New Economics Papers
on Efficiency and Productivity
Issue of 2009‒04‒13
thirteen papers chosen by

  1. Looking beyond the methods: Productivity Estimates and Growth Trends in Indian Manufacturing By Gupta, Abhay
  2. Productivity Convergence Across Industries and Countries: The Importance of Theory-based Measurement By Inklaar, R.; Timmer, M.P.
  3. Measurement error in cross-country productivity comparisons: Is more detailed data better? By Inklaar, R.; Timmer, M.P.
  4. A Comparison of Real Output and Productivity for British and American Manufacturing in 1935 By Jong, H. de; Woltjer, P.
  5. Determinants of Export Behaviour of German Business Services Companies By Alexander Eickelpasch; Alexander Vogel
  6. Domestic Plant Productivity and Incremental Spillovers from Foreign Direct Investment By Altomonte, C.; Pennings, H.P.G.
  7. On the Assessment of Regulators' Efficiency. An Application to European Telecommunications By Paolo Lupi; Fabio M. Manenti; Antonio Scialà; Cristiano Varin
  8. Comparitive Performance Analysis of European Airports by Means of Extended Data Envelopment Analysis By Soushi Suzuki; Peter Nijkamp; Eric Pels; Piet Rietveld
  9. How to Increase the Long Run Growth Rate of Bangladesh? By Rao, B. Bhaskara; Hassan, Gazi
  10. Pre-reform Conditions, Intermediate Inputs and Distortions: Solving the Indian Growth Puzzle By Gupta, Abhay
  11. Technology Diffusion and Productivity Growth in Health Care By Jonathan Skinner; Douglas Staiger
  12. Are there any ‘hot’ spots and ‘bright’ spots of rice water productivity in Bangladesh? A spatio-temporal analysis of district-level data By Upali A Amarasinghe; Bharat R. Sharma; Mohammad Alauddin
  13. The impact of bank concentration on financial distress: the case of the European banking system By Andrea Cipollini; Franco Fiordelisi

  1. By: Gupta, Abhay
    Abstract: Studies on Indian manufacturing have been unable to provide consistent estimates of productivity and its growth rates. This paper performs detailed and exhaustive set of accounting exercises for the period 1970-2003 using production function, index number and envelopment analysis methods. TFP growth rate average is 1.1% for both gross output based and net value added based measures. In gross output production, share of materials is 0.6, much larger than the capital and labor shares. Share of capital is constantly increasing. For the period just after the reforms (1991-1997), input growth jumps but TFP growth is negative. But after 1998, the trend reverses and output grows slowly despite negative input growth due to large TFP growth. Aggregated TFP growth rates (Domar-weighted and Fisher index) also follow the same pattern; showing upward trends after mid- 1990s. There are no significant differences in TFP growth rates among different-sized firms. After the reforms, TFP growth increases substantially in the public corporations. Productivity transition seems to be random across different (3-digit NIC code) industries. Industries with focus towards services experienced higher productivity growth than others. These results show that the lack of productivity growth was the reason for unimpressive performance of Indian manufacturing earlier.
    Keywords: Productivity Growth. Indian Manufacturing. Tornqvist Index. Reallocation. Envelopment and Frontier Analysis. Value-Added. TFP Decomposition. Domar Aggregation.
    JEL: J08 C43 L6 D45 D24 O4 B41
    Date: 2009–04
  2. By: Inklaar, R.; Timmer, M.P. (Groningen University)
    Abstract: Cross-country studies of economic growth have been hampered by the scarcity of reliable data on productivity at the sector level, see Bernard and Jones (AER, 2001) and Rogerson (JPE, 2008). We bring together literature on industry prices, human capital and capital assets to construct industry-level productivity measures that are well-grounded in neo-classical production theory. These theory-based measures differ widely from the crude measures commonly used in the literature. We use these to confirm and strengthen the finding of Bernard and Jones (AER, 1996) that for advanced OECD countries, patterns of convergence across sectors have differed since 1970: while productivity in market services converged, there is no convergence in manufacturing. More detailed analysis confirms that patterns of convergence are highly industry-specific. There is no dominant convergence trend in sectoral productivity growth across advanced countries.
    Date: 2009
  3. By: Inklaar, R.; Timmer, M.P. (Groningen University)
    Abstract: Relative productivity levels are used intensively in analyzing cross-country growth, but often based on crude measures and with little information on their reliability. In this paper, we provide a new framework to estimate purchasing power parities and productivity levels with associated standard errors using the country-product-dummy (CPD) method. For a set of OECD countries, we show that productivity levels in manufacturing industries are measured with sizeable error. We also show that cruder productivity measures are often poor proxies for the data-intensive measure presented here. This evidence can be used to deal with the problem of attenuation bias in cross-country regressions.
    Date: 2009
  4. By: Jong, H. de; Woltjer, P. (Groningen University)
    Abstract: The manufacturing productivity gap between the U.S. and the U.K. became much larger during the interwar period than existing estimates suggest. This paper presents a new estimate based on real value added and hours worked. First, a detailed benchmark comparison for 1935 is constructed using official industrial census reports. Second, structural shift methodology is applied to analyse productivity movements for industrial branches in the period 1900-1957. U.S. manufacturing shows high comparative levels and growth rates for chemicals and engineering. These results support revisionist accounts of Robert Gordon and Alexander Field on the Depression?s strengthening of American productivity leadership.
    Date: 2009
  5. By: Alexander Eickelpasch; Alexander Vogel
    Abstract: The determinants of export behaviour at firm level have been widely investigated for manufacturing companies. By contrast, what has remained largely neglected is a detailed investigation in the service sector. As aggregate statistics show, international trade in services has grown significantly over the last few years. However, it is unclear why some companies export and others do not. This paper presents some initial results about the German business services sector at firm level. Using a unique panel dataset of enterprises from the business services sector (transport, storage and communication, real estate, renting and business activities) for the years 2003 to 2005, we analysed the impact of several firm-specific characteristics such as size, productivity, human capital, experience on the national market in Germany, etc. on the firms' export performance. Further, we used the pooled fractional probit estimator, recently introduced by Papke & Wooldridge, an approach that considers both the special nature of the export intensity variable and in addition unobserved time-invariant characteristics. When there is no control for fixed enterprise effects the overall results are in line with previous studies. When there is a control for unobserved heterogeneity, the positive effects of productivity and human capital disappear, indicating that these variables are not per se positively related to export performance, but rather to time-constant characteristics that are unobserved. Size and product diversification still have a positive and significant effect.
    Keywords: Business services sector, export behaviour, firm performance
    JEL: F14 F23 L80
    Date: 2009
  6. By: Altomonte, C.; Pennings, H.P.G. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: We develop a simple test to assess whether horizontal spillover effects from multinational to domestic firms are endogenous to the market structure generated by the incremental entry of the same multinationals. In particular, we analyze the performance of a panel of 10,650 firms operating in Romania in the period 1995-2001. Controlling for the simultaneity bias in productivity estimates through semi-parametric techniques, we find that changes in domestic firms’ TFP are positively related to the first foreign investment in a specific industry and region, but get significantly weaker and become negative as the number of multinationals that enter in the considered industry/region crosses a specific threshold. These changing marginal effects can explain the lack of horizontal spillovers arising in traditional model designs. We also find these effects to vary between manufacturing and service, suggesting as a possible explanation a strategic change in technology transfer decisions by multinational firms as the market structure evolves.
    Keywords: transition economies;productivity;multinational firms
    Date: 2009–03–10
  7. By: Paolo Lupi (Servizio Analisi di Mercato e Concorrenza, Autorità per le Garanzie nelle Comunicazioni (ITALY)); Fabio M. Manenti (Universita' di Padova); Antonio Scialà (Università di Padova); Cristiano Varin (Università di Venezia)
    Abstract: This paper offers a methodology to assess the internal productive efficiency of National Regulatory Authorities (NRAs) based on the performances of regulated markets, measured in terms of the degree of market efficiency (either static or dynamic). The estimation procedure is based on a Data Envelopment Analysis (DEA), along with a smoothed bootstrap method and it is applied to telecommunications sector across 18 European countries, 5 of which are new accession countries, in 2005. After the discussion of several desirable outcomes for a telecom regulator, we construct an ad hoc database containing information about NRAs regulatory inputs and outputs. We run three bootstrapped DEAs in order to rank NRAs according to their efficiency in carrying out their regulatory activities. We find the NRAs in 2004 accession countries are more efficient in pursuing dynamic efficiency goals than the more experienced NRAs, while they perform generally worse when the regulatory outcomes are measured in terms of retail efficiency.
    Keywords: regulators efficiency, Data Envelopment analysis, bootstrapping, telecommunications
    JEL: L86 L96
    Date: 2009–03
  8. By: Soushi Suzuki (Hokkai-Gakuen University, Sapporo, Japan); Peter Nijkamp (VU University Amsterdam); Eric Pels (VU University Amsterdam); Piet Rietveld (VU University Amsterdam)
    Abstract: Data Envelopment Analysis (DEA) has become an established approach for analyzing and comparing efficiency results of corporate organizations or economic agents. It has also found wide application in comparative studies on airport efficiency. The standard DEA approach to comparative airport efficiency analysis has two feeble elements, viz. a methodological and a substantive weakness. The methodological weakness originates from the choice of uniform efficiency improvement assessment, while the substantive weakness in airport efficiency analysis concerns the insufficient attention for short-term and long-term adjustment possibilities in the production inputs determining airport efficiency. The present paper aims to address both flaws by: (i) designing a data-instigated Distance Friction Minimization (DFM) model as a generalization of the standard Banker-Charnes-Cooper (BCC) model with a view to the development of a more appropriate efficiency improvement projection model in the BCC version of DEA; (ii) including as factor inputs also lumpy or rigid factors that are characterized by short-term indivisibility or inertia (and hence not suitable for short-run flexible adjustment in new efficiency stages), as is the case for runways of airports. This so-called fixed factor (FF) case will be included in the DFM submodel of DEA. This extended DEA – with a DFM and an FF component – will be applied to a comparative performance analysis of several major airports in Europe. Finally, our comparative study on airport efficiency analysis will be extended by incorporating also the added value of the presence of shopping facilities at airports for their relative economic performance.
    Keywords: Transportation; Demand Supply; and Congestion; Safety and Accidents; Transportation Noise
    JEL: R41
    Date: 2009–03–18
  9. By: Rao, B. Bhaskara; Hassan, Gazi
    Abstract: This paper develops a framework to analyse the determinants of the long term growth rate of Bangladesh. It is based on the Solow (1956) growth model and its extension by Mankiw, Romer and Weil (1992) and follows Senhadji’s (2000) growth accounting procedure to estimate total factor productivity (TFP). Our growth accounting exercise showed that growth rate in Bangladesh, until 1990, was due to factor accumulation. Since then, however, TFP made a small positive contribution to growth. An analysis of the determinants of TFP showed that remittances by emigrant workers have negative effects which seem to be due to the loss of skilled labour force. Using these results policy options, to double per capita income of Bangladesh in about 15 years, are discussed.
    Keywords: Solow Growth Model; Endogenous Growth; Total Factor Productivity; Growth Accounting; Remittances; Bangladesh
    JEL: O11 O30 A10
    Date: 2009–04–04
  10. By: Gupta, Abhay
    Abstract: This paper answers the puzzling questions that why under the similar set of economic conditions service sector in India grew while manufacturing could not and how economic reforms in 1990s accelerated the productivity growth. The paper provides a very innovative and convincing explanation. Two subtle but important distortion-inefficiency mechanisms, which work through distorting the intermediate input allocation, are identified in the paper. Interaction of policies of quantitative restrictions and inflexible labor laws resulted in lower than optimal materials per worker usage.Combination of high inflation and unavailability of credit exacerbated this factor distortion and lowered the productivity growth further. Using panel data on Indian industries, I find underutilization of materials compared to labor until recently. This sub-optimal materials per worker usage lowers productivity growth. Productivity estimates are negatively related to labor growth and positively related to materials growth. Real wages and labor productivity are negatively related to materials inflation and this relationship breaks down after the capital market reforms in 1990s. Since these mechanisms work through intermediate inputs, service sector productivity is not affected as adversely. Estimates show that after 1990s firms have started oversubstituting materials and capital relative to labor, which can explain the jobless growth in Indian manufacturing.
    Keywords: License Quota. Labor Laws. Price Change and Factor Substitution. Credit Constraints. Intermediate Inputs. Distortions and Productivity Growth.
    JEL: J08 C43 L6 D45 D24 O4 B41
    Date: 2009–04
  11. By: Jonathan Skinner; Douglas Staiger
    Abstract: Inefficiency in the U.S. health care system has often been characterized as “flat of the curve†spending providing little or no incremental value. In this paper, we draw on macroeconomic models of diffusion and productivity to better explain the empirical patterns of outcome improvements in heart attacks (acute myocardial infarction). In these models, small differences in the propensity to adopt technology can lead to wide and persistent productivity differences across countries -- or in our case, hospitals. Theoretical implications are tested using U.S. Medicare data on survival and factor inputs for 2.8 million heart attack patients during 1986-2004. We find that the speed of diffusion for highly efficient and often low-cost innovations such as beta blockers, aspirin, and primary reperfusion explain a large fraction of persistent variations in productivity, and swamp the impact of traditional factor inputs. Holding technology constant, the marginal gains from spending on heart attack treatments appear positive but quite modest. Hospitals which during the period 1994/95 to 2003/04 raised their rate of technology diffusion (the “tigersâ€) experienced outcome gains four times the gains in hospitals with diminished rates of diffusion (the “tortoisesâ€). Survival rates in low-diffusion hospitals lag by as much as a decade behind high-diffusion hospitals, raising the question of why some hospitals (and the physicians who work there) adopt so slowly.
    JEL: H51 I1 O33
    Date: 2009–04
  12. By: Upali A Amarasinghe; Bharat R. Sharma; Mohammad Alauddin (School of Economics, The University of Queensland)
    Abstract: Employing Bangladeshi district-level time series data as an empirical exploration this paper aims to: (1) estimate two measures of rice water productivity for the main crop seasons; (2) undertake a spatio-temporal analysis; and (3) identify ‘hot’ spots and ‘bright’ spots focusing on the Ganges-dependent (GDA) vis-à-vis other districts (NGDA). The paper finds that (1) kharif (wet) season rice water productivity grew much faster than for the rabi (dry) season across all districts. There was no significant correlation between seasonal growth rates although significant correlation existed between seasonal growth rates and the annual growth rate. Eight Ganges dependent districts experienced faster growth rate in kharif and overall productivity but their rabi season performance was slower relative to other districts. (2) Marginal productivity (MP) experienced fastest growth for the kharif season during 1968-1980. Up to 1990, there was no significant growth in rabi MP. Its growth declined in the 1980s but picked up since the early 1990s. (3) MPs products were slightly lower in the GDA districts for kharif and overall. The study did not find any consistent ‘hot’ spots or ‘bright’ spots in Bangladeshi rice water productivity. The process is highly groundwater intensive and is debatable whether it is sustainable.
    Date: 2009
  13. By: Andrea Cipollini; Franco Fiordelisi
    Abstract: This paper examines the impact of bank concentration on bank financial distress using a balanced panel of commercial banks belonging to EU 25 over the sample period running from 2003 to 2007. Financial distress is proxied by the observations falling below a given threshold of the empirical distribution of a risk adjusted indicator of bank performance: the Shareholder Value ratio. We employ a panel probit regression estimated by GMM in order to obtain consistent and efficient estimates following the suggestion of Bertschek and Lechner (1998). Our findings suggest, after controlling for a number of enviroment variables, a positive effect of bank concentration on financial distress.
    Keywords: EVA; Banking; Panel Probit; GMM
    JEL: C33 C35 G21 G32
    Date: 2009–02

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