nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2008‒11‒11
fifteen papers chosen by
Angelo Zago
University of Verona

  1. Investment climate and firm’s economic performance: econometric methodology and application to Turkey's investment climate survey By Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena
  2. Social protection performance in the European Union: comparison and convergence By COELLI, Tim; LEFEBVRE, Mathieu; PESTIEAU, Pierre
  3. Investment climate assessment based on demean Olley and Pakes decompositions: methodology and application to Turkey's investment climate survey By Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena
  4. Does international openness affect productivity of local firms? Evidence from Southeastern Europe By Jože P. Damijan; Jose de Sousa; Olivier Lamotte
  5. The Direct Impact of Climate Change on Regional Labour Productivity By Tord Kjellstrom; R. Sari Kovats; Simon J. Lloyd; Tom Holt; Tol, Richard S. J.
  6. The work volume reflection in the profit’s mass By Căruntu , Constantin; Lăpăduşi , Mihaela Loredana
  7. Exports and Profitability: First Evidence for German Manufacturing Firms By Fryges, Helmut; Wagner, Joachim
  8. Robust methodology for investment climate assessment on productivity: application to investment climate surveys from Central America By Alvaro Escribano Saez; J. Luis Guasch
  9. Assessing the Role of Technology Adoption in China's Growth Performance. By Nadja Wirz
  10. Organizational Redesign, Information Technologies and Workplace Productivity By Benoit Dostie; Rajshri Jayaraman
  11. Competitiveness of the knitwear industry in Bangladesh : a study of industrial development amid global competition By Bakht, Zaid; Salimullah, Md.; Yamagata, Tatsufumi; Yunus, Mohammad
  12. Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector By Kristof De Witte; David S. Saal
  13. ICT Investments and Technical Efficiency in Italian Manufacturing Firms: The Productivity Paradox Revisited By Concetta Castiglione
  14. Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries By Jože P. Damijan; Matija Rojec; Boris Majcen; Mark Knell
  15. Productivity Growth in European Railways: Technological Progress,Efficiency Change and Scale Effects By Heike Wetzel

  1. By: Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena
    Abstract: Government policies and behavior exert a strong influence on the investment climate through their impact on costs, risks and barriers to competition. Key factors affecting the investment climate through their impact on costs are: corruption, taxes, the regulatory burden and extent of red tape in general, factor markets (labor, intermediate materials and capital), the quality of infrastructure, technological and innovation support, and the availability and cost of finance. While the investment climate surveys are quite useful in identifying major issues and bottlenecks as perceived by firms, the data collected is also meant to provide the basic information for an econometric assessment of the impact or contribution of the investment climate (IC) variables on productivity. We believe that improving the investment climate (IC) is a key policy instrument to promote economic growth and to mitigate the institutional, legal, economic and social factors that are constraining the convergence of per capita income and labor productivity of Turkey relative to more developed countries. For that, we need to identify the main investment climate variables that affect economic performance measures like total factor productivity, employment, wages, exports and foreign direct investment and this is the main goal of this paper. In turn, that quantified impact is used in the advocacy for, and design of, investment-climate reforms.
    Keywords: Investment climate, firm level determinants of TFP, Employment, Wages, Exports and FDI, Mean contributions of investment climate
    JEL: D24 L60 F18 J23 C01 C33
    Date: 2008–06
  2. By: COELLI, Tim (CEPA, University of Queensland); LEFEBVRE, Mathieu (CREPP, Université de Liège); PESTIEAU, Pierre (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: In this paper we use data on five social inclusion indicators (poverty, inequality, unemployment, education and health) to assess the performance of 15 European welfare states (EU15) over a ten-year period from 1995 to 2004. Aggregate measures of performance are obtained using index number methods similar to those employed in the construction of the widely used Human Development Index (HDI). These are compared with alternative measures derived from data envelopment analysis (DEA) methods. The influence of methodology choice and the assumptions made in scaling indicators upon the results obtained is illustrated and discussed. We also analyse the evolution of performance over time, finding evidence of some convergence in performance and no sign of social dumping.
    Keywords: performance measure, best practice frontier, social protection.
    JEL: H50 C14 D24
    Date: 2008–03
  3. By: Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena
    Abstract: Most empirical studies show strong detrimental evidence that regulatory, and administrative, barriers to entry have on productivity and on firm growth. In this paper we evaluate and measure the total factor productivity (TFP) impacts of having; low quality physical infrastructures (electricity, telecommunications, transport, customs, etc.) and bad social infrastructures (rules of law, informality, corruption, etc.). We suggest evaluating the impact on average productivity (TFP) and on the allocative efficiency of production among firms based on several versions of the Olley and Pakes (O&P) decompositions. We evaluate the advantages and disadvantages of each the O&P decomposition in terms of their IC explanatory power. Once we have measured those IC impacts, we compare them with other sources of empirical information obtained from firm’s perceptions on main bottlenecks for firm growth and from doing business reports of the World Bank (2007). For the econometric analysis, we use firm level data bases from Turkey’s manufacturing sector based on Investment Climate surveys (ICs) done by the World Bank. These ICs are done in many other developing countries and therefore we propose to make crosscountry comparisons based on a new demean concept of TFP that also reduces the heterogeneity if using several robust productivity measures within each country.
    Keywords: Total factor productivity, Investment climate, Firm level determinants of allocative efficiency, Robust productivity impacts, Cross country comparisons of demean TFP
    JEL: D61 L60
    Date: 2008–06
  4. By: Jože P. Damijan; Jose de Sousa; Olivier Lamotte
    Keywords: international trade, trade liberalization, foreign ownership, total factor productivity, transition economics
    JEL: F14 D24 L25
    Date: 2008
  5. By: Tord Kjellstrom (Australian National University); R. Sari Kovats (London School of Hygiene and Tropical Medicine); Simon J. Lloyd (London School of Hygiene and Tropical Medicine); Tom Holt (University of East Anglia); Tol, Richard S. J. (Economic and Social Research Institute (ESRI))
    Abstract: Global climate change will increase outdoor and indoor heat loads, and may impair health and productivity for millions of working people. This study applies physiological evidence about effects of heat, climate guidelines for safe work environments, climate modelling and global distributions of working populations, to estimate the impact of two climate scenarios on future labour productivity. In most regions, climate change will decrease labour productivity, under the simple assumption of no specific adaptation. By the 2080s, the greatest absolute losses of population based labour work ability as compared with a situation of no heat impact (11-27%) are seen under the A2 scenario in South-East Asia, Andean and Central America, and the Caribbean. Climate change will significantly impact on labour productivity unless farmers, self-employed and employers invest in adaptive measures. Workers may need to work longer hours to achieve the same output and there will be economic costs of occupational health interventions against heat exposures.
    Keywords: Climate change, heat, work, labour productivity
    Date: 2008–10
  6. By: Căruntu , Constantin; Lăpăduşi , Mihaela Loredana
    Abstract: At microeconomic level, labour productivity is accepted as a possibility of the man power to produce in a certain period of time, a certain amount of goods (to make a certain volume of works or services). The reflection of work volume in the profit mass provides a company’s activity reliability, based on economic rationality.
    Keywords: productivity; profit; work volume ; efficiency of production factors.
    JEL: D24
    Date: 2008–06
  7. By: Fryges, Helmut (ZEW Mannheim); Wagner, Joachim (University of Lüneburg)
    Abstract: Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for self-selection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.
    Keywords: exports, profitability, micro data, Germany
    JEL: F14 D21
    Date: 2008–10
  8. By: Alvaro Escribano Saez; J. Luis Guasch
    Abstract: Developing countries are increasingly concerned about improving country competitiveness and productivity, as they face the increasing pressures of globalization and attempt to improve economic growth and reduce poverty. Among such countries, Investment Climate Assessments (ICA) surveys at the firm level, have become the standard way for the World Bank to identify key obstacles to country competitiveness, in order to prioritize policy reforms for enhancing competitiveness. Given the surveys objectives and the nature and limitations of the data collected, this paper discusses the advantages and disadvantages of using different productivity measures. The main objective is to develop a methodology to estimate, in a consistent manner, the productivity impact of the investment climate variables. The paper applies it to the data collected for ICAs in four countries: Costa Rica, Guatemala, Honduras and Nicaragua. Observations on logarithms (logs) of the variables are pooled across three countries (Guatemala, Honduras and Nicaragua). Endogeneity of the production function inputs and of the investment climate variables is addressed by using a variant of the control function approach, based on individual firm information, and by aggregating investment climate variables by industry and region. It is shown that it is possible to get robust results for 10 different productivity measures. The estimates for the four countries show how relevant the investment climate variables are to explain the average level of productivity. IC variables in several categories (red tape, corruption and crime, infrastructure and, quality and innovation) account for over 30 percent of average productivity. The policy implications are clear: investment climate matters and the relative impact of the various investment climate variables indicate where reform efforts should be directed in each country. It is argued that this methodology can be used as a benchmark to assess productivity effects in other ICA surveys. This is important because ICA surveys are available now for more than 65 developing countries.
    Keywords: Total factor productivity, Investment climate, Competitiveness, Firm level determinants of productivity, Robust productivity impacts,
    JEL: D24 L60 O54 C01
    Date: 2008–06
  9. By: Nadja Wirz (University of St. Gallen, Switzerland)
    Abstract: China has experienced a period of tremendous economic growth in recent years. In an attempt to explain this development, several existing growth-accounting studies reveal that impressively high rates of productivity growth have been at the heart of China's performance. This study investigates to what extent these productivity increases can be explained by technology-adoption theory. In less developed countries, the key element behind technological progress is technology adoption, the process of copying technological knowledge invented throughout the world. To uncover a measure of China's technological advances, the paper constructs a hybrid of some prominent technology-adoption models and calibrates it to reasonable parameter values. The calibrated version of the model is then combined with Chinese economic data. For the period 1978-2005, the analysis finds that the Chinese performance can be explained to a surprisingly large extent by the suggested technology-adoption framework. It can account for roughly 80% of China's productivity gains.
    Keywords: technological progress; technology adoption; TFP; China
    JEL: O11 O30 O40 O52
    Date: 2008–10
  10. By: Benoit Dostie (HEC Montreal); Rajshri Jayaraman (ESMT European School of Management and Technology)
    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.
    Keywords: organizational capital, IT, computers, workplace productivity, matched employer-employee data
    JEL: D20 L20 M54 O33
    Date: 2008–10–06
  11. By: Bakht, Zaid; Salimullah, Md.; Yamagata, Tatsufumi; Yunus, Mohammad
    Abstract: This paper assesses the technical efficiency and profitability of the knitwear industry in Bangladesh taking into account the sector’s role in poverty reduction. While stochastic frontier analysis was invoked to assess technical efficiency, three alternative measures, namely the rate of return, total factor productivity and the Solow residual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation results indicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiency in comparison with the garment industries of other developing countries. While there is a significant scale effect in profitability and productivity, no supporting evidence was found for the positive impact on competitiveness of industrial upgrading in terms of usage of expensive machinery and vertical integration and industrial agglomeration.
    Keywords: Bangladesh, Knitwear, Poverty reduction, Productivity, Profitability, Stochastic frontier analysis, Apparel industry, Textile industry
    JEL: D24 J31 L67 O14 O53
    Date: 2008–10
  12. By: Kristof De Witte; David S. Saal
    Abstract: This paper analyzes the conduct of publicly owned monopolistic utilities regulated by a voluntary sunshine regulatory model (i.e. publication of the performances of utilities). In particular, we examine the behaviour of Dutch drinking water utilities before and after the introduction of the sunshine regulation. As during the period 1992-2006 several alternative regulatory reforms including privatization, yardstick competition and profit regulation were also seriously considered, we examine how the discussion and possible implementation of these reforms influenced the behaviour of the utilities. By decomposing profit change into its economic drivers (quantity effect, price effect, operating efficiency, technical progress, scale, etc.), our results suggest that in an appropriate political and institutional context, sunshine regulation can be an effective and appropriate mean of insuring that publicly organised services are efficiently and profitably provided. In methodological terms, the profit decomposition is extended to robust (i.e. allowing for stochastic elements) and conditional (i.e. accounting for heterogeneity) non-parametric efficiency measures.
    Keywords: Regulation, Drinking water utilities, Profit decomposition, Data Envelopment Analysis
    JEL: C14 L33 L51 L95
    Date: 2008–10
  13. By: Concetta Castiglione (Department of Economics, Trinity College Dublin)
    Abstract: From the Seventies the importance of information and communication technologies (ICTs) has been a much debated question. A lot of studies are made in order to understand if the ICTs are able to increase economic growth, firm productivity and firm efficiency. In this study both the translog and the Cobb-Douglas production function are used in order to estimate the impact of information and communication technology on technical efficiency (TE) in the Italian manufacturing firms over the period 1995-2003. Results show that ICT investments positively and significantly affect firm technical efficiency. Moreover, group, size and geographical position are able to influence positively TE. Finally, results show that older firms are in average more efficient than younger ones.
    Keywords: ICT investment, Productivity Paradox, Stochastic Frontier, Italian manufacturing firms
    JEL: D21 L63 O33
    Date: 2008–10
  14. By: Jože P. Damijan; Matija Rojec; Boris Majcen; Mark Knell
    Abstract: This paper presents a comparative study of the importance of direct technology transfer and spillovers through FDI on a set of ten transition countries, using a common methodology and appropriate methods to account for selection and simultaneity correction. This paper considers by far the largest firm level dataset (more than 90,000 firms) used by any study on the spillover effects of FDI. The main novelty of the paper is the explicit control for various sources of firm heterogeneity when accounting for different effects of FDI on firm performance. Controlling for these variables leads to some interesting results which contrast with the previous empirical work in the field. We find that horizontal spillovers have become increasingly important over the last decade, and they may even become more important than vertical spillovers. Furthermore, this work shows that the heterogeneity of firms in terms of absorptive capacity, size, productivity and technology levels affect the results. These findings suggest that both direct effects from foreign ownership as well as the spillovers from foreign firms substantially depend on the absorptive capacity and productivity level of individual firms. Only more productive firms and firms with higher absorptive capacities are able to both compete with foreign affiliates in the same sector and benefit from the increased upstream demand for intermediates generated by foreign affiliates. In addition, these results show that foreign presence may also affect smaller firms to a larger extent than larger firms, but this impact may be in either direction.
    Keywords: Foreign direct investment, technology transfer, spillovers, transition economies, firm heterogeneity
    JEL: D24 F14
    Date: 2008
  15. By: Heike Wetzel (Institute of Economics, University of Lüneburg)
    Abstract: This paper analyzes the performance of the European railway sector in the period of deregulation (1990-2005). Using a stochastic frontier panel data model that controls for unobserved heterogeneity a multiple-output multiple input distance function model is estimated in order to evaluate the sources of productivity growth: technological progress, technical efficiency change and scale effects. The results indicate that technology improvements were by far the most important driver of productivity growth, followed by gains in technical efficiency, and to a lesser extent by exploitation of scale economies. Overall, we find an average productivity growth of 39 per cent within the sample period.
    Keywords: European railways, Deregulation, Stochastic frontier analysis,Total factor productivity
    JEL: D24 L51 L92
    Date: 2008–10

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