New Economics Papers
on Efficiency and Productivity
Issue of 2009‒01‒17
nineteen papers chosen by

  1. Effect of mergerson efficiency and productivity: Some evidence for banks in Malaysia By Radam, Alias; Baharom, A.H.; Dayang-Afizzah, A.M.; Ismail, Farhana
  2. EFFICIENCY, TECHNOLOGICAL PROGRESS AND REGIONAL COMPARATIVE ADVANTAGE: A Study of Organised Manufacturing Sector in India By Mukherjee, Dipa; Majumder, Rajarshi
  3. Revisiting Solow’s Decomposition of Economic and Productivity Growth By Tung Liu; Kui-Wai Li
  4. Technological sources of productivity growth in Japan, the Us and Germany: What makes the difference? By Jesús Rodríguez; José L.Torres
  5. The Most Efficient Czech SME Sectors: An Application of Robust Data Envelopment Analysis By Jan Průša
  6. Productivity growth and technological change in Europe and us By Diego Martínez, y José L. Torres; Jesús Rodríguez-López; José L. Torres
  7. FDI and productivity convergence in central and eastern Europe - an industry-level investigation By Martin Bijsterbosch; Marcin Kolasa
  8. Panel Data Estimates of the Production Function and Product and Labor Market Imperfections By Sabien Dobbelaere; Jacques Mairesse
  9. The Relationship Between Environmental Efficiency and Manufacturing Firm’s Growth By Massimiliano Mazzanti; Giulio Cainelli; Roberto Zoboli
  10. Labour protection and productivity in the European economies: 1995-2005 By Damiani, Mirella; Pompei, Fabrizio
  11. Are young and old workers harmful for firm productivity? By Thierry Lallemand; François Rycx
  12. Technical efficiency of Italian public hospitals By Alessandro Schiavone
  13. Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis By Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
  14. What is the Long Run Growth Rate of the East Asian Tigers? By Rao, B. Bhaskara; Tamazian, Artur; Singh, Rup
  15. An Economic Approach to the Measurement of Productivity Growth Using Differences Instead of Ratios By Diewert, Erwin; Mizobuchi, Hideyuki
  16. Blaming the exogenous environment? Conditional efficiency estimation with continuous and discrete environmental variables By Kristof DE WITTE; Mika KORTELAINEN
  17. Comparing the Early Research Performance of PhD Graduates in Labor Economics in Europe and the USA By Ana Rute Cardoso; Paulo Guimarães; Klaus F. Zimmermann
  18. Sizing up performance measures in the financial services sector By Jacob A. Bikker
  19. The Impact of Regional Absorptive Capacity on Spatial Knowledge Spillovers By Andrea Caragliu; Peter Nijkamp

  1. By: Radam, Alias; Baharom, A.H.; Dayang-Afizzah, A.M.; Ismail, Farhana
    Abstract: This study is undertaken to investigate the extent to which mergers lead to efficiency by which services are provided to the public and the productivity of Malaysia’s banking institutions sector. The data cover the period 1993 to 2004, which includes the pre-merger years and the post-merger years. This study attempts to evaluate technical efficiency, efficiency change, technical change and productivity of commercial banks, finance companies and merchant banks using a non-parametric Data Envelopment Analysis (DEA) and Malmquist Index approach as the framework for the analyses. It is found that: (1) that on average, productivity across banking institutions increased at annual rate of 5.8% over the study period 1993 to 2004; (2) the results also indicated that almost all of the productivity growth comes from technical change (or innovations in banking technology) rather than improvement in efficiency change, which contributes for 6.1% of productivity growth, while the latter accounted for 0.2% decline; (3) the merger process led to productivity improvements whereby, it is observed that the productivity of Malaysia’s banking sector has been improved (in terms of efficiency) after the implementation of merger program for domestic banking institutions in 1999. This might be due to the utilization of their scale economies to improve their efficiencies. However, the productivity of banking institutions has been affected by certain economic conditions in year 2001 and 2004 (such as the September 11 tragedy and the process of capital rationalization that merged entities have undergone).
    Keywords: Banking sector; Mergers; DEA and Malmquist index;Malaysia
    JEL: G14 G34 E44 G21
    Date: 2008–06–04
  2. By: Mukherjee, Dipa; Majumder, Rajarshi
    Abstract: Technological upgradation and increasing capital intensity in organised manufacturing sector in India has been championed on grounds of improving productivity, efficiency, and competitiveness. In a developing economy this is a costly proposition due to capital scarcity, and the effect of technological changes on productivity and efficiency levels have to be estimated before taking such policies. This paper seeks to estimate trends in Factor Productivity, Technological Progress, and Technological Efficiency in this sector and examines their relative importance also. Technical Efficiency is observed to be moderate and further declining in the nineties. Substantial disparity exists among regions and product groups regarding Efficiency, Technical Progress and Efficiency changes. It is found that increasing capital intensity has been associated with falling productivity, efficiency, and technological deceleration in the nineties. Wider diffusion rather than greater capital use is thus recommended for productivity rise. Regional efficiency matrix is also prepared so that states can focus on specific areas where they have comparative advantages.
    Keywords: Productivity; Technical Efficiency; Technological Progress; Organised Manufacturing; Diffusion; Regional Comparative Advantage
    JEL: E23 O33 D24 R11 L60
    Date: 2008
  3. By: Tung Liu (Department of Economics, Ball State University); Kui-Wai Li (City University of Hong Kong, Hong Kong SAR)
    Abstract: By relaxing the two assumptions of constant returns to scale and perfect competition in the product market used by Solow (1957), this paper identifies a new decomposition of economic and productivity growth. The sources of economic growth are; adjusted economies of scales effect, weighted sum of input growth, and technical progress. The sources of productivity growth are; adjusted economies of scale effect and technical progress. The weight used for the input growth is the cost share of each input.
    Keywords: Solow; Growth decomposition; Total factor productivity; Returns to scale
    JEL: D24 O47
    Date: 2008–12
  4. By: Jesús Rodríguez (Universidad Pablo de Olavide); José L.Torres (Universidad de Málaga)
    Abstract: This paper studies the contribution of Information and Communication Technologies (ICT) on economic growth and labor productivity across the three leading economies in the world: Japan, Germany and the US. We use a dynamic general equilibrium growth model with investment-specific technological change to quantify the contribution to productivity growth in the three countries from different technological progress. We find that contribution to productivity growth due to ICT capital assets is about 0.40 percentage points for Japan and Germany, whereas it is about 0.65 percentage points in the case of the US. Neutral technological change is the main source of productivity growth in Japan and Germany. For the US, the main source of productivity growth derives from investment-specific technological change, mainly associated to ICT.
    Keywords: Productivity growth; Investment-specific technological change; Neutral technological change; Information and communication technology.
    JEL: O3 O4
    Date: 2008
  5. By: Jan Průša (Faculty of Economics, University of Cambridge; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper analyzes the efficiency of Czech small and medium enterprises. We use the data from 2002 to 2005 of thirty manufacturing industries, each divided into five subgroups according to the number of employees. We employ standard and advanced robust data envelopment analysis (DEA) to obtain cross-sectional rankings of individual industries. The results reveal substantial variance in the efficiency scores, which is only partly removed by the robust DEA specification. We found that the majority of firms operate below full efficiency; with only a few companies (industries) belonging to top performers. Average efficiency lies between 50 to 70 per cent of the best sectors. We conclude that only a minor proportion of Czech SME concentrate on high value added production.
    Keywords: production, efficiency measurement, data envelopment analysis, small and medium enterprises
    JEL: D24 L60 L70
    Date: 2009–01
  6. By: Diego Martínez, y José L. Torres (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 productivity growth across European countries and the U.S. for the period 1980-2004. Technological progress is divided into neutral change and investment specific change. Contribution to productivity growth from each type of technological progress is computed using a growth accounting approach and a general equilibrium approach. Concerning the growth accounting view, the neutral change dominates the effect from the implicit change, and the ICT assets provide most of the implicit technological change. Regarding the general equilibrium approach, ICT assets (specially the hardware equipment) also respond for most of the implicit change affecting productivity growth.
    Keywords: Productivity growth, Investment-specific technological change, Neutral technological change.
    JEL: O41 O47
    Date: 2008
  7. By: Martin Bijsterbosch (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marcin Kolasa (National Bank of Poland, Economic Institute, ul. Swietokrzyska 11/21, 00-919 Warsaw, Poland.)
    Abstract: This paper presents empirical evidence of the effect of FDI inflows on productivity convergence in central and eastern Europe, using industry-level data. Four conclusions stand out. First, there is a strong convergence effect in productivity, both at the country and at the industry level. Second, FDI inflow plays an important role in accounting for productivity growth. Third, the impact of FDI on productivity critically depends on the absorptive capacity of recipient countries and industries. Fourth, there is important heterogeneity across countries, industries and time with respect to some of the main findings. JEL Classification: C23, F21, O33.
    Keywords: Productivity convergence, FDI, absorptive capacity.
    Date: 2009–01
  8. By: Sabien Dobbelaere (VU University Amsterdam); Jacques Mairesse (CREST, Institut National de la Statistique et des Études Économiques (INSEE), Merit, Maastricht University, and NBER)
    Abstract: Embedding the efficient bargaining model into the R. Hall (1988) approach for estimating price-cost margins shows that both imperfections in the product and labor markets generate a wedge between factor elasticities in the production function and their corresponding shares in revenue. This article investigates these two sources of discrepancies both at the industry level and the firm level using an unbalanced panel of 10646 French firms in 38 manufacturing industries over the period 1978-2001. By estimating standard production functions and comparing the estimated factor elasticities for labor and materials and their shares in revenue, we are able to derive estimates of average price-cost mark-up and extent of rent sharing parameters. For manufacturing as a whole, our estimates of these parameters are of an order of magnitude of 1.17 and 0.44 respectively. Our industry-level results indicate that industry differences in these parameters and in the underlying estimated factor elasticities and shares are quite sizeable. Since firm production function, behavior and market environment are very likely to vary even within industries, we also investigate firm-level heterogeneity in estimated mark-up and rent-sharing parameters. To determine the degree of true heterogeneity in these parameters, we adopt the P.A. Swamy (1970) methodology ailowing to correct the observed variance in the firm-level estimates from their sampling variance. The median of the firm estimates of the price-cost mark-up ignoring labor market imperfections is of 1.10, while as expected it is higher of 1.20 when taking them into account and the median of the corresponding firm estimates of the extent of rent sharing is of 0.62. The Swamy corresponding robust estimates of true dispersion are of about 0.18, 0.37 and 0.35, showing indeed very sizeable within-industry firm heterogeneity. We find that firm size, capital intensity, distance to the industry technology frontier and investing in R&D seem to account for a significant part of this heterogeneity.
    Keywords: Rent sharing; price-cost mark-ups; production function; panel data
    JEL: C23 D21 J51 L13
    Date: 2009–01–07
  9. By: Massimiliano Mazzanti (University of Ferrara); Giulio Cainelli (University of Bari); Roberto Zoboli (Catholic University of Milan & CERIS CNR)
    Abstract: This paper investigates the empirical link between emission intensity and economic growth, using a very large data set of 61,219 Italian manufacturing firms over the period 2000-2004. As a measure of lagged environmental performance (efficiency) at firm level we exploit NAMEA sector for CO2, NOx, SOx data over 1990-1999. The paper tests the extent to which (past) environmental efficiency/intensity, which is driven by structural features and firm strategic actions, including responses to policies, influences firms growth. Our results show, first, a typical trade off generally appearing for the three core environmental emissions we analyse: lower environmentally efficiency in the recent past allows higher degrees of freedom to firms and relax the constraints for growth, at least in this short/medium term scenario. Nevertheless, the size of the estimated coefficients is not large. Trade off are significant for two emission indicators out of two, but quite negligible in terms of impacts, besides the case of CO2. For example, growth is reduced by far less than 0.1% in association to a 1% increase of environmental efficiency. Environmental efficiency does not seem a primary cost factor and constraint to growth if compared to other factors affecting firm targets and firm competitiveness. In addition, non-linearity seems to characterise the economic growth-environmental performance relationship. Signals of inverted U shape appears: this may be a signal that both firm strategies and recent policy efforts are affecting the dynamic relationship between environmental efficiency and economic productivity, turning it from an usual trade off to a possible joint complementary/co-dynamics, where bad environmental performances hamper firm growth and investments in greener technologies may be associated to positive economic performances of firms and sectors.
    Keywords: Firm growth, Manufacturing, Emission intensity, Economic performance, Environmental performance
    JEL: C23 D21 O32 Q55
    Date: 2008–12
  10. By: Damiani, Mirella; Pompei, Fabrizio
    Abstract: The present study examines cross-national and sectoral differences in multifactor productivity growth in sixteen European countries from 1995 to 2005. The main aim is to ascertain the role of flexible employment contracts and collective labour relationships in explaining the ample differentials recorded in the European economy. Research Findings We use the EU KLEMS database for growth accounting and a broad set of indicators of labour regulations, covering two distinct ‘areas’ of labour regulation: employment laws and collective relations laws. This comprehensive approach allow us to consider arrangements that regulate allocation of labour inputs (fixed-term, part-time contracts, hours worked) and of payoff and decision rights of employees. We find that, since 1995, European countries have not followed similar patterns of growth. A large number of variations between European economies are caused by deep differentials in multifactor productivity and part of this heterogeneity is caused by sectoral diversities. We show that, in labour-intensive sectors such as services, fixed-term contracts, which imply shorter-term jobs and lower employment tenures, may discourage investment in skills and have detrimental effects on multifactor productivity increases. We also find that some forms of labour regulation and arrangements that give a ‘voice’ to employees mitigate these perverse effects on efficiency patterns. Employment protection reforms which slacken the rules of fixed-term contracts cause potential drawbacks in terms of low productivity gains. More stringent regulation of these practices, as well as a climate of collective relations, sustain long-term relationships and mitigate these negative effects.
    Keywords: productivity; labour regulation; comparative institutions.
    JEL: O47 J24 J50
    Date: 2009–01–13
  11. By: Thierry Lallemand (Université Libre de Bruxelles, SBS-EM, DULBEA); François Rycx (Université Libre de Bruxelles, SBS-EM, CEB, DULBEA and IZA)
    Abstract: This paper investigates the effects of the workforce age structure on the productivity of large Belgian firms. More precisely, it examines different scenarios of changes in the proportion of young (16-29 years), middle-aged (30-49 years) and old (more than 49 years) workers and their expected effects on firm productivity. Using detailed matched employer-employee data, we find that a higher share of young (old) workers within firms is favourable (harmful) for firm value added per capita. Results also show that age structure effects on productivity are stronger in ICT than in non-ICT firms.
    Keywords: Firm performance, Workforce age structure, Demographic changes
    JEL: J21 J31 L25
    Date: 2008–03
  12. By: Alessandro Schiavone (Banca d'Italia)
    Abstract: Since the late eighties the Italian National Health System, in particular hospital care, has undergone deep reforms. This paper evaluates the technical efficiency of Italian public hospitals in light of the main features of the hospital system at a regional level. The evaluation was carried out using data on endowments and admissions of all Italian public hospitals over the period 2000-2004 and applying DEA, a non-parametric method. Individual efficiency is partly explained by the composition of input endowment and the case-mix of hospital services provided. However a significant portion of variance is related to differences in regional averages. A second stage of analysis was performed to detect determinants of technical efficiency, including supply side structural features at the regional level. It demonstrates that some features of local markets, such as the existence of hospital networks and competitiveness between providers, lead to higher levels of efficiency. Another source of variance between regions consists in pressures on the demand for in-patient care.
    Keywords: hospitals, health system, DEA, hospital efficiency
    JEL: H75 I11 I18
    Date: 2008–09
  13. By: Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
    Abstract: We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the pre-crisis destinations of firms' exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose export destinations experience greater currency depreciation have slower export growth, and that export growth leads to increases firm productivity and other firm performance measures. Consistent with "earning-by-exporting", the productivity impact of export growth is greater when firms export to more developed countries.
    JEL: D24 F10 F31 L60
    Date: 2009–01
  14. By: Rao, B. Bhaskara; Tamazian, Artur; Singh, Rup
    Abstract: New panel data estimates for the four East Asian Tigers show that the contribution of total factor productivity (TFP) to growth is much higher than past estimates. An extended production function with learning by doing implies that TFP is about 3.5% and these countries will grow at this rate in the long run.
    Keywords: Asian Tigers; Systems Dynamic GMM; Growth Accounting; Factor Accumulation as Residual
    JEL: O11 N15
    Date: 2009–01
  15. By: Diewert, Erwin; Mizobuchi, Hideyuki
    Abstract: Traditional index number theory decomposes a value ratio into the product of a price index times a quantity index. Growth accounting is based on this traditional approach to index number theory. This paper takes an alternative approach which decomposes a value difference into the sum of a price difference plus a quantity difference. We apply this new exact difference methodology in order to decompose the growth of a new measure of labour productivity into additive explanatory factors. This new measure of labour productivity takes into account changes in the terms of trade. We apply our methodology to investigate the growth in living standards per unit of labour for the Japanese economy over the years 1955-2004. The paper also introduces a new flexible functional form for a GDP function that is based on the normalized quadratic functional form pioneered by Diewert and Wales.
    Keywords: Flexible functional form, producer theory, Japanese economic growth, difference approach, Bennet indicators, labour productivity, exact index numbers
    JEL: C14 D24 O47 O53
    Date: 2009–01–09
  16. By: Kristof DE WITTE; Mika KORTELAINEN
    Abstract: This paper proposes a fully nonparametric framework to estimate relative efficiency of entities while accounting for a mixed set of continuous and discrete (both ordered and unordered) exogenous variables. Using robust partial frontier techniques, the probabilistic and conditional characterization of the production process, as well as insights from the recent developments in nonparametric econometrics, we present a generalized approach for conditional efficiency measurement. To do so, we utilize a tailored mixed kernel function with a data-driven bandwidth selection. So far only descriptive analysis for studying the effect of heterogeneity in conditional efficiency estimation has been suggested. We show how to use and interpret nonparametric bootstrap-based significance tests in a generalized conditional efficiency framework. This allows us to study statistical significance of continuous and discrete environmental variables. The proposed approach is illustrated by a sample of British pupils from the OECD Pisa data set. The results show that several exogenous discrete factors have a significant effect on the educational process.
    Date: 2008–12
  17. By: Ana Rute Cardoso; Paulo Guimarães; Klaus F. Zimmermann
    Abstract: This paper analyzes the early research performance of PhD graduates in labor economics, addressing the following questions: Are there major productivity differences between graduates from American and European institutions? If so, how relevant is the quality of the training received (i.e. ranking of institution and supervisor) and the research environment in the subsequent job placement institution? The population under study consists of labor economics PhD graduates who received their degree in the years 2000 to 2005 in Europe or the USA. Research productivity is evaluated alternatively as the number of publications or the quality-adjusted number of publications of an individual. When restricting the analysis to the number of publications, results suggest a higher productivity by graduates from European universities than from USA universities, but this difference vanishes when accounting for the quality of the publication. The results also indicate that graduates placed at American institutions, in particular top ones, are likely to publish more quality-adjusted articles than their European counterparts. This may be because, when hired, they already have several good acceptances or because of more focused research efforts and clearer career incentives.
    Keywords: graduate programs, research productivity
    JEL: A23 J44 A11 A14 A10
    Date: 2008
  18. By: Jacob A. Bikker
    Abstract: The adequate performance of banks, insurers and pension funds is of crucial importance to their private and business customers. The prices and quality of financial products sold by such entities are largely determined by operational efficiency and the degree of competition in the markets concerned. Since efficiency and competition cannot be observed directly, various indirect measures in the form of simple indicators or more complex models have been devised and used both in economic theory and in business practice. This paper demonstrates that measuring the performance of financial institutions is no simple matter and that indicators differ strongly in quality. It investigates which methods are to be preferred and how by combining certain indicators stronger measures may be developed. These measures are then subjected to a predictive validity test.
    Keywords: concentration, competition, costs, efficiency, performance, profits, banks, insurance firms, pension funds, predictive validity test
    JEL: C52 G21 G22 G23 G28 L1
    Date: 2008–12
  19. By: Andrea Caragliu (Politecnico di Milano); Peter Nijkamp (VU University Amsterdam)
    Abstract: We design a conceptual framework for linking two approaches: the literature on absorptive capacity and the literature on spatial knowledge spillovers. Regions produce new knowledge, but only part of it is efficiently adopted in the economy; the share of efficiently adopted technology depends on territorial capital. Our data set is based on a panel of European regions over the period 1999-2005, combining data from EUROSTAT and the European Values Study (EVS); we test the hypothesis that insufficient levels of territorial capital hamper the capability of regions to grasp and fully exploit new knowledge. Results show that a lower regional absorptive capacity increases knowledge spillovers towards surrounding areas, hampering the regions’ capability to understand, decode and efficiently exploit new knowledge, both locally produced and originating from outside.
    Keywords: Absorptive capacity; knowledge spillovers; total factor productivity; spatial econometrics
    JEL: O33 R11
    Date: 2008–12–15

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