New Economics Papers
on Efficiency and Productivity
Issue of 2009‒06‒10
eleven papers chosen by

  1. The Estimation of Technical Efficiency Effects Models with an Example Applied to the Thai Manufacturing Sector By Suwanee Arunsawadiwong; Gavin C. Reid
  2. Trade, Reallocations and Productivity: A Bridge between Theory and Data in Öresund By Åkerman, Anders
  3. Localized introduction of biased technological change and productivity growth. The empirical evidence in the Italian manufacturing industry By Antonelli Cristiano; Scellato Giuseppe
  4. The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective By Bart Van Ark; Abdul Azeez; Erumban Vivian Chen; Chen Utsav Kumar
  5. Financial and Economic Determinants of Firm Default By Giulio Bottazzi; Marco Grazzi; Angelo Secchi; Federico Tamagni
  6. On insect infestation and agricultural productivity in developing countries By Raghav Gaiha; Katsushi S. Imai; Kenneth Hill; Shantanu Mathur
  7. Research Lags Revisited: Concepts and Evidence from U.S. Agriculture By Alston, Julian M.; Pardey, Philip G.; Ruttan, Vernon W.
  8. State-led or Market-led Green Revolution? Role of Private Irrigation Investment vis-a-vis Local Government Programs in West Bengal’s Farm Productivity Growth By Pranab Bardhan; Dilip Mookherjee; Neha Kumar
  9. Capital Service Flows: Concepts and Comparisons of Alternative Measures in U.S. Agriculture By Andersen, Matt A.; Alston, Julian M.; Pardey, Philip G.
  10. What Drives the Efficiency of Hard Coal Fuelled Electricity Generation? An Empirical Assessment By Hoffmann, Tim; Voigt, Sebastian
  11. Parametric and Non-Parametric Tests for Economies-of-Scale in Nonpoint Pollution Control: The Case of Bear River Basin, Utah By Arthur J. Caplan; John Gilbert; Devalina Chatterjee

  1. By: Suwanee Arunsawadiwong; Gavin C. Reid
    Abstract: This paper does two things. First, it presents alternative approaches to the standard methods of estimating productive efficiency using a production function. It favours a parametric approach (viz. the stochastic production frontier approach) over a non-parametric approach (e.g. data envelopment analysis); and, further, one that provides a statistical explanation of efficiency, as well as an estimate of its magnitude. Second, it illustrates the favoured approach (i.e. the ‘single stage procedure’) with estimates of two models of explained inefficiency, using data from the Thai manufacturing sector, after the crisis of 1997. Technical efficiency is modelled as being dependent on capital investment in three major areas (viz. land, machinery and office appliances) where land is intended to proxy the effects of unproductive, speculative capital investment; and both machinery and office appliances are intended to proxy the effects of productive, non-speculative capital investment. The estimates from these models cast new light on the five-year long, post-1997 crisis period in Thailand, suggesting a structural shift from relatively labour intensive to relatively capital intensive production in manufactures from 1998 to 2002.
    Keywords: productive efficiency, stochastic production frontier, Thai manufacturing sector
    JEL: C21 L64 N65 L69 L85
    Date: 2009–06
  2. By: Åkerman, Anders (Research Institute of Industrial Economics (IFN))
    Abstract: The paper estimates the causal effect of trade liberalisation on aggregate productivity through mechanisms related to firm selection. The construction of a bridge in 2000 across the Öresund Strait linking Copenhagen with Malmö, Sweden's third largest city, provided a natural experiment with which to analyse this effect. A difference-in-difference methodology is applied using both geographic and sectoral variation in how much the bridge affected export patterns and productivity. Firms based in Malmö raise exports to Denmark substantially, mostly by firms selecting into exporting, and the aggregate productivity in Malmö increases. I find that almost all of Malmö's productivity growth is due to the reallocation of production from less productive to more productive firms. When decomposing the productivity gain, I find that these efficiency gains come mostly from the exit of the least productive firms but also from firms with an above-average productivity that start to export and therefore expand their output share. The two largest sectors in Malmö are wholesale trade and manufacturing. Exports by the wholesale sector in Malmö are strongly affected by the bridge whereas those of manufacturing are not. The productivity effects are also the strongest in the wholesale sector.
    Keywords: Firm Heterogeneity; International Trade; Aggregate Productivity; Natural Experiment
    JEL: F10 F40 L10 R30
    Date: 2009–04–29
  3. By: Antonelli Cristiano (University of Turin); Scellato Giuseppe
    Abstract: The features of the industrial system within which innovation processes take place affect the pace and the characteristics of the innovation processes and influence their evolution. The analysis of the industrial structure and of the innovation strategies of firms cannot be separated. The introduction of general technological changes that concern mainly the position rather than the slope of the maps of isoquants characterize the innovation process of large corporations. Small manufacturing firms instead rely upon technological knowledge implemented by means of learning processes and introduce technological changes typically characterized by a bias finalized to make the most efficient use of locally abundant production factors. Their contribution to economic growth in terms of total factor productivity is important and can be grasped only when the role of output elasticity of production factors in growth accounting is properly appreciated. The empirical evidence for a sample of 6000 Italian firms in the years 1997-2005 confirms that localized technological changes were mainly introduced by small firms with low levels of profitability and high wages and had significant positive effects on their economic efficiency.
    Date: 2009–08
  4. By: Bart Van Ark (Indian Council for Research on International Economic Rela); Abdul Azeez (Indian Council for Research on International Economic Rela); Erumban Vivian Chen (Indian Council for Research on International Economic Rela); Chen Utsav Kumar (Indian Council for Research on International Economic Rela)
    Abstract: This paper focuses on comparisons of productivity, (unit) labor cost and industry-level competitiveness for the manufacturing sector of China and India. We first provide a comparison between India and China using a broad international perspective. We find that China has increased its labor productivity to a level above that of India, but due to a somewhat higher compensation level, China is still somewhat at a disadvantage in terms of unit labor cost in manufacturing relative to India. In the second half of the paper, we make an analysis of industry level differences in productivity, labor compensation and unit labor costs at state and province level in the two countries from the mid 1990s to the early 2000s. We find rapid declines in unit labor cost across industries and provinces in China, but increases in many instances in India. This suggest that productivity and compensation growth have become much more aligned across regions in China whereas this is not (yet) the case in India. We relate these results to differences in the implementation of market reforms between the two countries and removal of barriers to resource mobility eradicating inefficient manufacturing activity
    Keywords: O14, J24
  5. By: Giulio Bottazzi; Marco Grazzi; Angelo Secchi; Federico Tamagni
    Abstract: This paper investigates the relevance of financial and economic variables on firm defaults. Our analysis is not limited to publicly traded companies but extends to a large sample of limited liability firms. We consider size, growth, profitability and productivity together with a standard set of financial indicators. Non parametric tests allow to asses to what extent defaulting firms differ from the non-defaulting group. Bootstrap probit regressions confirm that economic variables play both a long and short term effect. Our findings are robust with respect to the inclusion of Distance to Deafult and risk ratings among the regressors.
    Keywords: firm default, financial indicators, selection and growth dynamics, kernel densities, stochastic equality, bootstrap probit regressions, distance to default
    JEL: C14 C25 D20 G30 L11
    Date: 2009–06–09
  6. By: Raghav Gaiha; Katsushi S. Imai; Kenneth Hill; Shantanu Mathur
    Date: 2009
  7. By: Alston, Julian M.; Pardey, Philip G.; Ruttan, Vernon W.
    Abstract: Many researchers and commentators underestimate the length and importance of the time lags between initial research investment and ultimate impacts on the development and adoption of technological innovations. In both econometric studies of productivity and ex post and ex ante benefit-cost evaluations of research investments, researchers typically impose untested assumptions about the R&D lag, which can have profound implications for the results. In this paper we present a range of evidence on agricultural R&D lags including both aggregative analysis of U.S. agricultural productivity using time series data, and some specific details on the timelines for the research, development, and adoption processes for particular mechanical and biological innovations in U.S. agriculture. The aggregative analysis makes use of a comparatively rich state-level data set on U.S. agriculture that makes it possible to test hypotheses about the R&D lag and to evaluate the implications for the specification of models of production and for findings regarding the rate of return to public research investments. The results support the use of a longer lag with a different shape than is typically imposed in studies of industrial R&D. These findings are supported by the timelines for specific technological innovations, including new crop varieties, as well as tractors and other mechanical innovations.
    Keywords: Research and Development/Tech Change/Emerging Technologies,
    Date: 2008–12
  8. By: Pranab Bardhan (Department of Economics, University of California, Berkeley); Dilip Mookherjee (Department of Economics, Boston University); Neha Kumar (International Food Policy Research Institute, Washington DC)
    Abstract: This paper estimates respective roles of private investments in irrigation and local government programs (land reforms, extension services, and infrastructure investments) in the growth of farm productivity in West Bengal, India between 1981-95. Using a farm panel from a stratified random sample of farms from major agricultural districts of West Bengal, we find evidence that private investment in irrigation which reduced irrigation costs for farms played an important role in the growth process. However, the growth in private investment was itself stimulated by tenancy registration and minikit distribution programs implemented by local governments. This channel helps account for the substantial spillover effects of the tenancy reform on non-tenant farms noted in an earlier study. Hence the observed productivity growth was a result of complementarity between private investment incentives and state-led institutional reforms.
    Date: 2009–04
  9. By: Andersen, Matt A.; Alston, Julian M.; Pardey, Philip G.
    Abstract: Measures of capital services are used in studies of production and to inform policies related to growth and development. A variety of methods have been used to measure capital stocks and service flows. In this study we review methods commonly used to measure capital service flows, and outline important assumptions used in constructing such measures. We examine two recently constructed data sets that measure capital inputs in U.S. agriculture. Substantial differences in the measures appear to have been caused by the use of a fixed real interest rate versus a variable real market interest rate to calculate capital services.
    Keywords: capital measures, U.S. agriculture, state-level panel data, Agricultural and Food Policy, Agricultural Finance, Productivity Analysis,
    Date: 2009–05
  10. By: Hoffmann, Tim; Voigt, Sebastian
    Abstract: The efficiency of electricity generation in hard coal fired power plants varies considerably from country to country and over time. These differences occur both between developing and developed countries and between industrialised nations. The econometric analysis presented in this paper tests for the reasons of these discrepancies. In this examination abundance of hard coal and the price of hard coal are the two variables of our major interest. We assume that countries with an abundance of hard coal or relatively low costs of extraction show smaller degrees of efficiency than countries with poor deposits of this resource because the latter nations have a stronger dependency on efficient power plants than the former. Furthermore, higher prices should lead to more efficient electricity generation since production costs increase with growing hard coal prices. Our findings partially confirm these hypotheses and suggest that, among the chosen explanatory variables, hard coal abundance or the accessibility of hard coal, respectively, the hard coal price, the level of foreign direct investment inflows as well as the average power plant age are identified as principal drivers of power plant efficiency. From an environmental policy perspective we conclude that flexible policy instruments which internalise external effects caused by emissions as well as support for foreign investments are important means to foster energy efficiency. However, economic efficiency – even if contrasting with energy efficiency – must not be neglected in the design of energy policies.
    Keywords: energy efficiency, natural resources, hard coal fired power plant
    JEL: O13 Q40
    Date: 2009
  11. By: Arthur J. Caplan (Department of Applied Economics, Utah State University); John Gilbert (Department of Economics and Finance, Utah State University); Devalina Chatterjee (Department of Applied Economics, Utah State University)
    Abstract: This paper provides examples of both parametric and non-parametric tests for economies of scale in the control of non-point pollution. Because field-level control costs and control effectiveness are uncertain from the regulator's perspective (due to the existence of asymmetric information), we test for economies of scale in the correlations between control costs per unit abated (i.e., average control cost), on the one hand, and field size, estimated delivered phosphorous (TP) load per field, and estimated delivered TP load per acre, respectively, on the other. Our dataset consists of loading and delivery ratio estimates for over 12,000 fields owned by 5,900 farmers located in the Bear River Basin, Utah. The estimates - derived from a newly developed hydrologic model of the basin - are then combined with control cost and best management practice (BMP) effectiveness estimates to create a basin-wide profile. We find statistical evidence of a negative relationship between average control cost and both delivered TP load per field and per acre, i.e., larger TP loads per field and per acre are associated with lower average control costs. This suggests that ranking fields according to delivered TP loads per field and per acre are, all else equal, consistent with prioritizing BMP subsidies in a cost effective manner. Evidence is mixed regarding the statistical relationship between average control cost and field size, which is the traditional way in which economies of scale are assessed. Implications of our findings for the management of BMP subsidy programs such as the Environmental Quality Incentives Program (EQIP) are discussed.
    Keywords: economies-of-scale; non-point pollution; delivered load; control costs
    JEL: Q12 Q25 Q53
    Date: 2009–05–26

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