New Economics Papers
on Efficiency and Productivity
Issue of 2009‒07‒28
sixteen papers chosen by

  1. Estimation and Decomposition of Total Factor Productivity Growth in the EU Manufacturing Sector: a Stochastic Frontier Approach By Marco Fioramanti
  2. Total Factor Productivity Growth when Factors of Production Generate Environmental Externalities By Anastasios Xeapapadeas; Dimitra Vouvaki
  3. Producer Services and Manufacturing Productivity: Evidence from Japan Industrial Productivity Database By Kiyoyasu Tanaka
  4. The Effects of External and Internal Strikes on Total Factor Productivity By Ferreira, Pedro; Galvao, Antonio
  5. Multilateral comparison of total factor productivity and convergence in Italian agriculture (1951-2002) By Paolo Pierano
  6. Innovation and productivity in SMEs. Empirical evidence for Italy By Bronwyn H. Hall; Francesca Lotti; Jacques Mairesse
  7. Panel data estimates of the production function and product and labor market imperfections By S. DOBBELAERE; J. MAIRESSE
  8. Do Foreign Mergers and Acquisitions Boost Firm Productivity? By Marc Schiffbauer; Iulia Siedschlag; Frances Ruane
  9. Efficiency Analysis of Energy Networks : An International Survey of Regulators By Brophy Haney, A.; Pollitt, M.G.
  10. Management Practices in Hospitals By Bloom, N; Propper, C; Seiler, S; Van Reenen, J
  11. Counterfactual Distribution Dynamics across European Regions By Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti
  12. Operational Practices and Performance: An Empirical Analysis of Brazilian Manufacturing Companies By Duarte, André Luís de C. Moura; DiSerio, Luiz Carlos; Brito, Luiz Artur L.
  13. The euro and firm restructuring By Matteo Bugamelli; Fabiano Schivardi; Roberta Zizza
  14. Why Did Some Banks Perform Better During the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation By Andrea Beltratti; René M. Stulz
  15. Teacher Qualifications and Middle School Student Achievement By Richard Buddin; Gema Zamarro
  16. Corporate Governance and Efficiency of Russian Companies from Stock Market Perspective By Kleiner, Vadim

  1. By: Marco Fioramanti (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this paper the Stochastic Frontier approach was used for the estimation and decomposition of manufacturing TFP growth in 14 EU member countries, drawing upon the EU-KLEMS database. This study identifies some key issues: in the period 1970-2005, the TFP rate of change in the EU manufacturing sector constantly decreased, mainly due to the reduction in technical efficiency and, to a lesser extent, to the decline in the rate of growth of input factors and allocative efficiency. In the same period, the sector recorded considerable technical progress, which, nonetheless, did not offset the negative forces which pulled the EU TFP growth down, especially in the last decade of the sample period.
    Keywords: Stochastic frontier, Total Factor Productivity, Technical efficiency, Technical change, Allocative efficiency.
    JEL: D24 O47 C33
    Date: 2009–06
  2. By: Anastasios Xeapapadeas (Athens University of Economics and Business); Dimitra Vouvaki (University of Crete)
    Abstract: Total factor productivity growth (TFPG) has been traditionally associated with technological change. We show that when a factor of production, such as energy, generates an environmental externality in the form of CO2 emissions which is not internalized because of lack of environmental policy, then TFPG estimates could be biased. This is because the contribution of environment as a factor of production is not accounted for in the growth accounting framework. Empirical estimates confirm this hypothesis and suggest that part of what is regarded as technology’s contribution to growth could be attributed to the use of environment in output production.
    Keywords: Total Factor Productivity, Sources of Growth, Environmental Externalities, Energy, Environmental Policy
    JEL: O47 Q20 Q43
    Date: 2009–03
  3. By: Kiyoyasu Tanaka
    Abstract: As service sectors account for a growing share of economic activity in advanced economies, economists claim that the quality and cost of producer services supplied by the service sectors are crucial in supporting the competitiveness of manufacturing firms. This paper provides an empirical assessment on this argument by exploring a link between service-sector performance and manufacturing productivity in Japan for the period 1980-2005. Assuming that an improvement in producer services is measured with errors by a price deflator growth of service outputs, I propose an estimation framework in which an observed productivity depends partly on the performance of service sectors weighted by service-input intensities. Robust to a wide range of specifications and alternative indicators of services upgrading, I find little evidence that the service sectors contributed to productivity growth of the manufacturing sector. Thus, my findings do not support the claim that the upgrading of producer services improves manufacturing competitiveness.
    Keywords: Producer Services, Service Sector, Productivity, Japan
    JEL: D24 L60 L80
    Date: 2009–07
  4. By: Ferreira, Pedro; Galvao, Antonio
    Date: 2009–10
  5. By: Paolo Pierano
    Abstract: This article uses the index number approach to estimate the regional differences of agricultural output, input and total factor productivity (TFP) in Italy. Data cover the period 1951 to 2002 and are taken from Agrefit, which is a new database of Italian agriculture at regional level. Comparisons across space and time are constructed in two steps: first, bilateral Fisher indexes, which are not transitive, are spatially chained to obtain transitivity, using the EKS method, then, multilateral indexes are linked chronologically over time by means of the so-called TFGG method, which satisfies temporal fixity. The second focus of the paper is to test for convergence in agricultural productivity. We consider the problems of heterogeneity and stability of cross-section growth regressions using a hierarchical Bayesian method based on panel data.
    Keywords: Index number approach, Agricultural TFP, Multilateral comparisons, Panel data, Regional convergence.
    JEL: Q11 C43 O47
    Date: 2009–02
  6. By: Bronwyn H. Hall (Department of Economics, University of California at Berkeley); Francesca Lotti (Bank of Italy); Jacques Mairesse (CREST (ENSAE, Paris))
    Abstract: Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.
    Keywords: R&D, innovation, productivity, SMEs, Italy
    JEL: L60 O31 O33
    Date: 2009–06
    Abstract: Embedding the efficient bargaining model into the R. Hall (1988) approach for estimating price-cost margins shows that both imperfections in the product and labor markets generate a wedge between factor elasticities in the production function and their corresponding shares in revenue. This article investigates these two sources of discrepancies both at the industry level and the firm level using an unbalanced panel of 10646 French firms in 38 manufacturing industries over the period 1978-2001. By estimating standard production functions and comparing the estimated factor elasticities for labor and materials and their shares in revenue, we are able to derive estimates of average price-cost mark-up and extent of rent sharing parameters. For manufacturing as a whole, our estimates of these parameters are of an order of magnitude of 1.17 and 0.44 respectively. Our industry-level results indicate that industry differences in these parameters and in the underlying estimated factor elasticities and shares are quite sizeable. Since firm production function, behavior and market environment are very likely to vary even within industries, we also investigate firm-level heterogeneity in estimated mark-up and rent-sharing parameters. To determine the degree of true heterogeneity in these parameters, we adopt the P.A. Swamy (1970) methodology allowing to correct the observed variance in the firm-level estimates from their sampling variance. The median of the firm estimates of the price-cost mark-up ignoring labor market imperfections is of 1.10, while as expected it is higher of 1.20 when taking them into account and the median of the corresponding firm estimates of the extent of rent sharing is of 0.62. The Swamy corresponding robust estimates of true dispersion are of about 0.18, 0.37 and 0.35, showing indeed very sizeable within-industry firm heterogeneity. We find that firm size, capital intensity, distance to the industry technology frontier and investing in R&D seem to account for a significant part of this heterogeneity.
    Keywords: Rent sharing, price-cost mark-ups, production function, panel data
    JEL: C23 D21 J51 L13
    Date: 2009–05
  8. By: Marc Schiffbauer (ESRI); Iulia Siedschlag (ESRI); Frances Ruane (ESRI)
    Abstract: This paper examines the causal relationship between foreign mergers and acquisitions and firm productivity in the UK over the period 1999-2007. Our results raise questions about the existence of aggregate effects of foreign ownership on TFP in the longer-run. However, we find significant heterogeneity in the TFP effects of foreign M&A at the industry level. Overall, we uncover a systematic pattern of post-acquisition TFP effects that is consistent with the most recent theoretical models of firm heterogeneity and cross-border mergers and acquisitions as mode of foreign entry. Furthermore, we find positive aggregate effects on labor productivity due to capital deepening but not due to changes in TFP.
    Date: 2009–07
  9. By: Brophy Haney, A.; Pollitt, M.G.
    Abstract: Incentive regulation for networks has been an important part of the reform agenda in a number of countries. As part of this regulatory process, incentives are put in place to improve the cost efficiency of network companies by rewarding good performance relative to a predefined benchmark. The techniques used to establish benchmarks are central to the efficiency improvements that are ultimately achieved. Much experience has been gained internationally in the application of benchmarking techniques and we now have a solid understanding of the main indicators of best practice. These include the use of frontier-based methods; a large and high quality dataset; panel data; and bootstrapping techniques. What we are lacking is a more complete understanding of the factors that influence choice of methods by regulators, i.e. characteristics that may encourage or discourage regulators to adopt best practice methods.
    Keywords: Electricity; Gas; Benchmarking; Efficiency analysis; Incentive regulation; Energy networks
    Date: 2009–06–09
  10. By: Bloom, N; Propper, C; Seiler, S; Van Reenen, J
    Abstract: We develop a new methodology for measuring management practices in hospitals, and use this in 182 interviews of physicians and managers in public and private hospitals (covering 61% of English acute trusts). We find our management measure is strongly correlated with hospital performance, both clinical outcomes like survival rates from heart attacks, and general operational and financial outcomes. Management in publicly owned hospitals (the National Health Service) compares poorly with management in manufacturing. These public hospitals also appear to have significantly worse management practices than private hospitals. Among publicly owned hospitals management scores are relatively higher for Foundation Trusts (hospitals with greater autonomy from the government), for larger hospitals and where managers have more clinical expertise. We also find some evidence that competition is associated with better hospital performance.
    Keywords: management, hospitals, competition, productivity
    JEL: J45 F12 I18 J31
    Date: 2009–07
  11. By: Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti
    Abstract: This paper proposes a methodology which combines elements of parametric regression analysis with the nonparametric distribution dynamics approach in order to analyse the role of some variables in the convergence of productivity across European regions over the period 1980-2002. We find that the initial productivity crucially accounts in the convergence process across European regions. Differently, employment growth seems not to play a role, while the Structural and Cohesion Funds seem to play a positive role, even though such effect seems to be very low and statistically significant only at the low bound of the range of initial productivity. The structural change of regional economies plays a positive role, but such e effect is statistically significant only for the least productive regions. The output composition of a region in 1980 a effects the convergence process of productivity growth in several ways. In particular, the share of non market services on output acts like a source of convergence from 1980 to 2002 but in the long-run it plays a negligible role. Finally, the share of finance acts like a force of divergence across European regions, especially for the least productive regions.
    Keywords: European regional policy, structural change, convergence, European regions.
    JEL: C21 E62 R11 O52
    Date: 2009–06–19
  12. By: Duarte, André Luís de C. Moura; DiSerio, Luiz Carlos; Brito, Luiz Artur L.
    Date: 2009–10
  13. By: Matteo Bugamelli (Bank of Italy); Fabiano Schivardi (University of Cagliari and EIEF); Roberta Zizza (Bank of Italy)
    Abstract: We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states’ productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Since its adoption, productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level evidence from Italian manufacturing confirms that low-tech businesses, which arguably benefited most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.
    Keywords: euro, devaluations, productivity growth, firm restructuring, skill intensity
    JEL: F33 J24 L16 O47
    Date: 2009–06
  14. By: Andrea Beltratti; René M. Stulz
    Abstract: Though overall bank performance from July 2007 to December 2008 was the worst since at least the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have been discussed as having contributed to the poor performance of banks during the credit crisis. More specifically, we investigate whether bank performance is related to bank-level governance, country-level governance, country-level regulation, and bank balance sheet and profitability characteristics before the crisis. Banks that the market favored in 2006 had especially poor returns during the crisis. Using conventional indicators of good governance, banks with more shareholder-friendly boards performed worse during the crisis. Banks in countries with stricter capital requirement regulations and with more independent supervisors performed better. Though banks in countries with more powerful supervisors had worse stock returns, we provide some evidence that this may be because these supervisors required banks to raise more capital during the crisis and that doing so was costly for shareholders. Large banks with more Tier 1 capital and more deposit financing at the end of 2006 had significantly higher returns during the crisis. After accounting for country fixed effects, banks with more loans and more liquid assets performed better during the month following the Lehman bankruptcy, and so did banks from countries with stronger capital supervision and more restrictions on bank activities.
    JEL: G15 G18 G21 G32 G34
    Date: 2009–07
  15. By: Richard Buddin; Gema Zamarro
    Abstract: This research examines whether teacher licensure test scores and other teacher qualifications affect middle school student achievement. The results are based on longitudinal student-level data from Los Angeles. The achievement analysis uses a value-added approach that adjusts for both student and teacher fixed effects. The results show little relationship between traditional measures of teacher quality (e.g., experience and education level) and student achievement in reading or math. Similarly, licensure test scores in general aptitude, subject-matter knowledge, and reading pedagogy had no significant effects on student achievement. Teachers with elementary school credentials had slightly better success in the classroom than did teachers with secondary school credentials.
    Keywords: teacher quality, teacher licensure, student achievement, middle school, two-level fixed effects, education production function
    JEL: J44 J45 H0 H75 I21
    Date: 2009–06
  16. By: Kleiner, Vadim
    Abstract: The article shows that a transition from a static to a dynamic analysis of corporate governance changes of the definition of "corporate governance" to include not only relationships between a company and its shareholders, but also company relationships with a variety of other stock market participants. The article analyses corporate governance's level of influence on company efficiency. It also suggests a minimum set of key corporate governance principles, by examining which company meets compliance with most well-known principles of corporate governance. The conclusions are illustrated using case studies of Russian companies.
    Date: 2009–02

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