New Economics Papers
on Efficiency and Productivity
Issue of 2009‒09‒19
fourteen papers chosen by

  1. Could small dairy farms in Switzerland compete with their French counterparts? A metafrontier analysis during 1990-2004 By Ferjani, Ali; Latruffe, Laure
  2. Technical efficiency of Organic Fertilizer in small farms of Nicaragua: 1998-2005 By Zuniga González, Carlos Alberto
  3. The Generation and Exploitation of Technological Change: Market Value and Total Factor Productivity By Antonelli Cristiano; Colombelli Alessandra
  4. What are the Key Constraints in Technical Efficiency of Smallholder Farmers in Africa? Empirical Evidence from Kenya By Owuor, George; Shem, Ouma A.
  5. Is there a rural-urban divide? Location and Productivity of UK manufacturing By Marian Rizov; Patrick Paul Walsh
  6. A two-stage productivity analysis using bootstrapped Malmquist index and quantile regression By Kaditi, Eleni A.; Nitsi, Elisavet I.
  7. Small U.S. Dairy Farms: Can They Compete? By Gillespie, Jeffrey; Nehring, Richard; Sandretto, Carmen; Hallahan, Charlie
  8. Policy impact on technical efficiency of Spanish olive farms located in Less Favored Area By Lambarraa, Fatima; Kallas, Zein
  9. The Economic Impact of Migration: Productivity Analysis for Spain and the United Kingdom By Kangasniemi, Mari; Mas, Matilde; Robinson, Catherine; Serrano, Lorenzo
  10. Efficiency and profitability of European banks: how important is operational efficiency? By Werner, Karl; Moormann, Jürgen
  11. Health Insurance and Productivity: Evidence from the Manufacturing Sector By Sang Nguyen; Alice Zawacki
  12. Measuring Economic Growth from Outer Space By Vernon Henderson; Adam Storeygard; David N. Weil
  13. Enterprise systems and labor productivity: disentangling combination effects By Engelstätter, Benjamin
  14. Growth Accounting By Charles R. Hulten

  1. By: Ferjani, Ali; Latruffe, Laure
    Abstract: The objective of the paper is to investigate whether Swiss farms specialised in dairy (the prevailing production of the country), which are small in international standards, would have a survival potential if they had to compete more directly with EU farms. More specifically, we investigate whether Swiss dairy farms would be able to compete with their French counterparts (located in mountainous areas, but larger than Swiss ones) in a future made of increased globalisation and reduced borders. For this we evaluate which country, during the period 1990-2004, would have been more able to use efficiently a common hypothetical technology, and would have had a more productive (own) technology. Efficiency scores and technology ratios are calculated using the concept of metafrontier and the Data Envelopment Analysis (DEA) approach. Results indicate that Swiss farms would have been slightly less efficient on average with respect to the common frontier, and that they had a less productive technology, the productivity gap with France being however only 5 percent. Regression results suggest that the efficiency differential and the productivity gap between Swiss farms and French farms were mainly due to larger Swiss farms with lower labour per livestock unit and higher proportion of family labour.
    Keywords: technical efficiency, technology gap, Data Envelopment Analysis, dairy farming, Switzerland, France, Agricultural and Food Policy, Productivity Analysis, Q12, D24,
    Date: 2009–08–20
  2. By: Zuniga González, Carlos Alberto
    Abstract: This article applies frontier production function analysis to small farms in Nicaragua during 1998-2005 (Battese and Coelli, 1988). The objective of this study is to estimate an average function that will provide a picture of the shape of the organic fertilizer technology of an average firm (in our case, agricultural production units). Furthermore I present a best-practice of organic fertilizer against which the efficiency of the firms within the primary sector can be measured (Coelli, T: 1995). The results show an average of technical efficiency acceptable which the makers of public policy in Nicaragua must considerer for the future. It is imperative if we consider an economy activity indexes that have increased during this period.
    Keywords: Technical Efficiency, LSMS, Organic Fertilizer, Small Farm, Panel Data, Agribusiness, Production Economics, Productivity Analysis,
    Date: 2009–08–27
  3. By: Antonelli Cristiano (University of Turin); Colombelli Alessandra
    Abstract: In this paper we articulate and test the hypothesis that TFP is a reliable and relevant measure of firm’s innovation capabilities, and, as such, accounts for Tobin’s q indicator. With this aim, we investigate empirically the relationship between firm level total factor productivity and the Tobin’s q. Measuring Tobin’s q allows inferring the actual value of knowledge capital from stock market valuation. We use a panel of companies listed on UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995 - 2005. Our results confirm that TFP is a reliable indicator of firm’s innovative capabilities. When we control for firm’s R&D investments, the effects of TFP on market value remain highly significant. This suggests that TFP is a broader measure of innovation capability than R&D is. The validation of the Tobin’s q and TFP relationship has important implications concerning firm’s technological innovation measurement.
    Date: 2009–09
  4. By: Owuor, George; Shem, Ouma A.
    Abstract: The idea that smallholder farmers are reasonably efficient has triggered much debate in Sub-Saharan Africa. Indeed, efficiency of smallholder farmers has implications for choice of development strategy; reason being that Sub-Saharan countries derive over 60% of their livelihoods from smallholder agriculture and rural economic activities. This paper evaluates factors that promote production efficiency among smallholder farmers in Kenya as avenues for policy intervention. A production frontier function was fitted to a random sample derived from a survey carried in 2007. Results show that all conventional inputs had the expected significance. On the inefficiency indicators, ownership to farmland, attendance to agricultural workshops, access to credit and participation in self-help groups significantly reduced inefficiency, while age, market distance, female gender and formal education increased inefficiency. Our findings suggest that within the available technologies, farmers can improve on their productivity if they nurture teamwork as in groups where labour is shared. Besides, better roads would reduce transaction costs and promote higher returns, and training in agriculture would boost efficient resources use for better performance. Therefore, there exists opportunity to improve efficiency in production given existing farm technologies.
    Keywords: Technical Efficiency, Smallholder Farmers, Africa, Productivity Analysis,
    Date: 2009–08–20
  5. By: Marian Rizov (Middlesex University Business School, UK and Wageningen University, The Netherlands); Patrick Paul Walsh (SPIRe and The Geary Institute University College Dublin)
    Abstract: We compute the productivity gaps in manufacturing industries by urban, rural less sparse and rural sparse locations in the UK. This is done by using firm-specific total factor productivities, which are estimated by a semi-parametric algorithm within 4-digit manufacturing industries using FAME data over the period 1994-2001, by each location. We analyse the productivity differentials across locations by decomposing them into firm differences within the same industry and by differences that are explained by industry composition effects. Our analysis indicates that at the end of twentieth century a rural-urban divide in manufacturing productivity still remains but there is a tendency of convergence between rural and urban location categories. Even though industry productivity is different by location, industry composition effects are positively correlated with industry productivity by location suggesting that locations with high productivity are also characterised by industrial structures with higher productivity.
    Keywords: Total factor productivity, structural estimation, rural-urban divides, UK manufacturing
    JEL: D24 R11 R30
    Date: 2009–09–09
  6. By: Kaditi, Eleni A.; Nitsi, Elisavet I.
    Abstract: This paper examines the effects of farm characteristics and government policies in enhancing productivity growth for a sample of Greek farms, using a two-stage procedure. In the 1st-stage, non-parametric estimates of Malmquist index and its decompositions are computed, while a bootstrapping procedure is applied to provide their statistical precision. In the 2nd-stage, the productivity growth estimates are regressed on various covariates using a bootstrapped quantile regression approach. The effect that the covariates exert on productivity growth of the average producer is analyzed, as well as the marginal effect of a given covariate for individuals at different points in the conditional productivity distribution. The results indicate that there exists large disparity of the covariates effect on productivity growth at different quantiles. Thus, policy suggestions should take into account the productivity distribution involved, as well as the selected policy objectives.
    Keywords: Malmquist productivity index, quantile regression, bootstrap, Research Methods/ Statistical Methods, C14, C21, D24,
    Date: 2009–08–20
  7. By: Gillespie, Jeffrey; Nehring, Richard; Sandretto, Carmen; Hallahan, Charlie
    Abstract: The U.S. dairy industry is undergoing rapid structural change, evolving from a structure including many small farmers in the Upper Midwest and Northeast to one that includes very large farms in new production regions. Small farms are struggling to retain competitiveness via improved management and low-input systems. Using data from USDAâs Agricultural Resource Management Survey, we determine the extent of U.S. conventional and pasture-based milk production during 2003-2007, and estimate net returns, scale efficiency, and technical efficiency associated with the systems across different operation sizes. We compare the financial performance of small conventional and pasture-based producers with one another and with largescale producers. A stochastic production frontier is used to analyze performance over the period for conventional and pasture technologies identified using a binomial logit model. Large conventional farms generally outperformed smaller farms using most economic measures â technical efficiency, various profitability measures, and returns to scale.
    Keywords: Pasture-based system, technical efficiency, returns to scale, dairy, Livestock Production/Industries, Productivity Analysis,
    Date: 2009–08–20
  8. By: Lambarraa, Fatima; Kallas, Zein
    Abstract: Most of Spanish olive farms are concentrated in Less-Favoured Areas (LFA) with the majority of producer areas are under Objective 1 of the EU Regional Policy. The EU has long recognized such distinctive characteristics of those holdings with a specific support measures aiming to prevent the abandonment of olive groves as well as to support sustainable development of this sector. The main objective of this study is to evaluate the impact of LFA payment on the olive farms technical efficiency. Two sample farms located in LFA (63 farms receiving LFA payment support and 99 farms do not) have been observed from 2000 to 2004. A stochastic frontier production has been used. Results indicate that LFA payment, age of manager, tenure regimes of land, workforce composition and farm size affect efficiency levels. The LFA payment coefficient indicates a significant negative impact on the technical efficiency of Spanish olive farms. The farms that not receive the LFA payment has a technical efficiency rate 0.15 percentage units upper compared to those that receive this payment. Thus, the payment policy could decreases farms technical efficiency which could represents a handicap for farms economic survival and its persistence in the long term period.
    Keywords: LFA payment, olive farm, technical efficiency, Production Economics, Productivity Analysis, Q180, D210,
    Date: 2009–08–20
  9. By: Kangasniemi, Mari; Mas, Matilde; Robinson, Catherine; Serrano, Lorenzo
    Abstract: Increased internationalization over the past 20 years has meant that labour has become increasingly mobile, and whilst employment and earnings effects have been extensively analysed in host and source nations, the implications for firm and industry performance have been largely ignored. This paper explores the direct economic consequences of immigration on host nations’ productivity performance at a sectoral level. We consider its impact in two very different European countries, Spain and the UK. Whilst the UK has traditionally had a substantial in-flow of migration, for Spain, the phenomenon is much more recent. The paper provides an overview of the role played by immigration on per capita income, highlighting the importance of demographic differences. We then go on to analyze the role of migration on productivity using two different approaches: i) growth accounting methodology and ii) econometric estimation of a production function. Our findings indicate that migration has had very different implications for Spain and the UK, migrants being more productive than natives in the UK but less productive than natives in Spain. This may in part be a function of different immigration policies, particularly related to the skill requirements on entry, but also in part a feature of the host nations’ ability to ‘absorb’ foreign labour.
    Keywords: Key words: migration; productivity; industries
    JEL: O40 J30 J20
    Date: 2009
  10. By: Werner, Karl; Moormann, Jürgen
    Abstract: Most previous research on efficiency in banking takes a regulatory perspective. In contrast, this paper investigates the empirical relation between efficiency and profitability in five large economies of the European Union during the period 1998-2005 and discusses the results from the perspective of corporate bank strategy. Methodologically the existing literature is expanded by the use of DEA super-efficiency values to regress profitability, the incorporation of risk by calculative costs of capital, and a model specification built on the modern understanding of banks as centers of value creation. The results of the conducted static and dynamic regression analyses show that profitable banks operate with higher technical efficiency than their competitors. Furthermore, the strategic environment and in this regard the structure and concentration of the national financial sector have a considerable impact on a bank's financial performance. Both issues proved to be statistically and economically significant. Thus, the results support the appropriateness of the generic strategy of cost leadership for the European banking market. Banks following this strategic position were able to achieve higher excess returns during the analyzed period.
    Keywords: Banks,corporate strategy,efficiency,operational efficiency,profitability
    JEL: C14 G21 L25 M21
    Date: 2009
  11. By: Sang Nguyen; Alice Zawacki
    Abstract: This paper examines the relationship between employer-sponsored offers of health insurance and establishments’ labor productivity. Our empirical work is based on unique plant level data that links the 1997 and 2002 Medical Expenditure Panel Survey-Insurance Component with the 1992, 1997, and 2002 Census of Manufactures. These linked data provide information on employer-provided insurance and productivity. We find that health insurance offers are positively associated with levels of establishments’ labor productivity. These findings hold for all manufacturers as well as those with fewer than 100 employees. Our preliminary results also show a drop in health care costs from the 75th to the 25th percentile would increase the probability of a plant offering insurance by 1.5-2.0 percent in both 1997 and 2002. The results from this paper provide encouraging and new empirical evidence on the benefits employers may reap by offering health insurance to workers.
    Keywords: Employer-provided health insurance, labor productivity, manufacturing industries
    Date: 2009–09
  12. By: Vernon Henderson; Adam Storeygard; David N. Weil
    Abstract: GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night. Our statistical framework uses light growth to supplement existing income growth measures. The framework is applied to countries with the lowest quality income data, resulting in estimates of growth that differ substantially from established estimates. We then consider a longstanding debate: do increases in local agricultural productivity increase city incomes? For African cities, we find that exogenous agricultural productivity shocks (high rainfall years) have substantial effects on local urban economic activity.
    Keywords: economic growth; remote sensing; urbanization; income measurement
    Date: 2009
  13. By: Engelstätter, Benjamin
    Abstract: This study analyzes the relationship between the three main enterprise systems (Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM)) and labor productivity. It reveals the performance gains due to different combinations of these systems. It also tests for complementarity among the enterprise systems with respect to their interacting nature. Using German firm-level data the results show that the highest productivity gains due to enterprise system usage are realized through use of the three main enterprise systems together. In addition, SCM and CRM function as complements, especially if ERP is also in use.
    Keywords: Labor productivity,enterprise systems,complementarity,Enterprise Resource Planning,Supply Chain Management,Customer Relationship Management
    JEL: D20 M00
    Date: 2009
  14. By: Charles R. Hulten
    Abstract: Incomes per capita have grown dramatically over the past two centuries, but the increase has been unevenly spread across time and across the world. Growth accounting is the principal quantitative tool for understanding this phenomenon, and for assessing the prospects for further increases in living standards. This paper sets out the general growth accounting model, with its methods and assumptions, and traces its evolution from a simple index-number technique that decomposes economic growth into capital-deepening and productivity components, to a more complex account of the growth process. In the more complex account, capital and productivity interact, both are endogenous, and quality change in inputs and output matters. New developments in micro-level productivity analysis are also reviewed, and the long-standing question of net versus gross output as the appropriate indicator of economic growth is addressed.
    JEL: E01 O47
    Date: 2009–09

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