New Economics Papers
on Efficiency and Productivity
Issue of 2009‒07‒11
sixteen papers chosen by

  1. Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing By Loren Brandt; Johannes Van Biesebroeck; Yifan Zhang
  2. Agglomeration externalities and technical efficiency in French pig production By Solène Larue; Laure Latruffe
  3. Scale, efficiency and organization in Norwegian psychiatric outpatient clinics for children By Hallsteinli, Vidar; Kittelsen, Sverre AC; Magnussen, Jon
  4. Hospital Competition, Technical Efficiency, and Quality By C. L. Chua; Alfons Palangkaraya; Jongsay Yong
  5. Farmers' health status, agricultural efficiency, and poverty in rural Ethiopia: A stochastic production frontier approach By Ulimwengu, John M.
  6. Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence By Francisco Arizala; Eduardo Cavallo; Arturo Galindo
  7. TFP Growth in Old and New Europe By Michael C. Burda; Battista Severgnini
  8. The effect of activity-based financing on hospital efficiency: A panel data analysis of DEA efficiency scores 1992-2000 By Biørn, Erik; Hagen, Terje P.; Iversen, Tor; Magnussen, Jon
  9. Regional growth and finance in Europe: Is there a quality effect of bank efficiency? By Hasan, Iftekhar; Koetter , Michael; Wedow, Michael
  10. Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia By Eslava, Marcela; Haltiwanger, John C.; Kugler, Adriana; Kugler, Maurice
  11. Testing DEA Models of Efficiency in Norwegian Psychiatric Outpatient Clinics By Kittelsen, Sverre A.C.; Magnussen, Jon
  12. Productivity Differences Between and Within Countries By Daron Acemoglu; Melissa Dell
  13. Competition and Innovation: Evidence from Financial Services By Jaap W.B. Bos; Ryan C.R. van Lamoen; James W. Kolari
  14. Determinants of Heritage Authorities’ Performance: An exploratory study with DEA bootstrapping approach By Finocchiaro Castro, Massimo; Guccio, Calogero; Rizzo, Ilde
  15. Detecting Technological Heterogeneity in New York Dairy Farms By del Corral, Julio; Alvarez, Antonio; Tauer, Loren
  16. How do improvements in labour productivity in the Scottish economy affect the UK position on the Environmental Kuznets Curve? By Karen Turner; Nick Hanley

  1. By: Loren Brandt; Johannes Van Biesebroeck; Yifan Zhang
    Abstract: We present the first comprehensive set of firm-level total factor productivity estimates for China’s manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period 1998-2006. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.
    JEL: D24 O14
    Date: 2009–07
  2. By: Solène Larue; Laure Latruffe
    Abstract: The objective of the paper is to assess the effects of spatial agglomeration on the technical efficiency of French pig farms. We use a two-stage method with the first stage consisting of calculating the efficiency scores of pig activity with the non-parametric Data Envelopment Analysis (DEA) method, and the second stage being a regression of these scores on agglomeration variables. Data consist of 936 French pig producers in 2004. Results suggest that these farms were as much affected by positive agglomeration externalities (in the form of knowledge spillovers due to the density of farms, and arising from their closeness to downstream markets) as any other businesses. Our analysis also sheds light on the specificity of the sector, namely that environment pressures can force pig farmers to be more efficient, an effect that may be counteracted when legal dispositions relating to manure spreading are too stringent.
    Keywords: technical efficiency, Data Envelopment Analysis, agglomeration, environmental regulation, hog production, France
    JEL: Q12 R3
    Date: 2009
  3. By: Hallsteinli, Vidar (SINTEF Unimed, Health Services Research); Kittelsen, Sverre AC (Ragnar Frisch Centre for Economic Research); Magnussen, Jon (SINTEF Unimed, Health Services Research)
    Abstract: In this paper, the authors examine the scale, efficiency and organization of Norwegian psychiatric outpatient clinics for children. Their question is whether there is room for improved performance in these clinics, and how much? Assuming that about 5 per cent of the Norwegian population under 18 years sometimes is in need of specialist psychiatric care, it is clear that this group will suffer when we know that psychiatric services were delivered to only 2.1 per cent of the whole Norwegian population (data from 1998). Based on a relatively low number of registered consultations per therapist (1,1 per therapist day) the ministry has stipulated that productivity can increase with as much as 50 per cent. Access to services can be improved by increasing capacity, but also by increasing the utilization of the existing capacity. <p> With an Data Envelopment Analysis (DEA) the authors estimate a best-practice production frontier. The potential for efficiency improvement is measured as the difference between actual and best-practice performance, while allowing for trade-offs between different staff groups and different mixes of service production. Based on 135 observations for the years 1997 to 1999, the DEA tests lead to a model with two inputs, two outputs and variable returns to scale. The outputs are number of hours spent on direct and indirect interventions, while neither the number of interventions nor the number of patients where found to be significant. The inputs are the number of university-educated staff and other staff, but disaggregating the latter group was not significant. The analysis show that a average of estimated clinic efficiencies is 71%. Mean estimated productivity is 64%, but many large clinics have considerably lower performance due mainly to scale inefficiency.
    Keywords: Health Care; Productivity; Data Envelopment Analysis
    JEL: C61 D24 I12
    Date: 2009–06–30
  4. By: C. L. Chua (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper studies the link between competition and technical efficiency of public hospitals in the State of Victoria, Australia by accounting both quantity and quality of hospital output using a two-stage semi-parametric model of hospital production and Data Envelopment Analysis. On the one hand, it finds a positive relationship between efficiency and competition measured by the Hirschman-Herfindahl Index (HHI). On the other, it finds that efficiency and the number of competing hospitals, in particular the number of competing private hospitals, to be negatively correlated. More importantly, it finds that whether or not quality is treated as an endogenous output variable, as opposed to as an exogenous control variable, may impact on the statistical estimates of the link between efficiency and competition. Also, how the effect of competition on efficiency is modelled empirically may matter, though the impact of the treatment of quality as described above appears to be more important. Overall, the results highlight the importance of quality consideration in assessing the effects of competition on efficiency and points to possibly undesirable resource allocation effects when public hospitals are made to compete with a large number of private hospitals.
    Keywords: hospital competition; technical efficiency; Hirschman-Herfindahl Index; data envelopment analysis; hospital quality
    JEL: I11 D24 D40
    Date: 2009–06
  5. By: Ulimwengu, John M.
    Abstract: "The A stochastic frontier production function is used to estimate agricultural efficiency index. Then, controlling for household characteristics and other exogenous variables, the efficiency index is regressed on the probability of being sick. Estimation is performed using the treatment effect model where the probability of being sidelined by sickness is modeled as a probit. This framework allows policy simulations that underscore the impact of farmers' health status on both agricultural efficiency and poverty reduction. Overall, regression results confirm the negative impact of health impediment on farmers' agricultural efficiency. Simulation results show that improving farmers' agricultural efficiency by investing in farmers' health may not necessarily lead to poverty reduction. Additional policy instruments may be needed to achieve simultaneous increase in agricultural productivity and reduction in poverty rate." from authors' abstract
    Keywords: health, Agriculture, productivity, Poverty, Farmers, Efficiency, Stochastic, Production, Science and technology, Institutional change, Innovation,
    Date: 2009
  6. By: Francisco Arizala; Eduardo Cavallo; Arturo Galindo
    Abstract: This paper estimates the impact of financial development on industry-level total factor productivity (TFP) growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1963 to 2003. A significant relationship is found between financial development and industry-level TFP growth when controlling for country-time and industry-time fixed effects. The results are both statistically and economically significant. TFP growth can accelerate up to 0.6 percent per year, depending on the external finance requirement of industries, following a one standard deviation increase in financial development. The results are robust to different samples and specifications.
    Keywords: Financial development, TFP growth, Volatility
    JEL: D24 E44 O47
    Date: 2009–06
  7. By: Michael C. Burda; Battista Severgnini
    Abstract: Using Solow-Tornqvist residuals as well as two alternative measurements, we present estimates of total factor productivity (TFP) growth in a sample of 30 European economies for the period 1994-2005. In most of Western Europe, we find a deceleration of TFP growth since 2000. However, the economies of New Europe exhibit a higher level of TFP growth overall and have slowed less than those of Old Europe. In the new market economies of Central and Eastern Europe, we nd both high TFP growth as well as acceleration in the second half of the sample. Regression evidence from Western Europe suggests that product market regulation may adversely aect TFP growth and may thus impair convergence.
    Keywords: Total factor productivity growth, Solow residual, product and labor market regulation
    JEL: D24 O47 P27
    Date: 2009–06
  8. By: Biørn, Erik (Department of Economics); Hagen, Terje P. (Institute of Health Management and Health Economics); Iversen, Tor (Institute of Health Management and Health Economics); Magnussen, Jon (SINTEF Unimed Health Services Research)
    Abstract: Activity-based financing (ABF) was implemented in the Norwegian hospital sector from 1 July 1997. A fraction (30 to 50 per cent) of the block grant from the state to the county councils has been replaced by a matching grant depending upon the number and composition of hospital treatments. As a result of the reform, the majority of county councils have introduced activity-based contracts with their hospitals. This paper studies the effect of activity-based funding on hospital efficiency. We predict that hospital efficiency will increase because the benefit from cost-reducing efforts in terms of number of treated patients is increased under ABF compared with global budgets. The prediction is tested using a panel data set from the period 1992-2000. Efficiency indicators are estimated by means of data envelopment analysis (DEA) with multiple inputs and outputs. Using a variety of econometric methods, we find that the introduction of ABF has improved efficiency when measured as technical efficiency according to DEA analysis. Contrary to our prediction, the result is less uniform with respect to the effect on cost-efficiency. We suggest several reasons why this prediction fails. Keywords are poor information of costs, production-oriented drive, tight factor markets and soft budget constraints.
    Keywords: Public hospitals; financing; efficiency; DEA-scores; panel data; Norway
    JEL: C23 I11 I18 L32
    Date: 2009–06–29
  9. By: Hasan, Iftekhar (Lally School of Management and Technology, USA, and Bank of Finland Research); Koetter , Michael (University of Groningen and Deutsche Bundesbank); Wedow, Michael (Deutsche Bundesbank)
    Abstract: In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth than does an identical increase in credit. More credit provided by efficient banks exerts an independent growth effect in addition to the direct quantity and quality channel effects.
    Keywords: bank performance; regional growth; bank efficiency; Europe
    JEL: G21 O16 O47 O52
    Date: 2009–05–18
  10. By: Eslava, Marcela (Universidad de los Andes); Haltiwanger, John C. (University of Maryland); Kugler, Adriana (University of Houston); Kugler, Maurice (Wilfrid Laurier University)
    Abstract: We use plant output and input prices to decompose the profit margin into four parts: productivity, demand shocks, mark-ups and input costs. We find that each of these market fundamentals are important in explaining plant exit. We then use variation across sectors in tariff changes after the Colombian trade reform to assess whether the impact of market fundamentals on plant exit changed with in creased international competition. We find that greater international competition magnifies the impact of productivity, and other market fundamentals, on plant exit. A dynamic simulation that compares the distribution of productivity with and without the trade reform shows that improvements in market selection from trade reform help to weed out the least productive plants and increase average productivity. In addition, we find that trade liberalization increases productivity of incumbent plants and improves the allocation of activity within industries.
    Keywords: trade liberalization, plant exit, market selection
    JEL: F43 L25 O47
    Date: 2009–06
  11. By: Kittelsen, Sverre A.C. (The Ragnar Frisch Centre for Economic Research); Magnussen, Jon (SINTEF Unimed NIS Health Services Research)
    Abstract: While measures of output in mental health care are even harder to find than in other health care activities, some indicators are available. In modelling productive efficiency the problem is to select the output variables that best reflect the use of resources, in the sense that these variables have a significant impact on measures of efficiency. The paper analyses cross-sectional data on the psychiatric outpatient clinics of Norway using the Data Envelopment Analysis (DEA) non-parametric efficiency measurement method, and tests the variable specification using statistical tools recently introduced in the literature. In addition to outputs, the importance of different profession or educational groups on efficiency is examined, and results are compared for separate samples of clinics for children and youths (BUP) with clinics for adults (VP).
    Keywords: Mental health care; efficiency; psychiatric outpatient clinics; DEA; Norway
    JEL: I18
    Date: 2009–07–01
  12. By: Daron Acemoglu; Melissa Dell
    Abstract: We document substantial within-country (cross-municipality) differences in incomes for a large number of countries in the Americas. A significant fraction of the within-country differences cannot be explained by observed human capital. We conjecture that the sources of within-country and between-country differences are related. As a first step towards a united framework, we propose a simple model incorporating both differences in technological know-how across countries and differences in productive efficiency within countries.
    JEL: O18 O40 R11
    Date: 2009–07
  13. By: Jaap W.B. Bos; Ryan C.R. van Lamoen; James W. Kolari
    Abstract: In this paper we seek to contribute to the literature on competition and innovation by focusing on individual firms within the U.S. banking industry in the period 1984-2004. We measure innovation by estimating technology gaps and find evidence of an inverted-U relationship between competition and the technology gaps in banking. This finding is robust over several different specifications and is consistent with theoretical and empirical work by Aghion, Bloom, Blundell, Griffith, and Howitt (2005b). The optimal amount of innovation requires a slightly positive mark up. Also, we find that the U.S. banking industry as a whole has consolidated beyond this optimal innovation level and that state-level interstate banking deregulation has lowered innovation.
    Keywords: competition, innovation, stochastic frontier analysis, technology gap ratio, banking
    JEL: D21 G21 L10 O30
    Date: 2009–06
  14. By: Finocchiaro Castro, Massimo; Guccio, Calogero; Rizzo, Ilde
    Abstract: Government regulation plays a significant role in the field of heritage conservation. Namely, regulation is aimed at controlling the stock of heritage, restricting or modifying the activities of public as well as private actors. Surprisingly, the literature has neither extensively investigated the performance of the heritage authorities involved in the implementation of conservation policies nor its determinants. In this paper we address this issue, from a theoretical as well as an empirical perspective, using Sicily as a case study. More precisely, we analyze the determinants of the differences in the efficiency levels of conservation activity of the nine Sicilian heritage authorities over the period 1993-2005. Economic and managerial variables are used to distinguish non-discretionary from discretionary causes. The results show that the efficiency scores seem to be only affected by economic factors whereas the managerial variables do not affect the performance of heritage authorities.
    Keywords: Heritage regulation; cultural policy; efficiency analysis.
    JEL: C14 Z10 D24
    Date: 2009–05
  15. By: del Corral, Julio; Alvarez, Antonio; Tauer, Loren
    Abstract: Agricultural studies have often differentiated and estimated different technologies within a sample of farms. The common approach is to use observable farm characteristics to split the sample into several groups and subsequently estimate different functions for each group. Alternatively, unique technologies can be determined by econometric procedures such as latent class models. This paper compares the results of a latent class model with the use of a priori information to split the sample using dairy farm data in the application. Latent class separation appears to be a superior method of separating heterogeneous technologies.
    Keywords: parlor milking system, stanchion milking system, latent class model, stochastic frontier, Agribusiness, Farm Management,
    Date: 2009–04–29
  16. By: Karen Turner (Department of Economics, University of Strathclyde); Nick Hanley (Department of Economics, University of Stirling)
    Abstract: The Environmental Kuznets Curve (EKC) hypothesis focuses on the argument that rising prosperity will eventually be accompanied by falling pollution levels as a result of one or more of three factors: (1) structural change in the economy; (2) demand for environmental quality increasing at a more-than-proportional rate; (3) technological progress. Here, we focus on the third of these. In previous work we have used single region/nation models of the Scottish and UK economies to simulate the impacts of increased labour and energy efficiency on the domestic economy’s position on the EKC, with a specific focus on CO2 emissions. There we find that, while the impacts of an increase in energy efficiency are difficult to predict, mainly due to the potential for ‘rebound’ effects, while increasing CO2 emissions, improved labour productivity is likely to move an economy along its EKC through more rapid GDP growth. However, recent developments in the EKC literature have raised the issue of whether this will still be the case if emissions are accounted for from a consumption rather than a production perspective (the ‘pollution leakage’ hypothesis) – i.e. taking account of indirect pollution generation embodied in trade flows rather than just domestic emissions generation. Here we extend our earlier single region analysis for Scotland by using an interregional CGE model of the UK economy to examine the likely impacts of an increase in Scottish labour productivity on the rest of the UK and on a national EKC through interregional labour migration and trade flows.
    Keywords: computable general equilibrium; technological progress; environmental kuznets curve; pollution leakage
    JEL: D58 F16 F18 O13
    Date: 2009–06

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