nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2008‒10‒13
twelve papers chosen by
Angelo Zago
University of Verona

  1. More Machines or Better Machines? By James Bessen
  2. Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-country Evidence from the Amadeus Dataset By Cyrille Schwellnus; Jens Arnold
  3. Competitive Intensity as Driver of Innovation and Productivity Growth: A Synthesis of the Literature By Andrew Sharpe; Ian Currie
  5. ICT Investment and Productivity: A Provincial Perspective By Andrew Sharpe; Jean-François Arsenault
  6. Organizational Innovations and Labor Productivity in a Panel of Italian Manufacturing Firms. By Federico Biagi; Maria Laura Parisi; Lucia Vergano
  7. Ownership Structure and Financial Performance: Evidence from Panel Data of South Korea By Sanghoon Lee
  8. Productivity growth and technological change in Europe and the U.S. By Diego Martínez; Jesús Rodríguez-López; José L. Torres
  9. Italian Equity Funds: Efficiency and Performance Persistence By Roberto Casarin; Loriana Pelizzon; Andrea Piva
  10. Cross your border and look around By Henry van der Wiel; Harold Creusen; George van Leeuwen; Eugene van der Pijll
  11. Accounting for Productivity Growth When Technical Change is Biased By James Bessen
  12. Growth Processes of Italian Manufacturing Firms By Alex Coad; Rekha Rao; Federico Tamagni

  1. By: James Bessen (Research on Innovation, Boston University School of Law)
    Abstract: Using an engineering production function and detailed information on major inventions in nineteenth century cotton weaving, this paper explores how much of the rapid growth in labor productivity arose from capital-labor substitution and how much from technical change. I find that labor-saving technical change accounts for almost all of the growth. However, much of the labor-saving bias arose not from inventions, but from acquisition of new knowledge and skills by weavers. Moreover, this was endogenous, influenced by wages and prices. This provides a technology-based explanation for the persistent association between economic growth and capital deepening.
    Date: 2008
  2. By: Cyrille Schwellnus; Jens Arnold
    Abstract: This paper uses a stratified sample of firms across OECD economies over the period 1996-2004 to analyse the effects of corporate taxes on productivity and investment. Applying a differences-in-differences estimation strategy which exploits differential effects of corporate taxes on firms with different profitability, it is found that corporate taxes have a negative effect on productivity at the firm level. The effect is negative across firms of different size and age classes except for the small and young, which may be attributable to the relatively low profitability of small and young firms. The negative effect of corporate taxes is particularly pronounced for firms that are catching up with the technological frontier. In the investment analysis, the results suggest that corporate taxes reduce investment through an increase in the user cost of capital. This may partly explain the negative productivity effects of corporate taxes if new capital goods embody technological change. <P>Les impôts sur le revenu des sociétés réduisent-ils la productivité et l’investissement des firmes? <BR>Ce papier utilise un échantillon stratifié de firmes issues des pays de l’OCDE sur la période 1996-2004 pour analyser les effets de l’imposition des sociétés sur la productivité et l’investissement. En appliquant une stratégie d’estimation par différences-en-différences qui exploite des effets différentiels de l’imposition sur des firmes avec de différents niveaux de profitabilité, il s’avère que les impôts sur le revenu des sociétés ont un effet négatif sur la productivité des firmes. L’effet est négatif pour les firmes de toutes classes d’emploi et d’âge excepte pour les firmes à la fois petites et jeunes, ce qui peut être attribuable à la profitabilité relativement faible des firmes à la fois petites et jeunes. L’effet négatif de l’imposition est particulièrement fort pour les firmes qui sont en train de s’approcher à la frontière technologique. L’analyse de l’investissement indique que l’imposition des sociétés réduit l’investissement par une augmentation du coût du capital. Ceci expliquerait une partie des effets négatifs sur la productivité si les nouveaux biens de capital incorporent le progrès technologique.
    JEL: D21 D24 E22 E62 H25 H32
    Date: 2008–09–30
  3. By: Andrew Sharpe; Ian Currie
    Abstract: The objective of the report is to survey and assess the existing economic theoretical literature and empirical evidence on the linkages between open and competitive markets (competitive intensity) and innovation and productivity growth. The report is divided into three main parts. The first part examines the state of economic theory on the relationship between competitive intensity, innovation and productivity. The second section examines relevant empirical work that has been done on the role of firm dynamics in sustaining a competitive environment. The third section surveys evidence of linkages provided by the international case studies of the effects of open and competitive markets on innovation and productivity. The report concludes that the weight of the evidence indicates that competitive intensity has a strong positive effect on innovation and productivity. Accordingly, Canada should pay closer attention to the competitive implications of public policy than has been the case in the past. The international experience provides strong support for this conclusion. While there can be negative implications for certain groups from such policy changes, the evidence shows that they are often smaller than anticipated. Restrictions on competition should only be allowed when it can be demonstrated that they are needed to achieve overriding societal interests.
    Keywords: Competition, Competition policy, competitive intensity, innovation, productivity, firm dynamics, empirical work, case studies
    JEL: O20 O33 O38 O47
    Date: 2008–06
  4. By: Filippo Reganati; Rosanna Pittiglio; Edgardo Sica
    Abstract: Foreign direct investment (FDI) from Multinational Enterprises (MNEs) can generate positive externalities to host countries, increasing domestic firms’ productivity. Recently, the attention of researchers has moved from the analysis of ''horizontal'' spillovers – i.e. those benefits to local enterprises at an intra-industrial level - towards the investigation of ''vertical'' spillovers phenomenon – i.e. the diffusion of positive effects on domestic economies at an inter-industry level, as in the case of technology transfers to domestic suppliers or customers in the production chain. Using a firm-level panel data, this paper analyses spillovers from FDI in the Italian productive system both within and across industries. Our results suggest no evidence of ''horizontal'' spillover and the existence of ''vertical'' spillover whose impact on local firms seems to be very limited.
    Keywords: FDI; MNEs; Productivity Spillovers, Backward Linkages, Forward Linkages, Italian productive system.
    JEL: F21 F23 F29
    Date: 2008–04
  5. By: Andrew Sharpe; Jean-François Arsenault
    Abstract: In 2008, Statistics Canada, for the first time, made available estimates of information and communication technology (ICT) investment by province. Given the importance of ICT investment for productivity growth, these data are important for the comparative analysis and understanding of productivity growth by province. The objective of this report is to present the basic data on ICT investment and ICT investment per worker in Canada and the ten provinces over the 1981-2007 period. The first part of the report reviews the literature on why ICT investment is important for productivity. The second part examines ICT investment levels and trends by province. The third part decomposes the gap in ICT investment per worker by province, relative to the national average, into three effects: that related to income levels, to the total investment/GDP share, and to the ICT investment/total investment share.
    Keywords: Machinery and equipment investment, information and communications technology, ICT, Investment gap, Business sector, Provincial estimates
    JEL: E22 G11 J21 M00 O47 Z10
    Date: 2008–09
  6. By: Federico Biagi; Maria Laura Parisi; Lucia Vergano
    Abstract: We study determinants of the probability of introducing an organizational innovation using three large cross sections of Italian manufacturing firms in the period 1995-2003. We analyze the effect and complementarity of other types of investments, like ICT, R&D, human and physical capital and the adoption of product or process innovations. Furthermore, we estimate the effect of introducing organizational innovations and indirectly technical innovations on the growth rate of labor productivity for the unbalanced panel of firms. Disembodied technological change is well represented by OIs, while product innovations seem to heve an effect on the efficiency of capital inputs only (capital stock-embodied technical change). Process innovations do not have a statistical impact as an indirect input-efficiency driving force, in our data.
    Date: 2008
  7. By: Sanghoon Lee
    Abstract: The study seeks to examine the effect of equity ownership structure on firm financial performance in South Korea. I focus on the role of two main dimensions of the ownership structure- Ownership concentration (i.e., the distribution of shares owned by majority shareholders) and identity of owners (especially, foreign investors and institutional investors). Using panel data for South Korea in 2000--2006, I find that firm performance measured by the accounting rate of return on assets generally improves as ownership concentration increases, but the effects of foreign ownership and institutional ownership are insignificant. I also find that there exists a hump-shaped relationship between ownership concentration and firm performance, in which firm performance peaks at intermediate levels of ownership concentration. The study provides some empirical support for the hypothesis that as ownership concentration increases, the positive monitoring effect of concentrated ownership first dominates but later is outweighed by the negative effects, such as the expropriation of minority shareholders. The empirical findings shed light on the role ownership structure plays in corporate performance, and thus offer insights to policy makers interested in improving corporate governance systems in an emerging economy such as South Korea.
    Keywords: Ownership Structure, Ownership Concentration, South Korea
    JEL: G32 G34
    Date: 2008
  8. By: Diego Martínez (Universidad Pablo de Olavide); Jesús Rodríguez-López (Universidad Pablo de Olavide); José L. Torres (Universidad de Málaga)
    Abstract: This paper presents an evaluation on the technological sources of labor productivity growth across European countries and the US economy for the period 1980-2004. Assets of capital are divided into those related to the information and communication technologies (ICT), and non-ICT assets. Technological progress is divided into neutral change and investment specific change. Previous exercises have aimed at ICT as a serious contributor to the upsurge of US productivity from 1995 on. Contribution to productivity growth from each type of technological progress for the US and EU-15 countries is computed using two different approaches: a growth accounting and a general equilibrium. The US and Denmark are the countries with the larger contribution from ICT-technological progress. Overall, we find that Europe is well behind the US in terms of the effects of ICT technological change.
    Keywords: Productivity growth, Investment-specific technological change, Neutral technological change
    JEL: O4
    Date: 2008–10
  9. By: Roberto Casarin; Loriana Pelizzon; Andrea Piva
    Abstract: Have Italian mutual funds been able to generate "extra-return"? Were some of them able to persistently beat the competitors? In this paper we address thee question and provide a detailed and systematic performance and return persistence analysis of the Italian equity mutual funds. We show that, in general, fund managers have not benn able to score extra-performances and only few managers had stock picking ability or market timing ability. This evidence is consistent with the market efficiency hypothesis. Moreover, concerning performance persistence, first, we cannot trace out the hot-hand phenomenon on raw returns. The no persistence effect is fairly robust to: the performance measure, the temporal lag and the different methodology employed for testing persistence. Second, there has not been long-run persistence on risk-adjusted returns (we find a weak evidence of the reversal effect). Finally, the past performance displays weak evidence of the hot-hand effect on risk-adjusted returns on four-month using cross-section tests. However, as soon as we analyse yearly intervals any evidence of persistence disappears.
    Date: 2008
  10. By: Henry van der Wiel; Harold Creusen; George van Leeuwen; Eugene van der Pijll
    Abstract: This document focuses on innovation, human capital, technology transfers and competition as potential sources of productivity growth for firms. It integrates the views of existing literature such as the two faces of R&D, the convergence debate and the existence of firm-level heterogeneity in productivity. Using firm-level data of 127 industries in the Netherlands, the document analyses which determinants are most relevant for a catch up to the global frontier and in that respect are important for the productivity performance of firms. Moreover, the document takes into account the potential importance of a national frontier. The frontier is defined as the highest productivity level at the national or global level respectively. The document provides econometric evidence that technology transfers matter, predominantly from the national frontier. Particularly, R&D encourages growth through technology transfers from the national frontier. This suggests that firms mainly conduct R&D in order to adopt existing technologies from other (domestic) firms. Competition on Dutch markets plays a role in productivity growth as well. Finally, human capital also seems to affect productivity growth.
    Keywords: Competition; human capital; technological frontier; R&D; productivity
    JEL: D40 L10 O31
    Date: 2008–09
  11. By: James Bessen (Research on Innovation, Boston University School of Law)
    Abstract: Solow (1957) decomposed labor productivity growth into two components that are independent under Hicks neutrality: input growth and the residual, representing technical change. However, when technical change is Hicks biased, input growth is no longer independent of technical change, leading to ambiguous interpretation. Using Solow’s model, I decompose output per worker into globally independent sources. Adding a simple calculation to Solow’s framework, I show that technical bias directly contributes to labor productivity growth above what is captured in the Solow residual. This contribution is sometimes large, leading to rates of total technical change that substantially exceed the Solow residual.
    Date: 2008
  12. By: Alex Coad; Rekha Rao; Federico Tamagni
    Abstract: We propose a multidimensional empirical analysis of the growth processes of firms, focusing on the coevolution of employment growth, sales growth, growth of profits and labour productivity growth. Based on firm level data about Italian manufacturing firms, 1989-1997, we apply a reduced-form vector autoregression model to analyze the lead-lag associations between the different dimension of firm growth. Findings suggest that employment growth precedes sales growth and growth of profits, and that sales growth is also associated with subsequent profits growth. There appears to be little feedback of either sales or profits on employment growth, however, and there is no clear association of employment, sales or profits growth with subsequent changes in labour productivity. Productivity growth, in turn, is more strongly associated with subsequent growth of profits than it does with subsequent growth of either employment or sales. Growth of profits, therefore, tends to represent the absorbing dimension of the overall processes of firm growth. Quantile regressions reveal asymmetries between growth processes for growing and shrinking firms.
    Keywords: Household Consumption Expenditure, Budget Shares, Sum of Log-Normal Distributions
    Date: 2008–10–02

This nep-eff issue is ©2008 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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