nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2009‒05‒09
twelve papers chosen by
Angelo Zago
University of Verona

  1. Markups and Firm-Level Export Status By De Locker, Jan; Warzynski, Frederic
  2. Benchmarking and Firm Heterogeneity in Electricity Distribution : A Latent Class Analysis of Germany By Astrid Cullmann
  3. Determinants of the Long Run Growth Rate of Bangladesh: An ARDL Approach By Rao, B. Bhaskara; Hassan, Gazi
  4. Agricultural productivity and mortality: evidence from Kagera, Tanzania By Ikegami, Munenobu
  5. Endogenous Markups, Firm Productivity and International Trade: : Testing SomeMicro-Level Implications of theMelitz-Ottaviano Model By Bellone, Flora; Musso, Patrick; Nesta, Lionel; Warzynski, Frederic
  6. The impact of workplace conditions on firm performance By Buhai, Sebastian; Cottini, Elena; Westergaard-Nielsen, Niels
  7. Productivity shocks and real exchange rates - a reappraisal By Tuomas A. Peltonen; Michael Sager
  8. A Theory of Total Factor Productivity and the Convergence Hypothesis: Workers’ Innovations as an Essential Element By Harashima, Taiji
  9. A Return of the Threshing Ring? Motivations, Benefits and Challenges of Machinery and Labor Sharing Arrangements By Artz, Georgeanne M.; Colson, Gregory J.; Ginder, Roger
  10. Is the Impact Really That High? The Effect of FDI in Transition By Hagemejer, Jan; Tyrowicz, Joanna
  11. Mechanisms of Governance of Sustainable Development By Bachev, Hrabrin
  12. Forecasting the Fragility of the Banking and Insurance Sector By Kerstin Bernoth; Andreas Pick

  1. By: De Locker, Jan (Department of Economics, Aarhus School of Business); Warzynski, Frederic (Department of Economics, Aarhus School of Business)
    Abstract: We derive an estimating equation to estimate markups using the insight of Hall (1986) and the control function approach of Olley and Pakes (1996). We rely on our method to explore the relationship between markups and export behavior using plant-level data. We find significantly higher markups when we control for unobserved productivity shocks. Furthermore, we find significant higher markups for exporting firms and present new evidence on markup-export status dynamics. More specifically, we find that firms’ markups significantly increase (decrease) after entering (exiting) export markets. We see these results as a first step in opening up the productivity-export black box, and provide a potential explanation for the big measured productivity premia for firms entering export markets.
    Keywords: Markups; Control Function; Productivity; Exporting Behavior
    JEL: A10
    Date: 2009–01–01
    URL: http://d.repec.org/n?u=RePEc:hhs:aareco:2009_004&r=eff
  2. By: Astrid Cullmann
    Abstract: In January 2009 Germany introduced incentive regulation for the electricity distribution sector based on results obtained from econometric and nonparametric benchmarking analysis. One main problem for the regulator in assigning the relative efficiency scores are unobserved firm-specific factors such as network and technological differences. Comparing the efficiency of different firms usually assumes that they operate under the same production technology, thus unobserved factors might be inappropriately understood as inefficiency. To avoid this type of misspecification in regulatory practice estimation is carried out in two stages: in a first stage observations are classified into two categories according to the size of the network operators. Then separate analyses are conducted for each sub-group. This paper shows how to disentangle the heterogeneity from inefficiency in one step, using a latent class model for stochastic frontiers. As the classification is not based on a priori sample separation criteria it delivers more robust, statistical significant and testable results. Against this backround we analyze the level of technical efficiency of a sample of 200 regional and local German electricity distribution companies for a balanced panel data set (2001-2005). Testing the hypothesis if larger distributors operate under a different technology than smaller ones we assess if a single step latent class model provides new insights to the use of benchmarking approaches within the incentive regulation schemes.
    Keywords: Stochastic frontiers, latent class model, electricity distribution, incentive regulation
    JEL: C24 C81 D24 L94
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp881&r=eff
  3. By: Rao, B. Bhaskara; Hassan, Gazi
    Abstract: This short paper conducts growth accounting to estimate total factor productivity (TFP) for Bangladesh and analyses its key determinants. According to Solow (1956) the long run equilibrium growth rate equals TFP. Estimated show that trade openness, foreign direct investment and development of financial sector increase TFP. Inflation and government expenditure have negative effects on TFP.
    Keywords: Solow Model; Total Factor Productivity; Growth Accounting; Bangladesh
    JEL: O11 O10
    Date: 2009–05–02
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:14972&r=eff
  4. By: Ikegami, Munenobu
    Abstract: We ask whether prime-age adult mortality due to HIV/AIDS decreases the endowment of knowledge for agricultural production in Kagera, Tanzania, reducing total factor productivity. We also quantify how much this negative effect contributes to the decrease in long-term household agricultural income growth compared to the contribution of decreased accumulation of productive assets; household members, land, and livestock. We find that prime-age adult mortality decreases the accumulation of knowledge stock as total factor productivity and the contribution of this negative effect to the decrease in agricultural income growth is larger than the contribution of decreased accumulation of each productive asset.
    Keywords: mortality; human capital; HIV/AIDS; agriculture; total factor productivity; Tanzania
    JEL: D9 Q12 O12
    Date: 2009–04–30
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:15065&r=eff
  5. By: Bellone, Flora (GREDEG-CNRS); Musso, Patrick (GREDEG-CNRS); Nesta, Lionel (GREDEG-CNRS); Warzynski, Frederic (Department of Economics, Aarhus School of Business)
    Abstract: In this paper, we test key micro-level theoretical predictions ofMelitz and Ottaviano (MO) (2008), a model of international trade with heterogenous firms and endogenous mark-ups. At the firm-level, the MO model predicts that: 1) firm markups are negatively related to domestic market size; 2) markups are positively related to firm productivity; 3) markups are negatively related to import penetration; 4) markups are positively related to firm export intensity and markups are higher on the export market than on the domestic ones in the presence of trade barriers and/or if competitors on the export market are less efficient than competitors on the domestic market. We estimate micro-level price cost margins (PCMs) using firm-level data extending the techniques developed by Hall (1986, 1988) and extended by Domowitz et al. (1988) and Roeger (1995) for the French manufacturing industry from 1986 to 2004. We find evidence in favor of these theoretical predictions.
    Keywords: Endogenous markups; Export behavior; Productivity; Firm-level
    JEL: D24 F12
    Date: 2008–09–01
    URL: http://d.repec.org/n?u=RePEc:hhs:aareco:2008_020&r=eff
  6. By: Buhai, Sebastian (Department of Economics, Aarhus School of Business); Cottini, Elena (Department of Economics, Aarhus School of Business); Westergaard-Nielsen, Niels (Department of Economics, Aarhus School of Business)
    Abstract: This paper estimates the impact of work environment health and safety practice on …rm performance, and examines which …rm-characteristic factors are associated with good work conditions. We use Danish longitudinal register matched employer-employee data, merged with …rm business accounts and detailed cross-sectional survey data on workplace conditions. This enables us to address typical econometric problems such as omitted variables bias or endogeneity in estimating i) standard production functions augmented with work environment indicators and aggregate employee characteristics and ii) …rm mean wage regressions on the same explanatory variables. Our …ndings suggest that improvement in some of the physical dimensions of the work health and safety environment (speci…cally, "internal climate" and "repetitive and strenuous activ- ity") strongly impacts the …rm productivity, whereas "internal climate" problems are the only workplace hazards compensated for by higher mean wages.
    Keywords: Occupational health and safety; Work environment; Production function estimation; Firm performance; Compensating wage differentials
    JEL: J28 J31 L23
    Date: 2008–06–23
    URL: http://d.repec.org/n?u=RePEc:hhs:aareco:2008_013&r=eff
  7. By: Tuomas A. Peltonen (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Michael Sager (Wellington Management, 75 State Street, Boston, MA 02109, USA.)
    Abstract: We reappraise the relationship between productivity and equilibrium real exchange rates using a panel estimation framework that incorporates a large number of countries and importantly, a dataset that allows explicit consideration of the role of non-traded, as well as traded, sector productivity shocks in exchange rate determination. We find evidence of significant correlation between real exchange rates and productivity differentials in both sectors. But our finding of a significant role for the non-traded sector in exchange rate determination, and of a relatively larger correlation between exchange rates and productivity shocks of a given size emanating from this sector, represent clear contradictions of the widely cited Balassa-Samuelson hypothesis. Our findings remain valid in the face of a number of robustness tests, including the exchange rate regime and numéraire currency. JEL Classification: F31, O47, C23.
    Keywords: Exchange rate, productivity, Balassa-Samuelson, panel data, emerging market economies.
    Date: 2009–04
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901046&r=eff
  8. By: Harashima, Taiji
    Abstract: A theory of total factor productivity (TFP) is needed to explain why substantial differences in international income have been observed. This paper presents a theory of TFP that incorporates workers’ innovations. Because workers are human and capable of creative intellectual activities, they can create innovations even if these innovations are minor. The creative activities of ordinary workers have been almost entirely neglected in economics even though the importance of workers’ learning activities has been emphasized by the theories of learning-by-doing and human capital. I examine this creative element and show that innovations created by ordinary workers are indispensable for efficient production. A production function incorporating workers’ innovations is shown to have a Cobb-Douglas functional form with a labor share of about 70%. The production function offers a microfoundation of the Cobb-Douglas production function and more importantly indicates that heterogeneous parameter values with regard to workers’ innovations are essential factors of the currently observed substantial income difference across economies.
    Keywords: Innovation: Total factor productivity; Experience curve effect; Convergence hypothesis; Cobb-Douglas production function
    JEL: O11 E23 J24 D24 O31 O14
    Date: 2009–05–02
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:14978&r=eff
  9. By: Artz, Georgeanne M.; Colson, Gregory J.; Ginder, Roger
    Abstract: Cooperative approaches provide an alternative for small- and medium-sized producers to obtain the efficiencies of large farming operations and remain competitive in an increasingly concentrated agricultural industry. This article examines the motivation and effectiveness of equipment and labor sharing arrangements in the Midwestern US. Case study evidence shows that in addition to cost savings, access to skilled, seasonal labor is an important motivation for farm-level cooperation. Key factors identified for successful cooperative agreements include compatibility of operations and members' willingness to communicate and adapt. Sharing resources is found to improve farm profitability, efficiency and farmers' quality of life.
    Keywords: machinery sharing, skilled farm labor, productivity, farm-level cooperations
    JEL: Q1 Q12 Q13
    Date: 2009–05–05
    URL: http://d.repec.org/n?u=RePEc:isu:genres:13065&r=eff
  10. By: Hagemejer, Jan; Tyrowicz, Joanna
    Abstract: Literature is not clear on the eect of FDI on the economic performance in hosting countries. The analysed eects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection eect is found to be considerable. We use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We match firms with FDI entry and to a control group of non-foreign owned companies to disentangle the eect of self-selection and FDI entry. We also distinguish explicitly between foreign ownership and privatisation through a foreign investor. We find strong support of the view that foreign ownership increases access to financing. Evidence suggests also that although FDI enters more frequently companies who already participate in the international trading networks, while approximately 20% of the export intensity may be consistently on average attributed to the treatment effect. On the other hand, we were not able to confirm large effects on effciency not profitability, while the size of the effects are dierent for greenfield investment and private acquisitions as opposed to privatisation.
    Keywords: FDI; transition; propensity score matching; Poland; firm-level analysis
    JEL: C14 P45 O16 P52
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:14934&r=eff
  11. By: Bachev, Hrabrin
    Abstract: In this paper we incorporate the interdisciplinary New Institutional and Transaction Costs Economics (combining Economics, Organization, Law, Sociology, Behavioral and Political Sciences), and suggest a framework for analyzing the mechanisms of governance of sustainable development. The agricultural sector is used to illustrate the approach, test the framework, and support with examples. Firstly, we discuss the modern concepts and the economics of sustainability. Secondly, we present a new framework for analysis and improvement of the governance of sustainable development. This new approach takes into account the role of specific institutional environment; and the behavioral characteristics of individual agents; and the transaction costs associated with the various forms of governance; and the critical factors of economic activity and exchanges; and the comparative efficiency of market, private, public and hybrid modes; and the potential of production structures for adaptation; and the comparative efficiency of alternative modes for public intervention. Finally, we identify specific modes for environmental governance in Bulgarian agriculture; and access the efficiency of market, private and public modes; and estimate the prospects for evolution of environmental governance in the conditions of EU CAP implementation. Agrarian development is associated with specific (different from other European states) environmental challenges such as degradation and contamination of farmland, pollution of surface and ground waters, loss of biodiversity, significant greenhouse gas emissions etc. That is a result of the specific institutional and governing structure evolving in the sector during the past 20 years. Implementation of the common EU policies will have unlike results in “Bulgarian” conditions enlarging income, technological, social and environmental discrepancy between different farms, sub-sectors and regions. Dominating subsistence farming, production cooperatives, small-scale commercial farms, and large business firms will be highly sustainable in years to come.
    Keywords: mechanisms of governance; sustainable development; institutions; market; private; public and hybrid modes of governance; transaction costs; agrarian sustainability; environmental governance; Bulgaria
    JEL: D02 O13 Q01 Q12 Q18 L14 D23 O17 Q13 Q56 L22
    Date: 2009–04
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:14947&r=eff
  12. By: Kerstin Bernoth; Andreas Pick
    Abstract: This paper considers the issue of forecasting financial fragility of banks and insurances using a panel data set of performance indicators, namely distance-to- default, taking unobserved common factors into account. We show that common factors are important in the performance of banks and insurances, analyze the influences of a number of observable factors on banking and insurance performance, and evaluate the forecasts from our model. We find that taking unobserved common factors into account reduces the the root mean square forecasts error of firm specific forecasts by up to 11% and of system forecasts by up to 29% relative to a model based only on observed variables. Estimates of the factor loadings suggest that the correlation of financial institutions has been relatively stable over the forecast period.
    Keywords: Financial stability, financial linkages, banking, insurances, unobserved common factors, forecasting
    JEL: C53 G21 G22
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp882&r=eff

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