New Economics Papers
on Efficiency and Productivity
Issue of 2010‒01‒16
seventeen papers chosen by

  1. Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors By Kumbhakar, Subal C.; Ortega-Argilés, Raquel; Potters, Lesley; Vivarelli, Marco; Voigt, Peter
  2. Productivity and Financial Structure: Evidence from Indian High-Tech Firms By Ghosh, Saibal
  3. Investment-Specific Productivity Growth: Chile in a Global Perspective By Gabriel Di Bella; Martin Cerisola
  4. Evolution of Bank Efficiency in Brazil: A DEA Approach By Roberta B. Staub; Geraldo Souza; Benjamin M. Tabak
  5. The Need for Speed: Impacts of Internet Connectivity on Firm Productivity By Arthur Grimes; Cleo Ren; Philip Stevens
  6. Unobserved Heterogeneity and International Benchmarking in Public Transport By Astrid Cullmann; Mehdi Farsi; Massimo Filippini
  7. Efficiency of French football clubs and its dynamics By Jardin, Mathieu
  8. Assessing the impact of infrastructure quality on firm productivity in Africa: Cross-country comparisons based on investment climate surveys from 1999 to 2005 By Alvaro Escribano Saez; J. Luis Guasch; Jorge Pena
  9. Learning-by-exporting in Korean Manufacturing: A Plant-level Analysis By Chin Hee Hahn; Chang Gyun Park
  10. A Stochastic Model of Labor Productivity and Employment By FUJIWARA Yoshi; AOYAMA Hideaki
  11. Exports, Productivity, and Credit Constraints: A Firm-Level Empirical Investigation of China By Zhiyuan Li; Miaojie Yu
  12. Farmer participation in supermarket channels and technical efficiency: The case of vegetable production in Kenya By Elizaphan J.O. Rao; Matin Qaim
  13. Productivity and Firm Selection: Quantifying the “New” Gains from Trade By Gianmarco I.P. Ottaviano; Gregory Corcos; Massimo Del Gatto; Giordano Mion
  14. Happiness and Productivity By Oswald, Andrew J.; Proto, Eugenio; Sgroi, Daniel
  15. Bank relationships and firms’ financial performance: the Italian experience By Castelli , Annalisa; Dwyer, Gerald P; Hasan, Iftekhar
  16. Patents, Entrepreneurship and Performance By Christian Helmers; Mark Rogers
  17. Characteristics, Costs, and Issues for Organic Dairy Farming By McBride, William D.; Greene, Catherine

  1. By: Kumbhakar, Subal C. (Binghamton University, New York); Ortega-Argilés, Raquel (European Commission); Potters, Lesley (Utrecht School of Economics); Vivarelli, Marco (Università Cattolica del Sacro Cuore); Voigt, Peter (European Commission)
    Abstract: The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.
    Keywords: corporate R&D, productivity, technical efficiency, stochastic frontier analysis
    JEL: L2 O3
    Date: 2009–12
  2. By: Ghosh, Saibal
    Abstract: The paper utilizes data on high-tech Indian firms for 1996-2007 to explain the association between leverage and productivity. Accordingly, firm-level productivity measures are regressed on a set of control variables, which includes leverage among the regressors. The findings suggest that low leveraged firms tend to be more productive, on average. Robustness tests support the results.
    Keywords: productivity; financial structure; leverage; India
    JEL: D24
    Date: 2009–12–01
  3. By: Gabriel Di Bella; Martin Cerisola
    Abstract: By the end of 2007, Chile's total factor productivity was lower than ten years earlier, a performance that contrasted sharply with the previous decade, when productivity grew by a cumulative 30 percent. This paper assesses productivity trends in Chile, by decomposing productivity into investment-specific technological change (associated with improvements in the quality of capital) and neutral technological change (related to the organization of productive activities). It concludes that investment-specific technological improvements have contributed significantly to long-term growth in Chile, in line with trends observed in other net commodity exporters, while neutral technological change has been slow.
    Keywords: Capital , Chile , Cross country analysis , Economic growth , Economic models , Investment , Labor productivity , Productivity ,
    Date: 2009–12–02
  4. By: Roberta B. Staub; Geraldo Souza; Benjamin M. Tabak
    Abstract: This paper investigates cost, technical and allocative efficiency for Brazilian banks in the recent period (2000-2007). The empirical results imply that non-performing loans is an important indicator of efficiency level, as well as market share. Evidence is in favor of the home field advantage hypothesis since foreign banks are less cost efficient than their domestic counterparts. Furthermore, the agency theory hypothesis is not accepted as state-owned banks are more cost efficient than private banks. This could be due to: 1. the number of state-owned banks was reduced in the last years and only more efficient banks are left in the Brazilian banking system, and 2. state-owned banks hold very large public servants payroll accounts and therefore have an important advantage. Further research could exploit profit efficiency as private banks may have higher profit efficiency.
    Date: 2009–12
  5. By: Arthur Grimes (Motu Economic and Public Policy Research & University of Waikato); Cleo Ren (Motu Economic and Public Policy Research); Philip Stevens (Ministry of Economic Development)
    Abstract: Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access.
    Keywords: Internet, broadband, productivity
    JEL: O33
    Date: 2009
  6. By: Astrid Cullmann; Mehdi Farsi; Massimo Filippini
    Abstract: We analyze the technical efficiency of German and Swiss urban public transport companies by means of SFA. In transport networks we might face different network structures or complexities, not observed, but influencing the production process. The unobserved factors are typically modeled as separable factors. However, we argue that the entire production process is organized around different network structures. Therefore, they are inevitably non-separable from the observed inputs and outputs. The adopted econometric model is a random coefficient stochastic frontier model. We estimate an input distance function for the years 1991 to 2006. The results underline the presence of unobserved non-separable factors.
    Date: 2009
  7. By: Jardin, Mathieu
    Abstract: In the paper we evaluate the efficiency of French football clubs (Ligue 1) from 2004 to 2007 using Data Envelopment Analysis (DEA) with « Assurance Region ». Then, we study the dynamics of clubs’ performances. Contrary to previous works on other championships, best teams in competition or most profitable clubs are not the most efficient units in our sample. High average scores show that French First League is efficient. The first source of inefficiency in the Ligue 1 is linked to size problems and over-investments. Despite an average club performance stable over the period, we exhibit a deterioration of conditions in which clubs operate.
    Keywords: Ligue 1; efficiency scores; Data Envelopment Analysis (DEA); Malmquist index; over-investment
    JEL: L21 L83
    Date: 2009–06–23
  8. By: Alvaro Escribano Saez; J. Luis Guasch; Jorge Pena
    Abstract: This paper provides a systematic, empirical assessment of the impact of infrastructure quality on the total factor productivity (TFP) of African manufacturing firms. This measure is understood to include quality in the provision of customs clearance, energy, water, sanitation, transportation, telecommunications, and information and communications technology (ICT). We apply microeconometric techniques to investment climate surveys (ICSs) of 26 African countries carried out in different years during the period 2002–6, making country-specific evaluations of the impact of investment climate (IC) quality on aggregate TFP, average TFP, and allocative efficiency. For each country we evaluated this impact based on 10 different productivity measures. Results are robust once we control for observable fixed effects (red tape, corruption and crime, finance, innovation and labor skills, etc.) obtained from the ICSs. We ranked African countries according to several indices: per capita income, ease of doing business, firm perceptions of growth bottlenecks, and the concept of demeaned productivity (Olley and Pakes 1996). We divided countries into two blocks: high-incomegrowth and low-income-growth. Infrastructure quality has a low impact on TFP in countries of the first block and a high (negative) impact in countries of the second. We found heterogeneity in the individual infrastructure elements affecting countries from both blocks. Poor-quality electricity provision affects mainly poor countries, whereas problems dealing with customs while importing or exporting affects mainly faster-growing countries. Losses from transport interruptions affect mainly slower-growing countries. Water outages affect mainly slower-growing countries. There is also some heterogeneity among countries in the infrastructure determinants of the allocative efficiency of African firms.
    Keywords: Africa, Infrastructure, Total factor productivity, Investment climate, Competitiveness,
    JEL: D21 D24 D61 L60 O55 O57
    Date: 2009–11
  9. By: Chin Hee Hahn; Chang Gyun Park
    Abstract: The paper analyzes whether firms that start exporting become more productive utilizing recently developed sample matching procedures to control the problems from self-selection into the export market. We use plant level panel data on Korean manufacturing sector from 1990 to 1998. We find clear and robust empirical evidence in favor of the learning-by-exporting effect; total factor productivity differentials between exporters and their domestic counterparts arises and widens during several years after export market entry. We also find that the effect is more pronounced for firms that have higher skill-intensity, higher share of exports in production, and are small in size. Overall, the evidence suggests that exporting is one important channel through which domestic firms acquire accesses to advanced knowledge and better technology. Also, the stronger learning-by-doing effect for firms with higher skill-intensity seems to support the view that gabsorptive capacityh matters to receive knowledge spillovers from exporting activity.
    Keywords: Learning-by-exporting, Productivity, Propensity score matching
    JEL: F14 O12 O19
    Date: 2009–12
  10. By: FUJIWARA Yoshi; AOYAMA Hideaki
    Abstract: We investigate the productivity dispersion, i.e., allocation of workers among different levels of productivity and output, by employing the largest database for small and medium-sized companies, Credit Risk Database (CRD). Focusing on the manufacturing sector and small and medium levels of productivity, where more workers are distributed among higher levels of productivity, we have new empirical findings in a pivotal role of workers' allocation among different levels of output as a key to understand their allocation among varying levels of productivity. We also propose a stochastic process, mathematically a jump Markov process, in which workers are allocated to firms of differing output and productivity, interrupted by transitions to unemployment, where transitions are coupled with growth and contraction of firms' output that relate to fluctuations of demand.
    Date: 2010–01
  11. By: Zhiyuan Li; Miaojie Yu
    Abstract: Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firmfs productivity has significant effects on the firmfs exports. This paper examines how a firmfs credit constraints as well as its productivity affect its export decisions. We imbed the firmfs credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.
    Keywords: Credit Constraints, Heterogeneous Firms, Productivity, Trade
    JEL: F1 F3 D9 G2
    Date: 2009–12
  12. By: Elizaphan J.O. Rao (University of Göttingen); Matin Qaim (University of Göttingen)
    Abstract: Supermarkets and high-value exports are currently gaining ground in the agri-food systems of many developing countries. While recent research has analyzed income effects in the small farm sector, impacts on farming efficiency have hardly been studied. Using a survey of Kenyan vegetable growers and a stochastic frontier approach, we show that participation in supermarket channels increases mean technical efficiency by 19%. This gain is bigger at lower levels of efficiency, suggesting the potential for positive income distribution effects. However, disadvantaged farms often have problems in meeting strict supermarket requirements. Innovative market linkage initiatives can increase the probability of participation significantly.
    Keywords: supermarkets; small farms; technical efficiency; stochastic frontier; sample selection; Kenya
    JEL: Q12 O12 O13 D24
    Date: 2009–11–25
  13. By: Gianmarco I.P. Ottaviano (Bocconi University, KITeS, FEEM and CEPR); Gregory Corcos (Norwegian School of Economics and Business Administration); Massimo Del Gatto ("G. d'Annunzio" University and CRENoS); Giordano Mion (LSE, Department of Geography, NBB, CEP and CEPR)
    Abstract: We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects without missing other important channels of adjustment. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of firms; better exploitation of economies of scale; and, of course, efficiency gains via the selection of the most efficient firms. The model is estimated on E.U. data and simulated in counterfactual scenarios that capture several dimensions of European integration. Simulations suggest that the gains from trade are much larger in the presence of selection effects. Even in a relatively integrated economy as the E.U., dismantling residual trade barriers would deliver relevant welfare gains stemming from lower production costs, smaller markups, lower prices, larger firm scale and richer product variety. We believe our analysis provides enough ground to support the inclusion of firm heterogeneity and selection effects in the standard toolkit of trade policy evaluation.
    Keywords: European Integration, Firm-level Data, Firm Selection, Gains from Trade, Total Factor Productivity
    JEL: F12 R13
    Date: 2009–12
  14. By: Oswald, Andrew J. (University of Warwick); Proto, Eugenio (University of Warwick); Sgroi, Daniel (University of Warwick)
    Abstract: The paper provides evidence that happiness raises productivity. In Experiment 1, a randomized trial is designed. Some subjects have their happiness levels increased, while those in a control group do not. Treated subjects have 12% greater productivity in a paid piece-rate Niederle-Vesterlund task. They alter output but not the per-piece quality of their work. To check the robustness and lasting nature of this kind of effect, a complementary Experiment 2 is designed. In this, major real-world unhappiness shocks – bereavement and family illness – are studied. The findings from (real-life) Experiment 2 match those from (random-assignment) Experiment 1.
    Keywords: labor productivity, emotions, well-being, happiness, positive affect, experimental economics
    JEL: J24 C91
    Date: 2009–12
  15. By: Castelli , Annalisa (University of Rome, Italy); Dwyer, Gerald P (Federal Reserve Bank of Atlanta, USA); Hasan, Iftekhar (Rensselaer Polytechnic Institute, USA and Bank of Finland)
    Abstract: We examine the connection between the number of bank relationships and firms’ performance using a unique data set on Italian small firms for which banks are a major source of financing. Our evidence indicates that return on equity and return on assets decrease as the number of bank relationships increases, the effects being stronger for small firms than for large firms. We also find that the ratio of interest expense to assets increases as the number of relationships increases. Particularly for small firms, these results are consistent with finding that suggest that having fewer bank relationships reduces the information asymmetries and agency problems and outweighs the hold-up problems.
    Keywords: bank relationships; small business lending; firms’ performance
    JEL: D21 G21 G32
    Date: 2009–12–16
  16. By: Christian Helmers; Mark Rogers
    Abstract: This paper provides an overview of a new database that uses intellectual property data to track the innovative activity of firms in the UK. The paper looks at the extent and nature of patenting activity, focusing on micro firms and SMEs. Over the period 2000 to 2007, SME patenting has increased whereas large firm patenting has fallen and micro firm patenting has been roughly con- stant. Most micro and SMEs patent while relatively young (aged ten or less) and this tendency is becoming more pronounced over time. The paper provides a descriptive analysis on micro firms and SMEs that become high growth firms (defined as having greater than 20 percent growth per annum). Overall, 28.0 percent of young micro and SMEs achieve high growth (over 2002 to 2007). In comparison, 29.4 percent of young micro or SMEs that patent achieve high growth. This difference is much greater for firms in the high-tech industries. Moreover, the analysis shows that due to the skewed nature of the firm-level growth distribution, standard conditional mean estimators may fail to uncover important differences in the association between patenting and firm growth across the conditional growth distribution.
    Keywords: Firm growth, patents
    JEL: L25 O12
    Date: 2009–12
  17. By: McBride, William D.; Greene, Catherine
    Abstract: Organic milk production has been one of the fastest growing segments of organic agriculture in the United States in recent years. Despite the growing number of organic dairy operations, the characteristics of organic dairy operations and the relative costs of organic and conventional milk production have been diffi cult to analyze. This study, using 2005 ARMS data for U.S. dairy operations, which include a targeted sample of organic milk producers, examines the structure, costs, and challenges of organic milk production. The analysis addresses economies of size, regional differences, and pasture use in organic milk production and compares organic and conventional milk production costs. The findings suggest that economic forces have made organic operations more like conventional operations and that the future structure of the industry may depend on the interpretation and implementation of new organic pasture rules.
    Keywords: dairy, organic, milk production, costs of production, pasture, Agricultural Resource Management Survey (ARMS), Agricultural and Food Policy, Crop Production/Industries, Demand and Price Analysis, Production Economics,
    Date: 2009–11

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