New Economics Papers
on Efficiency and Productivity
Issue of 2008‒12‒14
fourteen papers chosen by

  1. What Drives the Productive Efficiency of a Firm? The Importance of Industry,Location, R&D, and Size By Stephan, Andreas; Badunenko, Oleg; Fritsch, Michael
  2. Does Openness to International Financial Flows Raise Productivity Growth? By M. Ayhan Kose; Eswar S. Prasad; Marco E. Terrones
  3. An Exploration of Local R&D Spillovers in France By Jacques Mairesse; Benoit Mulkay
  4. Accounting for (In)Efficiency in the Estimation of Time-Varying Returns to Scale By Shaik, Saleem
  5. Nonparametric Efficiency Analysis for Coffee Farms in Puerto Rico By Gregory, Alexandra; Featherstone, Allen M.
  6. Does Weather Explain the Cost and Quality? An Analysis of UK Electricity Distribution Companies By Yu, W.; Jamasb, T.; Pollitt, M.G.
  7. Cost and profit efficiency of banks in Haiti: do domestic banks perform better than foreign banks? By Cadet, Raulin L.
  8. The sources of long-term economic growth in Indonesia, 1880-2007 By Pierre van der Eng
  9. Intangible Investment in Japan: New Estimates and Contribution to Economic Growth By Kyoji Fukao; Tsutomu Miyagawa; Kentaro Mukai; Yukio Shinoda; Konomi Tonogi
  10. A Generalized Goals-achievement Model in Data Envelopment Analysis By Soushi Suzuki; Peter Nijkamp
  11. Genetically Modified Crops, an Input Distance Function Approach By Gardner, Justin; Nehring, Richard; Nelson, Carl
  12. Empirical Analysis of Stanchion and Parlor Milking Cost on New York Dairy Farms By Katsumata, Kentaro; Tauer, Loren
  13. The efficiency and evolution of R&D Networks By Michael D. König; tefano Battiston; Mauro Napoletano; Frank Schweitzer
  14. Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius By Habiyaremye, Alexis; Ziesemer, Thomas

  1. By: Stephan, Andreas (Jönköping International Business School); Badunenko, Oleg (German Institute for Economic Research, DIW Berlin); Fritsch, Michael (Friedrich Schiller University Jena)
    Abstract: This paper investigates the factors that explain the level and dynamics of productive efficiency of a manufacturing firm. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992–2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. <p> We find that (1) about half of the model’s explanatory power is due to industry effects, (2) that firm size accounts for another twenty percent, and (3) that the headquarters’ location explains approximately fifteen percent. <p> Interestingly, most other firm characteristics such as R&D intensity, outsourcing activities or the number of owners have an extremely small explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firm’s efficiency over time.
    Keywords: Frontier analysis; determinants of efficiency; firm performance; industry effects; regional effects; firm size
    JEL: D24 L10 L25
    Date: 2008–03–25
  2. By: M. Ayhan Kose; Eswar S. Prasad; Marco E. Terrones
    Abstract: Economic theory has identified a number of channels through which openness to international financial flows could raise productivity growth. However, while there is a vast empirical literature analyzing the impact of financial openness on output growth, far less attention has been paid to its effects on productivity growth. We provide a comprehensive analysis of the relationship between financial openness and total factor productivity (TFP) growth using an extensive dataset that includes various measures of productivity and financial openness for a large sample of countries. We find that de jure capital account openness has a robust positive effect on TFP growth. The effect of de facto financial integration on TFP growth is less clear, but this masks an important and novel result. We find strong evidence that FDI and portfolio equity liabilities boost TFP growth while external debt is actually negatively correlated with TFP growth. The negative relationship between external debt liabilities and TFP growth is attenuated in economies with higher levels of financial development and better institutions.
    JEL: F36 F41 F43
    Date: 2008–12
  3. By: Jacques Mairesse; Benoit Mulkay
    Abstract: This paper is an attempt to assess the existence and magnitude of local research spillovers in France. We rely on the model of an extended production function (Cobb-Douglas and Translog) with both local and neighborhood R&D capital stocks. We estimate this model on 312 employment areas as of 1999, first for the whole economy, then separately for five large manufacturing industries. The estimated elasticities of productivity with respect to R&D capital are significant and plausible, both within own-area and across neighboring areas as well as within own-industry, but they are weaker across different industries.
    JEL: C21 O30 O32 O47
    Date: 2008–12
  4. By: Shaik, Saleem
    Abstract: This paper has a two-fold contribution. First, it examines the importance of accounting for (in)efficiency in the estimation of primal production function on the input elasticities, technical change, and calculation of returns to scale. Second, it applies a variant of the rolling regression technique to identify time-varying input elasticities, technical change, and return to scale. Empirical application to the Asian agriculture sector using Food and Agricultural Organization data from 1961-2005 indicates returns to scale are underestimated by the traditional pooled and panel models. Further, the time-varying estimates of input elasticities, technical change, and returns to scale indicate variations with each additional year of information.
    Keywords: Asian agriculture sector, time-varying input elasticities, technical change, and returns to scale, pooled, two-way random effect, stochastic frontier analysis, 1961-2005., Agribusiness,
    Date: 2008–10
  5. By: Gregory, Alexandra; Featherstone, Allen M.
    Abstract: Coffee production in Puerto Rico is labor intensive since harvest is done by hand for quality and topography conditions. Färe's nonparametric approach was used to estimate technical, allocative, scale and overall efficiency measures for coffee farms in Puerto Rico during the 2000 to 2004 period. On average Puerto Rico coffee farms were 46% technically efficient, 79% scale efficient, and 74% allocatively efficient.
    Keywords: coffee production, nonparametric efficiency, Crop Production/Industries, Research Methods/ Statistical Methods,
    Date: 2008
  6. By: Yu, W.; Jamasb, T.; Pollitt, M.G.
    Abstract: In recent years, a number of empirical studies and energy regulators have applied benchmarking techniques to measure the efficiency and performance of network utilities. An important issue has been the extent to which such results are influenced by contextual factors. Among these, weather factors are frequently discussed as being important. We use Factor Analysis and two-stage Data Envelopment Analysis techniques to examine the effect of a set of important weather factors (gale, hail, temperatures, rainfall and thunder) on the performance of electricity distribution networks in the UK. The results indicate that such factors often do not have a significant economic and statistical effect on the overall performance of the utilities. The weather parameters in some models are significant in terms of economic efficiency. After excluding network length from the outputs, the weather effect becomes less significant in the model. Hence, the network length is counteracting the weather effect. The results echo our previous findings of the importance of extending the basic model to include other inputs such as Totex, CML and network energy losses in regulatory benchmarking.
    Keywords: Data Envelopment Analysis, electricity, weather, quality of service.
    JEL: L15 L51 L94
    Date: 2008–12
  7. By: Cadet, Raulin L.
    Abstract: I use the stochastic frontier methodology to estimate a cost and a profit frontier functions. The Fourier-flexible form is used in this paper because of its flexibility. Results show that, although foreign banks are more cost efficient than domestic banks, domestic banks are more profit efficient than foreign banks, in Haiti. The paper reveals also that, although treasury bills constitute an alternative source of profit for banks in Haiti, a growth of interest rate on treasury bills increases profit efficiency in current period whereas it decreases profit efficiency one period after this growth. The main implication of this paper is that foreign banks are not always more efficient than domestic banks in developing countries, and even in a country with low income level.
    Keywords: Cost Efficiency; Profit Efficiency; Foreign Banks; Domestic Banks
    JEL: G28 G21 N26
    Date: 2008–01
  8. By: Pierre van der Eng
    Abstract: This paper initiates discussion about the contribution of Total Factor Productivity (TFP) growth to Indonesia’s long-term economic growth. It presents new time series estimates of GDP, capital stock and education-adjusted employment, and offers a growth accounting approach that estimates the contribution of conventional factor inputs to GDP growth during 1880-2007. For most of the period, the growth of employment, educational attainment and particularly capital stock explained almost all of long-term output growth, and TFP growth was marginal. During the key growth periods 1900-29 and 1967-97, TFP growth was on balance negative, respectively marginally positive. However, the contribution of TFP growth was substantial during some sub-periods, particularly 1933-41, 1951-61, 1967-73 and 2000-07. Each of these followed a major economic downturn that slowed capital stock growth and required a more efficient use of productive resources, assisted by changes in economic policy and institutions that enhanced productivity and efficiency.
    JEL: N15 O11 O47 O53
    Date: 2008–12
  9. By: Kyoji Fukao; Tsutomu Miyagawa; Kentaro Mukai; Yukio Shinoda; Konomi Tonogi
    Abstract: The purpose of this paper is to measure intangible assets, to construct the capital stock of intangible assets, and to examine the contribution of intangible capital to economic growth in Japan. We follow the approach of Corrado, Hulten, and Sichel (2005, 2006) to measure intangible investment using the 2008 version of the Japan Industrial Productivity (JIP) Database. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.6%, which is lower than the ratio estimated for the United States in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the United States. In addition, we find that, in stark contrast with the United States, where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. In order to examine the robustness of our results, we also conducted a sensitivity analysis and found that the slowdown of the contribution of intangible capital deepening to economic growth and the recovery in Multi-Factor Productivity (MFP) growth from the second half of the 1990s observed in our base case remain unchanged even if we take on-the-job training and Japanese data with respect to investment in firm-specific resources into account.
    Keywords: intangible investment, labor productivity, growth accounting
    JEL: E22 O32 O47
    Date: 2008–12
  10. By: Soushi Suzuki (Hokkai-Gakuen University, Sapporo, Japan); Peter Nijkamp (VU University Amsterdam)
    Abstract: Data Envelopment Analysis (DEA) has become an established tool in comparative analyses of efficiency strategies in both the public and the private sector. The aim of this paper is to present and apply a newly developed, adjusted DEA model – emerging from a blend of a Distance Friction Minimization (DFM) and a Goals Achievement (GA) approach on the basis of the Charnes-Cooper-Rhodes (CCR) method – in order to generate a more satisfactory efficiency-improving projection model in conventional DEA. Our DFM model is based on a generalized Euclidean distance minimization and serves to assist a Decision Making Unit (DMU) in improving its performance by the most appropriate movement towards the efficiency frontier surface. Our DFM approach aims to generate a new contribution to efficiency enhancement strategies by deploying a weighted projection function. In addition, it may address both input reduction and output increase as a strategy of a DMU. The GA model can compute the input reduction value or the output increase value in order to achieve a pre-specified goal value for the efficiency improvement in an optimal way. The above-mentioned DFM-GA model is illustrated empirically by using a data set of efficiency indicators for cities in Hokkaido prefecture in Japan, where the aim is to increase the efficiency of local government finance mechanisms in these cities, based on various input and output performance characteristics.
    Keywords: Distance Friction Minimization; Goals Achievement; Data Envelopment Analysis (DEA); Efficiency-improving Projection; Local Government Finance
    JEL: R51 H71
    Date: 2008–11–13
  11. By: Gardner, Justin; Nehring, Richard; Nelson, Carl
    Abstract: Our initial findings indicate that GM crops do not contribute to the decline of traditional family farms. We make a significant methodological impact by using the within transformation to remove unobserved individual effects and demonstrate that the within transformation results in ML estimates that are identical to OLS estimates.
    Keywords: Production Economics, Genetically Modified Crops, Distance Function, Stochastic Frontier Analysis, Production Economics, Research Methods/ Statistical Methods,
    Date: 2008
  12. By: Katsumata, Kentaro; Tauer, Loren
    Abstract: This paper empirically estimates cost functions for two milking technologies, stanchion and parlor, using farm level data from New York dairy farms for the years 1993 through 2002. A translog cost function was estimated along with input cost share equations for each milking technology by Iterative Seemingly Unrelated Regression. Any pair of inputs among feed, hired Labor, and cows had some degree of substitutability except for a pair of feed and hired labor evaluated by the Allen elasticity, and that of hired labor and feed evaluated by the Morishima elasticity. Additionally, economies of scale were found to exist over the entire range of output levels of the samples. The cost of stanchion technology was lower than that of parlor technology over the sample range of output levels of stanchion technology, but because parlor using farms were larger and costs continually decline, parlor using farms eventually experience lower costs than farms milking with stanchions.
    Keywords: Livestock Production/Industries,
    Date: 2008
  13. By: Michael D. König (ETH Zurich); tefano Battiston (ETH Zurich); Mauro Napoletano (Observatoire Français des Conjonctures Économiques); Frank Schweitzer (ETH Zurich)
    Date: 2008
  14. By: Habiyaremye, Alexis (UNU-MERIT); Ziesemer, Thomas (UNU-MERIT, and Maastricht University)
    Abstract: In this paper, we combine the export-led and import-led growth hypotheses in a growth model in which the importation of foreign capital goods and the demand elasticities of own export products explain the growth opportunities and the technical progress of developing countries. This model, based on imported capital goods uses Mauritius’ data on capital investment, employment, export partners’ growth and terms of trade to estimate price and income elasticities of export demand, total-factor productivity growth and economies of scale. These elasticities are then used to assess how the growth in export partners’ income is converted into domestic growth. The implications of the presence of low or high export demand elasticities are discussed by relating them to various strands of trade and growth literature. Based on the results of this estimation, we also calculate steady-state growth rates, engine and handmaiden effects of growth as well as the dynamic steady-state gains from trade for this latecomer export economy. The implications of steady state results are also discussed in the light of the Mauritian employment and growth perspectives.
    Keywords: growth models, trade, capital goods, exports, total factor productivity
    JEL: O11 O19 O41 F43
    Date: 2008

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.