutral with respect to labour productivity, and hence that no evidence of welfare gain or welfare drain of foreign ownership can be established.
    Keywords: Multinational enterprises; Take-Over; Corporate Governance; Cross-country comparison; Spillovers; R&D; Innovation; Productivity
    JEL: C31 D21 F23 G34 L22 O31 O33
    Date: 2008–09–09
  5. By: Jones, Melanie K. (University of Wales, Swansea); Jones, Richard J. (University of Wales, Swansea); Latreille, Paul L. (University of Wales, Swansea); Sloane, Peter J. (University of Wales, Swansea)
    Abstract: This paper analyses the relationship between training, job satisfaction and workplace performance using the British 2004 Workplace Employee Relations Survey (WERS). Several measures of performance are analysed including absence, quits, financial performance, labour productivity and product quality. While there is clear evidence that training is positively associated with job satisfaction, and job satisfaction in turn is positively associated with most measures of performance, the relationship between training and performance is complex, depending on both the particular measures of training and of performance used in the analysis.
    Keywords: training, job satisfaction, absence, quits, financial performance, labour market, product quality
    JEL: J0 J2 J3
    Date: 2008–09
  6. By: Elisa Gaelotti (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper analyzes the effects of geographical proximity and agglomeration of FDIs (foreign direct investments) on domestic firms in the privatized glass sector in the Czech Republic. The motivation for this research is based on the scant evidence in Central and Eastern Europe of the effects of geographical proximity and agglomeration on the productivity of domestic firms. This study aims to explain how spillovers are transferred from FDIs to domestic firms. The econometrical analysis, using original panel data from 1990 to 2006, provides evidence that the agglomeration of FDIs has a negative and significant effect on the productivity of domestic firms in the glass sector at a 5% level. The effect of geographical proximity to FDIs is significant at a 10% level but not in all models. The results support the importance of geographic proximity and agglomeration of FDIs and conform with the evidence that shows that FDIs have produced negative spillovers on domestic firms in transition countries.
    Keywords: Foreign direct investments, agglomeration economies, panel data, regional location, Czech Republic, glass industry
    JEL: C23 F21 F23 L61 O18 R12
    Date: 2008–09
  7. By: Li, Zhe
    Abstract: Empirical studies suggest systematic relationships between plant’s productivity and plant’s emissions and emission-abatement costs. This paper demonstrates that productivity dispersion across plants is an important factor that influences the transmission of environmental policy. Within a general equilibrium framework, I model heterogeneous polluting plants by allowing them to be differing in productivity and to choose optimally a discrete emission-reduction technology taking into account both the costs of reducing emissions and the competition in the goods market. An emission-reduction policy affects the distribution of plants with the advanced abatement technology and relocates resources and market shares across plants. As a result, the aggregate effects of an environmental policy depend on the degree of productivity dispersion. Using Canadian data, I show quantitatively that the aggregate effects of an environmental policy significantly affected by the degree of productivity dispersion both in the transition periods and in the long-run steady-state equilibrium.
    JEL: Q52 E00 Q58
    Date: 2008–09–14
  8. By: Nyström, Kristina (Division of Economics KTH and Ratio Institute)
    Abstract: During the last decades, enhancing entrepreneurship has emerged as commonly used policy- measure in order to improve economic growth. However, is it true that entrepreneurship unambiguously can be claimed to improve economic growth? This paper intends to review the empirical evidence on the relationship between entrepreneurship on three measures of economic growth, employment, productivity and aggregate economic growth. The review shows that the studies that find no positive relationship between entrepreneurship and productivity growth have studied a relatively short period. Most studies that have studied a longer period (about ten years) provide rather clear evidence on the positive relationship between entrepreneurship and growth. Regarding the relationship between entrepreneurship and employment growth, the empirical evidence to some extent point in different directions. However, it must be concluded that in the long run there seems to be a positive relationship. A majority of the studies on the relationship between entrepreneurship and aggregate economic growth find a positive relationship. Studies that find a negative relationship usually employ non-harmonised self-employment rates as the measure of entrepreneurship.
    Keywords: entrepreneurship; economic growth; productivity; employment
    JEL: L26 R11
    Date: 2008–09–09
  9. By: Sebastian Buhai (University of Aarhus, and Erasmus University Rotterdam); Elena Cottini (University of Aarhus, and Cath. University Milan); Niels Westergård-Nielsen (University of Aarhus)
    Abstract: This paper estimates the impact of work environment health and safety practice on firm performance, and examines which firm-characteristic factors are associated with good work conditions. We use Danish longitudinal register matched employer-employee data, merged with firm business accounts and detailed cross-sectional survey data on workplace conditions. This enables us to address typical econometric problems such as omitted variables bias or endogeneity in estimating i) standard production functions augmented with work environment indicators and aggregate employee characteristics and ii) firm mean wage regressions on the same explanatory variables. Our findings suggest that improvement in some of the physical dimensions of the work health and safety environment (specifically, “internal climate” and “repetitive and strenuous activity”) strongly impacts the firm productivity, whereas “internal climate” problems are the only workplace hazards compensated for by higher mean wages.
    Keywords: occupational health and safety; work environment; production function estimation; firm performance; compensating wage differentials
    JEL: J28 J31 L23
    Date: 2008–08–28
  10. By: Barnes, Sebastian (OECD); Price, Simon (Bank of England); Sebastia Barriel, Maria (Bank of England)
    Abstract: Using a panel of UK firms spanning three decades, we provide estimates of the long-run elasticity of substitution between capital and other factors of production, the (negative of the) elasticity of capital and investment with respect to the user cost. The parameter is estimated using 'time averages' (with data differenced over long periods) and pooled mean group panel methods. The robust result is that the elasticity is in the region of 0.4. This is consistent with previous results obtained using aggregate UK data, and is also in line with some recent results using US firm-level data. Estimated returns to scale exceed unity. When constant returns are imposed, the estimated elasticity of substitution is not substantially changed.
    Keywords: Investment; firm-level data; elasticity of substitution; panel.
    Date: 2008–04
  11. By: Maria Thompson (Universidade do Minho - NIPE)
    Abstract: The theoretical richness and variety of the new growth literature can make it difficult to capture the essence of groeth models. With this paper, we wish to provide one possible integrating view of the nature of the growth generating processes. Revisiting the models that constitute the core of growth theory, we expose analytically the main mechanisms through which long-run growth can be delivered. Models that contemplate physical capital accumulation generate long-run growth through the attainment of non-declining marginal productivity of capital. One mechanism for achieving this entails the introduction of technological progress; another mechanism involves the inclusion of human capital accumulation; and a third method relies on the elimination from the production function of the diminishing returns to capital feature. The foundational models that classically represent each of these mechanisms are reviewed in an analytical and integrating perspective.
    Keywords: Non-diminishing returns to capital, economic growth, research & development, human capital accumulation, inada conditions
    JEL: O3 O4
    Date: 2008
  12. By: Marcos Gallacher
    Abstract: This paper attempts to understand the linkages between human capital and input choice in agricultural firms. The hypothesis to be tested is that better educated managers choose different input combinations than managers with a lower educational level. In particular, the hypothesis is that the ratio between non-land and land input increases as education increases. Non-land inputs include fertilizers, machinery services, herbicides, animal stocks and others. An increase in the non-land/land input ratio results in increased output (and costs) per unit of land. Given the fixity of land at the aggregate level, the non-land/land input ratio is an important determinant of total sector output. Este trabajo tiene como objetivo entender los vínculos que existen entre capital humano y uso de insumos en empresas agropecuarias. La hipótesis a ser sometida a prueba es que los productores con mayor nivel de educación eligen combinaciones de insumos distintas que las elegidas por aquellos que cuentan con un nivel de educación mas bajo. En particular, que el ratio entre insumos de capital y el insumo tierra aumenta a medida que la educación de los productores aumenta. Los insumos de capital incluyen fertilizantes, servicios de maquinaria, herbicidas, capital biológico (animales) y otros. Un aumento en el ratio entre insumos de capital por unidad de recurso tierra resulta en mayor producto (y costos) por unidad de tierra. Dado que a nivel agregado la tierra es un insumo fijo, el ratio entre capital y tierra es un importante determinante de la producción total lograda. El nivel educativo de los productores, al impactar sobre la intensidad de uso de la tierra, resulta entonces un importante determinante del nivel total de producción logrado.
    Keywords: human capital, agriculture, input use
    JEL: Q12 D24
    Date: 2008–09
  13. By: Radovan Chalupka (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Petr Teplý (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: In this paper we review the actual operational data of an anonymous Central European Bank, using two approaches described in the literature: the loss distribution approach and the extreme value theory (“EVT”). Within the EVT analysis, two estimation methods were applied; the standard maximum likelihood estimation method and the probability weighted method (“PWM”). Our results proved a heavy-tailed pattern of operational risk data consistent with the results documented by other researchers in this field. Additionally, our research demonstrates that the PWM is quite consistent even when the data is limited since our results provide reasonable and consistent capital estimates. From a policy perspective, it should be noted that banks from emerging markets such as Central Europe are exposed to these operational risk events and that successful estimates of the likely distribution of these risk events can be derived from more mature markets.
    Keywords: operational risk, economic capital, Basel II, extreme value theory, probability weighted method
    JEL: G18 G21 G32
    Date: 2008–09
  14. By: Kristian Behrens; Giordano Mion; Yasusada Murata; Jens Sudekum
    Abstract: We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure "border effects" and to decompose them into a "pure" border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced and consumed, and welfare. We finally provide a similar quantification with respect to regional population changes.
    Keywords: Heterogeneous firms, gravity equations, general equilibrium, monopolistic competition, variable demand elasticities
    JEL: F12 F15 F17
    Date: 2008
  15. By: Silvia Giannangeli; Giorgio Fagiolo; Massimo Molinari
    Abstract: We study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). We expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to expand, but rather to increase debt. We also find that firm growth is highly fragile as it is positively correlated with non-financial liabilities and it is not sustained by a long-term debt maturity. Finally, quantile regressions suggest that fast-growing firms are characterized by higher growth/cash-flow sensitivities and heavily rely on external debt, but seem to be less bank-backed than the rest of the sample. Overall, our findings suggest that the link between firms’ investment and expansion decisions is far more complicated than postulated by standard tests of investment/cash-flow sensitivities.
    Keywords: Firm growth; Financial structure; Cash flow; Financial constraints; Gibrat law; Quantile regressions
    Date: 2008–09–11

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