New Economics Papers
on Efficiency and Productivity
Issue of 2009‒06‒17
eleven papers chosen by

  1. Accounting for Research and Productivity Growth Across Industries By L. Rachel Ngai; Roberto M. Samaniego
  2. Convergence of Firm-Level Productivity, Globalisation, Information Technology and Competition: Evidence from France By Paul-Antoine Chevalier; Rémy Lecat; Nicholas Oulton
  3. Some university students are more equal than others: Evidence from England By Kwok Tong Soo; Ching-Fu Chen
  4. A Theory of Total Factor Productivity and the Convergence Hypothesis: Workers’ Innovations as an Essential Element By Harashima, Taiji
  5. Mapping prices into productivity in multisector growth models By Ngai, Liwa Rachel; Samaniego, Roberto
  6. A Dual-Solovian Measure of Productivity Increase and its Early Antecedents By Opocher, Arrigo
  7. Reallocating Profits in Restructuring Industries: Evidence from European and US Banking By Jaap W.B. Bos; P.C. van Santen; P. Schilp
  8. Exports and Profitability – First Evidence for German Business Services Enterprises By Alexander Vogel; Joachim Wagner
  9. Estimating the production function of university students By Kwok Tong Soo
  11. Technology Catching-up and the Role of Institutions By Fabio Manca

  1. By: L. Rachel Ngai; Roberto M. Samaniego
    Abstract: What factors underlie industry differences in research intensity and productivity growth? Wedevelop a multi-sector endogenous growth model allowing for industry specific parameters inthe production functions for output and knowledge, and in consumer preferences. We findthat industry differences in both productivity growth and R&D intensity mainly reflectdifferences in "technological opportunities", interpreted as parameters of knowledgeproduction. These include the capital intensity of R&D, knowledge spillovers, anddiminishing returns to R&D. Among these parameters, we find that the degree of diminishingreturns to R&D is the dominant factor when the model is calibrated to account for crossindustrydifferences in the US.
    Keywords: Multisector growth, total factor productivity, R&D intensity, technologicalopportunity
    JEL: D24 O3 O41
    Date: 2009–03
  2. By: Paul-Antoine Chevalier; Rémy Lecat; Nicholas Oulton
    Abstract: Studies of firm-level data have shown that there is a huge dispersion of productivity across firms evenwhen industries are narrowly defined. So there is a significant opportunity for the least productivefirms to catch up to the most productive. The formers' convergence could therefore constitute animportant part of productivity growth at the macroeconomic level. This article sheds light on thisconvergence process in the 1990s and the 2000s in France and on some of the factors which canexplain it. Productivity convergence was stronger for labour productivity than for total factorproductivity. But most importantly the speed of convergence has slowed during the course of the1990s, a fact which is explained principally by the acceleration of the productivity of firms on thetechnological frontier. Three possible explanations of these stylised facts are considered:globalisation, information technology, and competition. Globalisation and information technologymay have benefited the most productive firms more and the growth of competition may at the sametime have stimulated the productivity of firms at the frontier while discouraging the convergence ofthe least productive firms.
    Keywords: Convergence, productivity, TFP, globalisation, ICT, competition
    JEL: D24 D40 F10 J24 L11 O33
    Date: 2009–03
  3. By: Kwok Tong Soo; Ching-Fu Chen
    Abstract: This paper estimates the efficiency of students in English universities using Data Envelopment Analysis (DEA) and a new dataset which is able to capture the behaviour of university students. Taking as the output the classification of a university degree, we use as inputs teaching hours and quality, entry qualifications, and the effort level. We find that university students differ in terms of the efficiency with which they use inputs in producing good degrees. In a second stage, we explore the determinants of the efficiency of university students using a truncated regression model. Higher student efficiency is found to be positively and significantly related to university size, and negatively and significantly related to the proportion of part-time students and the number of academic staff. The quality of a university has no significant impact on the efficiency of its students once endogeneity of university quality is controlled for.
    Keywords: Data Envelopment Analysis (DEA); Efficiency; Education
    Date: 2009
  4. 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: 2009–05–31
  5. By: Ngai, Liwa Rachel; Samaniego, Roberto
    Abstract: Two issues related to mapping a multi-sector model into a reduced-form value-added model are often neglected: the composition of intermediate goods, and the distinction between the productivity indices for value added and for gross output. We illustrate their significance for growth accounting using the well known model of Greenwood, Hercowitz and Krusell (1997), who find that about 60% of economic growth can be attributed to investment-specific technical change (ISTC). When we recalibrate their model to account for the composition of intermediates, we find that ISTC accounts for an even greater share of post-war US growth.
    Keywords: growth accounting; Intermediate goods; investment-specific technical change; multisector growth models; value added
    JEL: E13 O30 O41 O47
    Date: 2009–06
  6. By: Opocher, Arrigo
    Abstract: The duality between a production function and the cost function generated by it implies that a Solovian ‘growth accounting’ measure of productivity increase, as referred to the industry, has an equivalent dual measure, based on what may be called ‘price accounting’. It is argued in this paper that the dual measure provides a coherent framework for considering productivity increase in relation to inflation/deflation, earnings dispersion, long-run variations in domestic relative prices and in external terms of trade. Even though the theoretical interest in measures based on real input prices dates back to the late 1960s, few or no attempts have been made thereafter to adopt it in practice. Curiously enough, the practical adoption of some kind of ‘price accounting’ dates to much earlier. We argue in this paper that, during the 19th century, distinguished statisticians and economic commentators such as G.R. Porter and R. Giffen based their evaluations on the comparative change in prices, wages and profits and in so doing they followed a logic that remarkably resembles that of a dual-Solovian measure.
    Keywords: productivity increase; TFP; cost function; real wages; income distribution
    JEL: D33 B16 D24
    Date: 2009–06–03
  7. By: Jaap W.B. Bos; P.C. van Santen; P. Schilp
    Abstract: We examine the reallocation of profits in the European and US banking sectors in the period of 1995 to 2004. Specifically, we ask whether the restructuring of both industries has contributed to an efficient reallocation of assets. Using a revised decomposition framework, we find that US banks are more flexible in the reallocation of profits than their European counterparts. In the US, efficient banks that appropriate assets decrease industry profitability, as expected in a market characterized by a sufficiently high level of competition. In addition, economies of scale are exploited more in the US than in Europe. Regulatory reforms in the EU, in particular in response to the current crisis, should therefore foster a more closely integrated European market.
    Keywords: market structure, efficiency, restructuring, stochastic frontier, banking
    JEL: O47 O30 D24 C24
    Date: 2009–05
  8. By: Alexander Vogel (Institute of Economics, University of Lüneburg); Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: We use the unique recently released German business services statistics panel to conduct the first comprehensive empirical study on the relationship between exports and profitability for the business services sector. We document a negative profitability differential of services exporters compared to non-exporters that is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. We find that export-starters in services are less profitable than non-starters, even two years before they begin to export, pointing to self-selection of less profitable firms into export markets. We use a recently developed continuous treatment approach to investigate the causal impact of exports on profits. The estimated dose-response function shows an s-shaped relationship between profitability in 2005 and firms’ export-sales ratio in 2004. Enterprises with a very small share of exports in total sales have a lower rate of profit than non-exporting firms. Then, with an increase in export intensity the rate of profit increases, too. However, even at the maximum the average profitability of the exporters is not, or only slightly, higher than the average rate of profit of the non-exporting firms. Given that Germany is one of the leading actors on the world market for services, the evidence provided here is interesting on its own. Furthermore, it can serve as a benchmark for future studies using comparable data for firms from services industries in other countries.
    Keywords: Exports, profitability, business services enterprises, Germany
    JEL: F14 D21 L80
    Date: 2009–05
  9. By: Kwok Tong Soo
    Abstract: This paper estimates the production function for university students in English universities. Taking as the output the quality of a university degree and the dropout rate, we use as inputs teaching quality and quantity, entry qualifications, and the effort level. Our results uncover new findings regarding the importance of each of these elements in university performance. In particular, we find that the quality of teaching and entry qualifications affect degree performance, but not the number of hours of teaching or private study. Controlling for unobserved ability through a 2SLS/GMM estimator suggests that entry scores have no additional impact on degree performance beyond its role as a measure of student ability.
    Keywords: Production function estimation; Higher education; Instrumental variables
    Date: 2009
  10. By: Lise Tole (University of Strathclyde, UK; The Rimini Centre for Economic Analysis, Rimini, Italy); ;
    Abstract: This paper uses plant level data on the worlds copper min- ing industry to measure changes in e¢ ciency from the adoption of the ISO 14001 environmental standard. The ISO 14001 is a voluntary standard that sets out minimum guidelines and procedures that …rms should follow in order to achieve more e¤ective management of the environment. Anecdotal and case study lit- erature suggests that …rms are motivated to adopt the ISO 14001 standard and seek certi…cation for a number of reasons. One important reason is the desire to achieve greater e¢ ciency and cost savings through changes in operating proce- dures and processes aimed at the minimization of waste pollution and reduction in the use of resource inputs. Using plant level data from 1992-2007 on virtually all of the worlds industrial copper mines the study tests this hypothesis in a stochastic frontier and random e¤ects model framework. The study measures the impact on operations of ISO 14001 adoption both in respect to the inten- tion to seek ISO 14001 certi…cation (the period before certi…cation when …rms must make necessary changes to their operations and management) and the pe- riod when and after certi…cation is achieved. The study …nds no evidence that adoption of the ISO 14001 standard imposes a cost on …rms either through lower e¢ ciencies or higher costs. In fact, in many cases adoption is associated with higher e¢ ciency, and to a certain extent, lower costs. Thus, the studys …ndings would tend to go against the claims of much of the academic literature that regulation has negative impacts on the …rm. Although …ndings were not robust to model choice or a subset sample, our results clearly indicate that, at a minimum, the adoption of the ISO 14001 does not raise costs or lower e¢ ciency for …rms.
    Keywords: ISO 14001; stochastic frontier production function; e¢ - ciency; cost savings; mining.
    Date: 2009–01
  11. By: Fabio Manca (Faculty of Economics, University of Barcelona)
    Abstract: The aim of the paper is to investigate the role played by differences in Institutional Quality on the process of technology catch-up across countries. Empirical evidence shows how countries endowed with better institutions are those experiencing higher TFP growth rates, faster rates of technology adoption and hence being those more rapidly closing the gap with the frontier. Conversely, countries lacking some minimum institutional level are shown to diverge in the long run and not to catch-up. Some institutions, however, play an ambiguous role in the creation and adoption of technology. We find that the tightening of Intellectual Property Rights reduces the ability of followers to freely imitate technology slowing down their catch-up rate. This negative effect is stronger the farther the countries are found from the frontier. Other institutional categories such as openness to trade, instead, benefit both leaders and followers.
    Keywords: TFP, Growth, Institutions, IPRs
    Date: 2009–06

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.