New Economics Papers
on Efficiency and Productivity
Issue of 2009‒07‒03
twenty-one papers chosen by

  1. Productivity growth in Norwegian psychiatric outpatient clinics A panel data analysis of the period 1996-2001 By Hallsteinli, Vidar; Magnussen, Jon; Kittelsen, Sverre A.C.
  2. Forecasting Productivity Using Information from Firm-Level Data By Eric J. Bartelsman; Zoltán Wolf
  4. Productivity and the international firm: dissecting heterogeneity By Davide Castellani; Giorgia Giovannetti
  5. Measurement error in cross-country productivity comparisons: Is more detailed data better? By Inklaar, R.; Timmer, M.
  6. A Common Factor Approach to Spatial Heterogeneity in Agricultural Productivity Analysis By Eberhardt, Markus; Teal, Francis
  7. Export Intensity and Productivity By Rosario Crinò; Paolo Epifani
  8. The Distributional impact of dams: Evidence from cropland productivity in Africa By Eric Strobl; Robert Strobl
  9. Survey on Wage and Price Formation of Czech Firms By Dana Hajkova
  10. Axiomatic Foundations of Inefficiency Measurement on < input, output > Space By R. Robert Russell; William Schworm
  11. Economies of scope in Norwegian hospital production - A DEA analysis By Kittelsen, Sverre A.C.; Magnussen, Jon
  12. A Value-Added Based Measure of Health System Output and Estimating the Efficiency of OECD Health Systems By Dennis Petrie; Kam Ki Tang; D.S. Prasada Rao
  13. Export, FDI and Productivity – Evidence for French Firms By Vivien Procher; Dirk Engel
  14. The impact of hurricane strikes on local cropland productivity: Evidence from the Carribean By Eric Strobl
  15. Capital misallocation and aggregate factor productivity By Azariadis, Costas; Kaas, Leo
  16. Technology Adoption And Pest Control Strategies Among UK Cereal Farmers: Evidence from Parametric and Nonparametric Count Data Models By Sharma, Abhijit; Bailey, Alastair; Fraser, Iain
  17. Far out or alone in the crowd: Classification of selfevaluators in DEA By Edvardsen, Dag Fjeld; Føsund, Finn R.; Kittelsen, Sverre A.C.
  18. Regional Differences in the Efficiency of Health Production: an Artefact of Spatial Dependence? By Harald Tauchmann; Stefan Felder
  19. Do Regional Investment Grants Improve Firm Performance? Evidence from Sweden By Ankarhem, Mattias; Daunfeldt, Sven-Olov; Quoreshi, Shahiduzzaman; Rudholm, Niklas
  20. Strategic Corporate Social Responsibility and Economic Performance By Belu, Constantin; Manescu, Cristiana
  21. Productivity Dynamics across European Regions: the Impact of Structural and Cohesion Funds By Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti

  1. By: Hallsteinli, Vidar (SINTEF Unimed, Health Services Research); Magnussen, Jon (SINTEF Unimed, Health Services Research); Kittelsen, Sverre A.C. (The Ragnar Frisch Centre for Economic Research)
    Abstract: Norwegian government policy is to increase the supply of psychiatric services to children and young persons, both by increasing the number of personnel and by increasing productivity in the psychiatric outpatient clinics (BUP). Increased accessibility to services is observed for the last years, measured as the number of children receiving services every year. The question is to what extent this is related to increased productivity. The paper aims to estimate change in productivity among outpatient clinics. Questions whether change in productivity is related to the personnel mix of the clinics, growth in treatment capacity or change in financial incentives are analysed. We utilise a non-parametric method called Data Envelopment Analysis (DEA) to estimate a best-practise production frontier. The potential for efficiency improvement are estimated as the difference between actual and best-practice performance, while allowing for trade-offs between different staff groups and different mixes of service production. A Malmquist output-based productivity index is calculated, decomposed in technical efficiency change, scale efficiency change and frontier shifts. The paper analyses panel data on the psychiatric outpatient clinics of Norway for the period of 1996-2001. Output is measured as number of direct and indirect patientrelated interventions (visits and consultations) while input is measured by usage of different types of personnel. The results indicate increased overall productivity, with important contribution from increased technical efficiency. Personell growth has a negative influence on productivity growth, while a growth in the share of university educated personell improves productivity. The financial reform of 1997 that gave greater weight for interventions per patient lead to lower productivity growth in the subsequent period for those that had an inital budgetary gain from the reform.
    Keywords: Health Care; Mental health; Productivity; Data; Envelopment Analysis; Malmquist
    JEL: C61 D24 I12
    Date: 2009–06–21
  2. By: Eric J. Bartelsman (VU University Amsterdam); Zoltán Wolf (VU University Amsterdam)
    Abstract: This paper contributes to the productivity literature by using results from firm-level productivity studies to improve forecasts of macro-level productivity growth. The paper employs current research methods on estimating firm-level productivity to build times-series components that capture the joint dynamics of the firm-level productivity and size distributions. The main question of the paper is to assess whether the micro-aggregated components of productivity---the so-called productivity decompositions---add useful information to improve the performance of macro-level productivity forecasts. The paper explores various specifications of decompositions and various forecasting experiments. The result from these horse-races is that micro-aggregated components improve simple aggregate total factor productivity forecasts. While the results are mixed for richer forecasting specifications, the paper shows, using Bayesian model averaging techniques (BMA), that the forecasts using micro-level information were always better than the macro alternative.
    Keywords: Economic growth; production function; total factor productivity; aggregation; firm-level data data; Bayesian analysis; forecasting
    JEL: C11 C14 C32 C33 D24 O12 O47
    Date: 2009–05–14
  3. By: Viet-Ngu Hoang; Tim Coelli (CEPA - School of Economics, The University of Queensland)
    Date: 2009
  4. By: Davide Castellani (University of Perugia); Giorgia Giovannetti (University of Florence, European University Institute and Fondazione Manlio MASI-ICE)
    Abstract: Firms in competitive markets are more likely achieve higher productivity. Indeed a better performance of multinationals and exporters with respect to domestic firms has been documented in the literature. The sources of these premia have however largely remained a black box: standard theoretical models consider differences in productivity as the results of a random draw. Only recently models have acknowledged that in competitive environments, firms are more likely to adopt new technologies. This theoretical framework reconciles recent empirical work noting that productivity differences among firms can be explained by different managerial practices, I.T. and organizational capital. In this paper, using an original dataset on Italian firms, we show that the higher use of knowledge workers (such as R&D workers, as well as workers in managerial and clerical occupations) explains some of the TFP premium of exporters and multinational firms. Our results suggest that TFP differences are not only the results in different constant in the production function between international and noninternational firms, but they rather reflect differences in the slopes of the production function. In fact, allowing for different returns to inputs between domestic and international firms, we explain all of the productivity premium and beyond. This is the result of the fact that multinational firms are both more capital intensive and exhibit higher returns to capital. Furthermore, we find that managers and capital are complements in the productivity of multinational firms. This is consistent with the idea that multinational firms have superior organizational capabilities and managerial practices.
    Keywords: productivity, tfp, competition, management, mode of internationalization
    JEL: E22 L22 M2
    Date: 2009–06–01
  5. By: Inklaar, R.; Timmer, M. (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
  6. By: Eberhardt, Markus; Teal, Francis
    Abstract: In this paper we investigate a `global' production function for agriculture, using FAO data for 128 countries from 1961-2002. Our review of the empirical literature in this field highlights that existing cross-country studies largely neglect variable time-series properties, parameter heterogeneity and the potential for heterogeneous Total Factor Productivity (TFP) processes across countries. We motivate the case for technology heterogeneity in agricultural production and present statistical tests indicating nonstationarity and cross-section dependence in the data. Our empirical approach deals with these difficulties by adopting the Pesaran (2006) Common Correlated Effects estimators, which we extend by using alternative weight-matrices to model the nature of the cross-section dependence. We furthermore investigate returns to scale of production and production dynamics. Our results support the specification of a common factor model in intercountry production analysis, highlight the rejection of constant returns to scale in pooled models as an artefact of empirical misspecication and suggest that agro-climatic environment, rather than neighbourhood or distance, drives similarity in TFP evolution across countries. The latter nding provides a possible explanation for the observed failure of technology transfer from advanced countries of the temperate `North' to arid and/or equatorial developing countries of the `South'.
    Keywords: agriculture; cross-country productivity analysis; nonstationary panel econometrics; factor models
    JEL: C23 O13 Q10
    Date: 2009–05–13
  7. By: Rosario Crinò (Institut d’Analisi Economica CSIC, Barcelona); Paolo Epifani (Department of Economics, and KITeS, Bocconi University, Milan)
    Abstract: We study, both theoretically and empirically, how export intensity (the ratio of exports to sales) is related to firm productivity. Using a representative sample of Italian manufacturing firms, we find that Total Factor Productivity (TFP) is strongly negatively correlated with export intensity to low-income destinations and uncorrelated with export intensity to high-income destinations, conditional on exporting. To account for these facts, which are not easily predicted by existing heterogeneous-firms models, we extend the Melitz’s (2003) model by allowing for endogenous product quality and for non-iceberg trade costs. Under plausible assumptions, our model predicts that the elasticity of export intensity to productivity is increasing in per capita income of the foreign destinations and decreasing in their distance. We find that these two variables can jointly explain the sign, size and ranking of the TFP elasticities of export intensity across individual foreign destinations.
    Keywords: Export Intensity; TFP; Heterogeneous Firms; Product Quality; Per Unit Trade Costs.
    JEL: F1
    Date: 2009–06–01
  8. By: Eric Strobl (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Robert Strobl (Institut for Environment and Sustainability - European Commission)
    Abstract: We examine the distributional impact of major dams on cropland productivity in Africa. As our unit of analysis we use a scientifically based spatial breakdown of the continent that allows one to exactly define regions in terms of their upstream/downstream relationship at a highly disaggregated level. We then use satellite data to derive measures of cropland productivity within these areas. Our econometric analysis shows that while regions downstream benefit from large dams, cropland within the vicinity tends to suffer productivity losses during droughts. Overall our results suggest that because of rainfall shortages dams in Africa caused a net loss of 0.96 per cent in productivity over our sample period (1981-2000). However, further dam construction in appropriate areas could potentially lead to large increases in productivity even if rainfall is not plenty.
    Keywords: dams, agricultural productivity, Africa
    Date: 2009–06–07
  9. By: Dana Hajkova
    Abstract: When the contribution of capital to aggregate production is to be quantified, a measure of capital services should be used. In this paper I present two experimental measures of capital services for the Czech economy using the OECD methodology. These measures use information on the structure of capital assets by asset type and by the industry in which the capital is used. They weight the contributions of different types of assets by their marginal product instead of by their price, which is the case when using the net capital stock. The analysis shows that growth in the net capital stock, if used as an input into the production function, underestimates the growth of capital input especially in periods of strong investment in highly productive capital assets.
    Keywords: Capital services, growth accounting, production function, total factor productivity.
    JEL: E23 O11 O12 O47
    Date: 2008–12
  10. By: R. Robert Russell (University of California, Riverside); William Schworm (School of Economics, The University of New South Wales)
    Abstract: We provide an axiomatic foundation for efficiency measurement in the full space, referred to as “graph efficiency” measurement by Färe, Grosskopf, and Lovell [1985]. We posit four types of axioms: indication, monotonicity, independence of units of measurement, and continuity. We analyze six well-known inefficiency indexes from the operations-research and economics literature and discuss several other related indexes. We present two impossibility results demonstrating that no index can satisfy all of the axioms on a general class of (well-behaved) technologies. Specifically, no inefficiency index can satisfy both indication and continuity (in either quantities or technologies), and no inefficiency index can satisfy both monotonicity and unit independence. We present a full evaluation of the trade-offs involved in selecting among the indexes.
    Keywords: Technical efficiency indexes; technical efficiency axioms
    JEL: C43 C61 D24
    Date: 2009–04
  11. By: Kittelsen, Sverre A.C. (The Ragnar Frisch Centre for Economic Research); Magnussen, Jon (SINTEF Unimed, Health Services Research)
    Abstract: From 2002 the Norwegian hospital sector is to be transferred from county to state ownership, organised through regional semiautonomous companies. A major motivation for the reform is to allow for more specialised hospital production. If there are economies or diseconomies of scope, the production of hospital services in a region could become more efficient by exploiting any cost savings that may stem from an optimal division of service production between units. While the theory of economics of scope is well developed, applications have chiefly been concerned with testing for natural monopoly, and few studies of hospital production have been concerned with scope. This paper estimates a multiple output cost function from data on Norwegian hospitals using the non-parametric Data Envelopment Analysis (DEA) method. The cost function is specified with total running costs as the only input, but with seven different outputs to focus on the properties of the output transformation frontier. To overcome the methodological assumption of convexity inherent in DEA, the sample is split into relative specialised and differentiated hospitals, before comparing costs. This partitioning is achieved through grouping as specialised the first and fifth quintiles of the hospitals ranked by the share of the relevant output, since in fact no hospital is fully specialised by producing only one output, or nothing of an output. Exploring scope economies of the best practice cost frontier along three different dimensions, strong economies are found for surgical and medical services, intermediate for inpatient and outpatient production, while elective and emergency care cases have only week economies of scope, which may not be statistically significant. Results for the output mix of individual observations, reveal both economies and diseconomies in the last of these three dimensions. Contrary to these results, average efficiencies are found to be lower for differentiated than specialised hospitals, in all of the dimensions mentioned, although the differences are not very large. Since the DEA method measures hospitals with the largest production of each output as efficient by default, the results for average efficiency may be due to the methods employed.
    Keywords: Hospital performance; DEA; Economies of Scope
    JEL: I11 I12
    Date: 2009–06–21
  12. By: Dennis Petrie; Kam Ki Tang; D.S. Prasada Rao (School of Economics, The University of Queensland)
    Abstract: Life expectancy at birth is the most commonly used measure for health system output. However, there are a number of reasons why it may be a poor proxy. First, life expectancy assumes a stationary population and thus does not take into account the current demographic structure of a country; and second, the output of a health system should be measured in terms of the value-added to the population’s health status rather than health status itself. The paper develops a new measure of health system output, the Incremental Life Years to address these problems. The new measure is applied to study health system output, efficiency and total factor productivity in OECD countries for the years 2000 and 2004. The new measure provides different results compared to those based on the traditional life expectancy measure, and the differences are further accentuated when changes in efficiency and productivity are estimated.
    Date: 2009
  13. By: Vivien Procher; Dirk Engel
    Abstract: The decision of companies to enter international markets, either via exports or foreign direct investment (FDI), has been postulated by the self-sorting model of Helpman, Melitz and Yeaple (HMY, 2004). In the strict sense, the theoretical predictions of HMY only apply to firms that become engaged in marketdriven (horizontal) FDI. Hence, in this paper we apply more precise methodologies to test the HMY hypothesis. First, we classify MNEs according to the underlying motives for investing abroad (market-driven vs. resource-driven FDI). Second, we highlight the role of productivity growth in the post-entry period.Our findings suggest that productivity affects the FDI decision considerably whereas expected feedback and learning effects of FDI on productivity are remarkably lower.We further detect that more market-driven MNEs exhibit a higher productivity than comparatively less market-driven MNEs.
    Keywords: Foreign direct investment, horizontal and vertical FDI, multinational enterprises, productivity
    JEL: F10 F23 D21 D24
    Date: 2009–06
  14. By: Eric Strobl (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We empirically estimate the impact of hurricane strikes on local crop productivity in the Caribbean region. To this end we first identify local cropland at 1km2 geographical units via Global Land Cover data. We then employ a windfield model combined with a power dissipation equation on hurricane track data to arrive at a scientifically based index of potential local destruction along these 1km2 cropland grid cells for landfalling and passing hurricanes. Cropland productivity at the local level is approximated by annual net primary production values derived from satellite spectral reflectance data. This provides us with a panel of over 150,000 potentially affected cropland areas in the Caribbean over the period 2000-20006. Our econometric results indicate that cropland productivity is substantially reduced after a hurricane strike.
    Date: 2009–06–10
  15. By: Azariadis, Costas; Kaas, Leo
    Abstract: We propose a sectoral-shift theory of aggregate factor productivity for a class of economies with AK technologies, limited loan enforcement, a constant production possibilities frontier, and finitely many sectors producing the same good. Both the growth rate and total factor productivity in these economies respond to random and persistent endogenous fluctuations in the sectoral distribution of physical capital which, in turn, responds to persistent and reversible exogenous shifts in relative sector productivities. Surplus capital from less productive sectors is lent to more productive ones in the form of secured collateral loans, as in Kiyotaki-Moore (1997), and also as unsecured reputational loans suggested in Bulow-Rogoff (1989). Endogenous debt limits slow down capital reallocation, preventing the equalization of risk-adjusted equity yields across sectors. Economy-wide factor productivity and the aggregate growth rate are both negatively correlated with the dispersion of sectoral rates of return, sectoral TFP and sectoral growth rates. If sector productivities follow a symmetric two-state Markov process, many of our economies converge to a limit cycle alternating between mild expansions and abrupt contractions. We also find highly periodic and volatile limit cycles in economies with small amounts of collateral.
    Keywords: TFP; misallocation; sectoral shocks; collateral; reputation
    JEL: E32 O47 D90
    Date: 2009–06–15
  16. By: Sharma, Abhijit; Bailey, Alastair; Fraser, Iain
    Abstract: This paper examines technology adoption and integrated pest management strategies employed by UK farmers, using both parametric and nonparametric methods. We employ a unique survey data set collected from UK cereal farmers to assess the determinants of technology adoption in relation to pest management. Our preferred model specification is nonparametric which makes use of the recently developed methods of Li and Racine (2007) and Racine and Li (2004). These methods allow us to combine categorical and continuous data and thereby avoid sample splitting and resulting efficiency losses. Our analysis reveals that total area farmed is positively related to the number of technologies adopted, whereas age is negatively related. We also find evidence of significant statistical differences for number of adoptions by region across the UK.
    Keywords: technology; adoption; cereal farming; UK; nonparametric
    JEL: Q16 O14
    Date: 2009–06–18
  17. By: Edvardsen, Dag Fjeld (The Norwegian Building Research Institute, Norway); Føsund, Finn R. (Department of Economics); Kittelsen, Sverre A.C. (The Frisch Centre, Norway)
    Abstract: The units found strongly efficient in DEA studies on efficiency can be divided into self-evaluators and active peers, depending on whether the peers are referencing any inefficient units or not. The contribution of the paper starts with subdividing the selfevaluators into interior and exterior ones. The exterior self-evaluators are efficient “by default”; there is no firm evidence from observations for the classification. These units should therefore not been regarded as efficient, and be removed from the observations on efficiency scores when performing a two-stage analysis of explaining the distribution of the scores. A method for classifying self-evaluators based on the additive DEA model is developed. The application to municipal nursing- and home care services of Norway shows significant effects of removing exterior self-evaluators from the data when doing a two-stage analysis.
    Keywords: Self-evaluator; interior and exterior self-evaluator; DEA; efficiency; referencing zone; nursing homes
    JEL: C44 C61 D24 I19 L32
    Date: 2009–06–21
  18. By: Harald Tauchmann; Stefan Felder
    Abstract: The inefficiency of health care provision presents a major health policy concern in Germany. In order to address the issue of efficiency comprehensively – i.e. at the level of the entire system of health care provision rather than individual service providers – empirical analyses are often based on data at the regional level.However, regional efficiencies might be subject to spatial dependence, rendering any analysis biased that aims at identifying the determinants of efficiency differentials. We address this issue by specifying a spatial autoregressive model to explain efficiency scores for German districts which we derive through data envelopment analysis. Regression results suggest that spatial dependence is not a dominant feature in the data. Hence, ignoring spatial interdependence is unlikely to severely bias results of efficiency analyses based on regional data.This holds, in particular, for the role of the states in the efficiency of health production. Significant heterogeneity among states is found in the data regardless of whether or not spatial dependence is accounted for.
    Keywords: Health production, data envelopment analysis, spatial autoregressive model
    JEL: I12 R10
    Date: 2009–06
  19. By: Ankarhem, Mattias (Ministry of Finance); Daunfeldt, Sven-Olov (The Ratio Institute); Quoreshi, Shahiduzzaman (The National Institute of Economic Research); Rudholm, Niklas (The Swedish Retail Institute and Dalarna University)
    Abstract: The effect of Swedish regional investment grants during 1990-1999 on firm performance, in terms of returns on equity and number of employees, were studied using a propensity-score matching-method to control for sample selection. Firms that received grants did not perform better in terms of returns on equity when compared to matched firms in the control group. In most years, recipient firms also did not hire more employees. The results thus cast doubt on the use of regional investment grants as a general policy instrument to improve firm performance.
    Keywords: Economic efficiency; propensity score matching; sample selection; logit regression; panel data
    JEL: R11 R58
    Date: 2009–06–09
  20. By: Belu, Constantin (Department of Economics, School of Business, Economics and Law, Göteborg University); Manescu, Cristiana (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper studies the link between Corporate Social Responsibility (CSR) and economic performance of companies. Acknowledging the argument that companies might behave socially responsible strategically, i.e. favoring the CSR dimensions that provide competitive advantages, we construct a novel CSR index based on a Data Envelopment Analysis (DEA) model. We argue that this index accounts for CSR achievements from a strategic perspective, and use it to analyze the link between CSR and economic performance expressed by Return on Assets (ROA). When explicitly accounting for strategic behavior of companies, our findings reveal a significant positive relationship between CSR and economic performance.<p>
    Keywords: Corporate Social Responsibility; Data Envelopment Analysis; Strategic CSR; System-GMM
    JEL: C23 C67 M14
    Date: 2009–06–11
  21. By: Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti
    Abstract: This paper analyzes the impact of the European Union regional policy of the three programming periods 1975-1988, 1989-1993 and 1994-1999 on the dynamics of productivity of European regions. On average, funding had a positive, but concave, effect on productivity growth. In particular, a share of funds on GVA of 10% GVA is estimated to raise the regional growth rate of about 0.9% per year. However, by separately considering the three programming periods and the composition of the funds according to the objectives defined by the EU, we find that: i) only the funds allocated in the second and third programming periods, when they remarkably increased, had a significant impact; and ii) only Objective 1 and Cohesion funds played a significantly positive impact, while funds devoted to Objectives 2, 3, 4 and 5 had a negative or non significant impact. The results are robust to potential endogeneity of funds and spatial dependence.
    Keywords: European regional policy, structural change, convergence, European regions.
    JEL: C21 E62 R11 O52
    Date: 2009–06–19

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