New Economics Papers
on Efficiency and Productivity
Issue of 2009‒10‒10
fourteen papers chosen by

  1. What determines local governments' technical efficiency? The case of road maintenance By Kalb, Alexander
  2. Technical Change and Total Factor Productivity Growth for Swedish Manufacturing and Service Industries By Oh, Donghyun; Heshmati, Almas; Lööf, Hans
  3. Aggregate and Sectoral Productivity Growth in Thailand and Indonesia By Peter Warr
  4. Technical Efficiency, Specialization and Ownership Form: Evidences from a Pooling of Italian Hospitals. By Silvio Daidone; Francesco D'Amico
  5. Corporate performances and market selection. Some comparative evidence By Giulio Bottazzi; Giovanni Dosi; Nadia Jacoby; Angelo Secchi; Federico Tamagni
  6. The Icelandic Economy: a victim of the financial crisis or simply inefficient? By Oh, Dong-Hyun; Lööf, Hans; Heshmati, Almas
  7. The Effect of Learning by Hiring on Productivity By Parrotta, Pierpaolo; Pozzoli, Daio
  8. Is Fair Trade Honey Sweeter? An Empirical Analysis on the Effect of Affiliation on Productivity By Leonardo Becchetti; Stefano Castriota
  9. Does Good Financial Performance Mean Good Financial Intermediation in China? By Tarhan Feyzioglu
  10. The effects of upcoding, cream skimming and readmissions on the Italian hospitals efficiency: a population–based investigation By Berta, P; Callea, G; Martini, G; Vittadini, G
  11. Catching up to the Technology Frontier: The Dichotomy Between Innovation and Imitation By Jakob Madsen; Rabiul Islam; James Ang
  12. The Impact of Training on Productivity and Wages: Firm Level Evidence By Jozef Konings; Stijn Vanormelingen
  13. Research and Productivity in Thai Agriculture By Waleerat Suphannachart; Peter Warr
  14. External scale economies in manufacturing sector of Pakistan: a comparison of large scale manufacturing sector of Sindh and Punjab By Zafar, Sohail; Ahmed, Vaqar

  1. By: Kalb, Alexander
    Abstract: In this paper we investigate the determinants of local governments' technical efficiency in road maintenance for a panel of German counties using a broad variety of estimation approaches. More specifically, we calculate efficiency indices using non-parametric (DEA) and parametric (stochastic frontier analysis) reference technologies, and examine how these efficiency indices can be explained by estimating and comparing four different regression models. The results of our analysis show that (controlling for numerous characteristics of the counties) the disposable income of the counties' citizens, intergovernmental grants (for county roads), and the payments to the counties influence efficiency negatively. Concerning political variables we find weak evidence that efficiency decreases with an increasing share of seats of left-wing parties in the county council; the hypothesis that efficiency decreases with the degree of political concentration in the county council could not be confirmed.
    Keywords: Technical efficiency,road maintenance,stochastic frontier analysis,data envelopment analysis,German counties
    JEL: H11 R30 R51
    Date: 2009
  2. By: Oh, Donghyun (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Heshmati, Almas (Seoul National University, Seoul, Korea); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper presents alternative specifications of the production functions of a large panel of Swedish firms for the period 1992-2000. The period can be characterized as a transition when long-run productivity growth in the Swedish economy improved from being among the weakest to one of the strongest within the OECD. In order to present a detailed exploration of this dramatic change, the time trend and general index models are applied to estimate total factor productivity (TFP) growth, rate of technical change and returns to scale. The models are extended to allow for firm-specific as well as time-varying technical change. The parametric TFP measures are also compared with the non-parametric Solow residual, and several hypotheses are tested to explain the growth patterns in the Swedish economy. It is found that the improved growth rate, initially starting in large exporting manufacturing firms, after a deep economic crisis at the beginning of the 1990s, spilled over to the rest of the economy, both manufacturing and services.
    Keywords: Technical change; total factor productivity growth; manufacturing; service; enterprise panel data
    JEL: C23 C52 C67 D24 L25 L60 L80 O30
    Date: 2009–09–28
  3. By: Peter Warr
    Abstract: Total factor productivity growth is studied in this paper for two countries, Thailand and Indonesia, from 1980 to 2006. The analysis is conducted at both the aggregate and sectoral levels. A feature of the analysis is the decomposition of aggregate total factor productivity growth into two components: productivity growth in individual sectors, and a resource reallocation effect: the movement of resources from low productivity to high productivity sectors. In both countries, virtually all factor productivity growth at the sectoral level derived from agriculture, but the reallocation of resources away from agriculture was a much larger source of aggregate productivity growth.
    Keywords: total factor productivity growth, Thailand, Indonesia
    JEL: O47 Q10 O30
    Date: 2009
  4. By: Silvio Daidone (Faculty of Economics, University of Rome "Tor Vergata"); Francesco D'Amico (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We evaluate how the productive structure and level of specialization of a hospital affect technical efficiency by analyzing a six-year panel database (2000/2005) drawn from hospital discharge records and Ministry of Health data. We adopt a distance function approach, while measuring the technical efficiency level with stochastic frontier techniques. After controlling for environmental variables and hospital case-mix, inefficiency is negatively associated with specialization and positively associated with capitalization. Capitalization is typical of private structures which, on average, use resources less efficiently with respect to public and not-for-profit hospitals. Finally, by looking at scale elasticities, we find some evidence of unexploited economies of scale, leaving room for centralization.
    Keywords: Stochastic frontiers, Hospital Discharge Records, Hospital Specialization, Distance Functions, Technical Efficiency.
    JEL: C16 I12 I18 L25 L33
    Date: 2009–09–30
  5. By: Giulio Bottazzi; Giovanni Dosi; Nadia Jacoby; Angelo Secchi; Federico Tamagni
    Abstract: Diverse theories of industry dynamics predict heterogeneity in production efficiency to be the driver of firms' growth, survival and industrial change, either through a direct link between efficiency and growth, or through an indirect effect via profitabilities, as more productive firms can enjoy higher profit margins which, under imperfect capital markets, allow them to invest and grow more. Does the empirical evidence bear such predictions? This paper explores the dynamics of selection and reallocation through an investigation of the productivity-profitability-growth relations at the firm level. Exploiting large panels of Italian and French industrial firms, we find that heterogeneity in efficiencies primarily yield persistent profitability differentials, whereas the relationships of corporate growth with either productivity or profitability appear much weaker, if at all existent. This suggests that selection forces are much less strong than usually assumed. Rather, the links between efficiency and corporate growth seem profoundly mediated by large degrees of behavioural freedom. The results robustly applies across different industrial sectors and across the two countries.
    Keywords: firms heterogeneity, corporate growth, productivity, profitability, market selection, cross-country comparisons
    JEL: C14 D20 L10 L20 O47
    Date: 2009–09–29
  6. By: Oh, Dong-Hyun (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Heshmati, Almas (Seoul National University, Seoul, Korea)
    Abstract: Iceland, one of the smallest European economies, was hit severely by the 2008-financial crisis. This paper uses a firm-level Community Innovation Survey (CIS) data set to consider the economy in the period preceding the collapse of its financial system. We examine the linkage between the crisis and innovativeness from the perspective of technical efficiency by means of the Data Envelopment Analysis of 204 randomly selected firms. The results suggest that a substantial fraction of the Icelandic firms can be classified as non-efficient in their production process. The production scale of many manufacturing firms is too small to be considered technically efficient, while services firms typically use excessive resources in their production process. A remarkably weak performance in transforming R&D and labor efforts into successful innovations is observed. Based on the empirical results, suitable policy implications are suggested to remedy the inoptimal production structure and help economic recovery.
    Keywords: Technical efficiency; R&D; Innovation; Productivity; Manufacturing; Services; Iceland
    JEL: C67 D24 D57 L25 L60 L80
    Date: 2009–09–28
  7. By: Parrotta, Pierpaolo (Department of Economics, Aarhus School of Business); Pozzoli, Daio (Department of Economics, Aarhus School of Business)
    Abstract: This work studies the phenomenon of inter- rm labor mobility as potential channel of knowledge transfer. Using data from the Danish employer-employee register, covering the period 1995-2005, it investigates how the knowledge embed- ded into recruited workers, coming from other rms, contributes to the process of knowledge diusion and boosts rms productivity. Speci cally, estimating both parametric (Cobb-Douglas) and semi-parametric production functions (Olley and Pakes, 1996; Levinsohn and Petrin, 2003), the impact of recruited technicians and highly educated workers on total factor productivity at the rm level is found to be signi cantly positive. A matching analysis, which allows for contin- uous treatment eect evaluation (Hirano and Imbens, 2004), corroborates this nding.
    Keywords: Labour mobility; Total factor productivity; Generalized propensity score
    JEL: C23 J33 J38 J51
    Date: 2009–07–22
  8. By: Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Stefano Castriota
    Abstract: We evaluate the impact of affiliation to Fair Trade on a sample of Chilean honey producers. Evidence from standard regressions and propensity score matching shows that affiliated farmers have higher productivity (income from honey per worked hour) than the control sample. Additional results on the effects of affiliation on training, cooperation and advances on payments suggest that affiliation contributed both to, and independently from, the economies of scale effect. Therefore, we show that the productivity effect is partially explained by the superior capacity of affiliated workers to exploit economies of scale.
    Keywords: fair trade, economies of scale, productivity.
    JEL: D63 D64 O18 O19 O22
    Date: 2009–06–30
  9. By: Tarhan Feyzioglu
    Abstract: Chinese banks generate large profits and have relatively low nonperforming loans. However, good financial performance does not, in itself, guarantee that banks efficiently intermediate the economy's financial resources. This paper first examines how efficient Chinese banks are in financial intermediation, using the stochastic production frontier approach. Quality of loans are controlled for by focusing on net loans and correcting for nonperforming loans; Hong Kong SAR banks are included in the sample to have a more universally representative production frontier. The results suggest that Chinese banks indeed became more efficient during 2001-07. Nevertheless, a majority of banks remain quite inefficient, including several large state owned banks and many city banks. Large banks tend to hoard deposits and operate beyond the point of diminishing returns to scale, while smaller banks operate at increasing returns to scale. This suggests that reallocating deposits from large to smaller banks would increase overall efficiency. The paper finds no significant correlation between bank efficiency and profitability. Possible factors leading to large profits in the banking system, despite wide-spread inefficiencies, are low deposit interest rates, large interest margins, and high market concentration. Moving to indirect monetary policy and deepening capital markets to channel some of the savings to productive investment would help improve the efficiency of financial intermediation. This may spur loan growth, however, which will need to be handled with monetary policy and regulatory/supervisory tools.
    Keywords: Bank supervision , Banking , Banking sector , Banks , China, People's Republic of , Depositories , Economic models , Financial intermediation , Financial management , Loans , Monetary policy , Performance indicators , Profits ,
    Date: 2009–08–12
  10. By: Berta, P; Callea, G; Martini, G; Vittadini, G
    Abstract: In this paper we analyze the effects of some distortions induced by prospective payment system, i.e. Upcoding, Cream Skimming and Readmissions, on hospitals’ technical efficiency. We estimate a production function using a population–based dataset composed by all active hospitals in an Italian region during the period 1998–2007. We show that cream skimming and upcoding have a negative impact on hospitals’ technical efficiency, while readmissions have a positive effect. Moreover, we find that private hospitals are more engaged in cream skimming than public and not–for–profit ones, while we observe no ownership differences regarding upcoding. Not–for–profit hospitals have the highest readmission index. Last, not–for–profit and public hospitals have the same efficiency levels, while private hospitals have the lowest technical efficiency.
    Keywords: Upcoding; Cream Skimming; Readmission; Hospital Technical Efficiency; Ownership.
    JEL: I11 C50 I18 L33
    Date: 2009–06–21
  11. By: Jakob Madsen; Rabiul Islam; James Ang
    Abstract: This research examines whether technology transfer, research intensity, educational attainment and the ability to absorb foreign technology help explain cross-country differences in productivity growth. Our data comprise a panel of 55 countries including 23 OECD and 32 developing economies over the period 1970-2004. The results show that TFP growth in both OECD and developing countries is positively affected by research intensity, distance to the frontier, research intensity-based absorptive capacity and educational attainment-based absorptive capacity. However, they reveal large differences between developed and developing countries.
    JEL: O30 O40
    Date: 2009–09
  12. By: Jozef Konings; Stijn Vanormelingen
    Abstract: This paper uses ?rm level panel data of ?rm provided training to estimate its impact on productivity and wages. To this end the strategy proposed by Ackerberg, Caves and Frazer (2006) for estimating production functions to control for the endogeneity of input factors and training is applied. The productivity premium for a trained worker is estimated at 23%, while the wage premium of training is estimated at 12%. Our results give support to recent theories that explain work related training by imperfect competition in the labor market.
    Keywords: Training, production functions, human capital
    JEL: J24 J31 L22
    Date: 2009
  13. By: Waleerat Suphannachart; Peter Warr
    Abstract: This paper examines the impact that publicly funded agricultural research has on productivity in crop production within Thailand. It tests empirically the two hypotheses that, first, publicly funded research and development (R&D) in crop production is a significant determinant of total factor productivity (TFP) in the crop sector and, second, that its social rate of return is high. The statistical analysis applies error correction methods to national level time series data for Thailand, covering the period 1970 to 2006. Emphasis is given to public research in crop production, where most publicly funded agricultural R&D has occurred. The role of international research spillovers and other possible determinants of TFP are also taken into account. The results demonstrate that public investment in research has a positive and significant impact on TFP. International research spillovers have also contributed to TFP. The results support the finding of earlier studies that returns on public research investment have been high. This result holds even after controlling for possible sources of upward biases present in most such studies, due to the omission of alternative determinants of measured TFP. The findings raise a concern over declining public expenditure on crop research, in Thailand and many other developing countries.
    Keywords: agricultural research, productivity, Thai agriculture, error correction model
    JEL: O30 Q16 C32
    Date: 2009
  14. By: Zafar, Sohail; Ahmed, Vaqar
    Abstract: This study investigates the external economies of scale in the manufacturing sector of Pakistan. The Return to scale is a property of the production function that indicates the relationship between proportionate change, in all inputs and resulting change in output. Returns to scale are applicable only in the long run, since all inputs are being changed. The estimated value of the coefficient of returns to scale at aggregate level is 1.017. It means that one percentage point change in all input quantities results in 1.017 percent change in output. It turns out that manufacturing sector of Pakistan is characterized by almost constant returns to scale at aggregates and disaggregate level.
    Keywords: Economies of Scale; Distortion; Efficiency; Pakistan;
    JEL: E23 R32 D51
    Date: 2009–10–04

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