New Economics Papers
on Efficiency and Productivity
Issue of 2010‒02‒13
ten papers chosen by

  1. Organized versus Unorganized Manufacturing Performance in India in the Post-Reform Period By Kathuria, Vinish; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
  2. State business relations and manufacturing productivity growth in India By Kathuria, Vinish; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
  3. Modelling and predicting labor force productivity By Ivan O. Kitov
  4. Insider Econometrics: Empirical Studies of How Management Matters By Casey Ichniowski; Kathryn L. Shaw
  5. Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing By Peter Debaere; Holger Görg; Horst Raff
  6. Agglomeration Premium and Trading Activity of Firms By Gábor Békés; Péter Harasztosi
  7. Rain, Rain, Go Away? The Investment Climate, State Business Relations and Firm Performance in India By Vinish, Kathuria; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
  8. Turbulence underneath the big calm? Exploring the micro-evidence behind the flat trend of manufacturing productivity in Italy By Giovanni Dosi; Marco Grazzi; Chiara Tomasi; Alessandro Zeli
  9. Do private equity owned firms have better management practices?. By Bloom, Nick; Sadun, Raffaella; Van Reenen, John
  10. Public sector decentralization and school performance: International evidence By Falch, Torberg; Fischer, Justina AV

  1. By: Kathuria, Vinish; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
    Abstract: This paper analyses the productivity performance of the Indian manufacturing sector using unit level data, which is aggregated at four-digit industry level for the period 1994-95 to 2004-05 for 15 major states. The study focuses on both the organized and unorganized segments of the manufacturing sector. Both partial and total factor productivity (TFP) measures have been employed to trace the productivity performance of formal and informal manufacturing sector. TFP is estimated using Cobb-Douglas production functions at the four-digit industry level. The estimation is carried out by employing the Levinsohn-Petrin method, which uses intermediate inputs as the proxy to address the potential simultaneity bias in production function estimations. Our analysis reveals that labour productivity has increased for the organized sector over time whereas both labour productivity and capital intensity growth have slowed down in the unorganized sector during the 2000-01 to 2004-05 period. The production function analysis shows that capital has played a more significant role in the production process in both the sectors. TFP growth accelerated in the organized manufacturing sector during 2001-05 over 1995-2001 while the TFP decline that started in the first period (1995-2001) continued unabated even in the second period (2001-2005) in the unorganized manufacturing sector. We also find that output growth in both the sectors is productivity driven and not input driven. The improvement in TFPG of organized manufacturing in the post-2000 period as compared to the second half the 1990s across most states in India and that output growth was mostly productivity driven are important positive features of manufacturing performance in the post-reform period. However, the declining total factor productivity on one hand and increasing capital intensity of the unorganized sector is a cause of worry and raises several important questions.
    Keywords: Productivity; Organized manufacturing; Unorganized sector; Industrial Sector
    JEL: D24
    Date: 2010–01–16
  2. By: Kathuria, Vinish; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
    Abstract: Empirical studies on total factor productivity growth (TFPG) in developing countries highlight trade open-ness, research and development and market structure as being the most important determinants of TFPG. The role of institutions remains overlooked in the literature on the determinants of TFPG. In this paper, we look into the role of institutional quality as captured by effective state-business relationships (SBRs) in influencing TFPG, using Indian manufacturing as a case-study. By SBRs we mean a set of highly institutionalised, responsive and public interactions between the state and the business sector. To compute TFPG, we use firm level data for both the formal and informal manufacturing sector. We correct for the simultaneity bias associated with the production function approach for TFPG estimation by employing a method developed by Levinsohn and Petrin. We propose measures of effective SBRs for 15 Indian States over the period 1994-2005, and then use them in TFP growth equations to estimate the effect of SBR on TFPG. The results indicate that SBR has positively affected the TFP growth of Indian industry. The effect however is primarily for the formal sector.
    Keywords: State-business relations; Indian Manufacturing; Total Factor Productivity Growth
    JEL: D24 O14
    Date: 2010–01–21
  3. By: Ivan O. Kitov
    Abstract: Labor productivity in Turkey, Spain, Belgium, Austria, Switzerland, and New Zealand has been analyzed and modeled. These counties extend the previously analyzed set of the US, UK, Japan, France, Italy, and Canada. Modelling is based on the link between the rate of labor participation and real GDP per capita. New results validate the link and allow predicting a drop in productivity by 2010 in almost all studied countries.
    Date: 2010–01
  4. By: Casey Ichniowski; Kathryn L. Shaw
    Abstract: This paper describes an approach for conducting empirical research into three interrelated questions that are fundamental to the field of organizational economics: 1. Why do firms in the same industry adopt different management practices? 2. Does the adoption of a new management practice raise productivity? 3. If so, why does the new management practice raise productivity? This research approach, which we term insider econometrics, addresses these questions by combining insights from industry insiders with rigorous econometric tests about the adoption and productivity effects of new management practices using rich industry-specific data. Understanding the selectivity in the adoption and coverage of different management practices within a single industry is central to this empirical research methodology. The paper considers a number of studies to illustrate persuasive features of insider econometric research and summarizes a number of themes emerging from this line of research.
    JEL: D2 J01 L2
    Date: 2009–12
  5. By: Peter Debaere; Holger Görg; Horst Raff
    Abstract: We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolitic-competition model of the materials sourcing decisions of heterogeneous firms. The model generates predictions about how the intensity of international sourcing of materials depends on a firm's productivity and the availability of local services. These predictions are supported by the data. We find evidence that more productive manufacturing firms tend to have a higher ratio of imported materials to sales. In addition, we find evidence that services grease the wheels of international commerce: A greater availability of services across regions, industries and time increases a firmÄs foreign sourcing of materials relative to sales. Interestingly, this positive impact of local service availability on imports especially applies to stand-alone firms that, unlike multinationals, are less likely to rely on imported or internally provided services
    Keywords: international trade, services, off-shoring, supply chain management, firm heterogeneity
    JEL: F12 L23
    Date: 2010–01
  6. By: Gábor Békés; Péter Harasztosi
    Abstract: Firms may benefit from proximity to each other due to the existence of several externalities. The productivity premia of firms located in agglomerated regions can be attributed to savings and gains from external economies. However, the capacity to absorb information may depend on activities of the firm, such as involvement in international trade. Importers, exporters and two-way traders are likely to employ a different bundle of resources and be organised differently so that they would appreciate inputs and information from other firms in a different fashion and intensity. Getting a better understanding of such external economies by looking at various types of firms is the focus of present paper. Using Hungarian manufacturing data from 1992-2003, we confirm that firms perform better in agglomerated areas and show that traders gain more in terms of productivity than non-traders when agglomeration rises. Firms that are stable participants of international trade gain 16 % in terms of total factor productivity growth as agglomeration doubles while non-traders may not benefit from agglomeration at all. Results also suggest that traders' productivity premium is most apparent in urbanised economies.
    Date: 2010–01–28
  7. By: Vinish, Kathuria; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
    Abstract: It is commonly argued that a better investment climate reform – that is, lower distortions in the institutional, policy and regulatory environment in which firms operate - lead to discernible improvements in firm performance. In this paper, we argue that effective state business relations condition better investment climate outcomes and that the deeper institutional determinants of firm performance are the former. We examine the effect of effective state-business relations of total factor productivity (TFP) for formal sector firms in India for the years 2000-01 and 2004-05 and find support for this hypothesis.
    Keywords: State business relations; total factor productivity; India
    JEL: D24
    Date: 2010–01–23
  8. By: Giovanni Dosi; Marco Grazzi; Chiara Tomasi; Alessandro Zeli
    Abstract: Italy ranked last in terms of manufacturing productivity growth according to OECD estimates over the last decade with a flat, if not declining, trend. In this work we investigate the underlying firm-level dynamics of enterprises on the grounds of a database developed by the Italian Statistical Office (ISTAT) covering the period 1989-2004 and containing information on more than 100,000 firms. Over the period not only the indicators of central tendency of the distribution of labour productivities have not significantly changed, but also the whole sectoral distributions have remained relatively stable over time, with their support at least not shrinking or even possibly widening over time. This is even more surprising if one takes into consideration the 'Euro' shock that occurred during the period of investigation. On the contrary we observe that inter-decile differences in productivity have been increasing. Further, heterogeneous firms' characteristics (i.e. export activity and innovativeness) appear to have contributed to boost such intra-industry differences. Given such wide heterogeneities we resort to quantile regressions to identify the impact of a set of regressors at different levels of the conditional distribution of labor productivity. One phenomenon that we observe is what we call a tendency toward 'neo-dualism' involving the co-existence of a small group of dynamic firms with a bigger ensemble of much less technologically progressive ones.
    Keywords: productivity; firm dynamics; market selection; trade; euro shock; quantile regressions
    JEL: C14 D20 F10 L10 L16 L25
    Date: 2010–01–28
  9. By: Bloom, Nick; Sadun, Raffaella; Van Reenen, John
    Abstract: We use an innovative survey tool to collect management practice data from over 4,000 medium sized manufacturing firms across Asia, Europe and the US. These measures of managerial practice are strongly associated with firm-level performance (e.g. productivity, profitability and stock market value). Private Equityowned firms are significantly better managed than government, family and privately owned firms. Although they are also better managed on average than publicly listed firms with dispersed owners, this difference is not statistically significant. Looking at management practices in detail we find that Private Equity-owned firms have strong people management practices (hiring, firing, pay and promotions) but even stronger operations management practices (lean manufacturing, continuous improvement and monitoring). This suggests that Private Equity ownership is associated with broad based operational improvement in management rather than just stronger performance incentives. Finally, looking at changes in management practices over time, it appears that Private Equity targets poorly managed firms and these firms improve their management practices at a faster rate than other ownership types.
    Date: 2009–07
  10. By: Falch, Torberg; Fischer, Justina AV
    Abstract: Using a panel of international student test scores 1980 – 2000 (PISA and TIMSS), panel fixed effects estimates suggest that government spending decentralization is conducive to student performance. The effect does not appear to be mediated through levels of educational spending.
    Keywords: Fiscal decentralization; Student achievement; federalism; PISA; TIMSS; education; school quality
    JEL: H40 I20 H20 C33
    Date: 2010–01–29

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