New Economics Papers
on Efficiency and Productivity
Issue of 2010‒02‒20
twelve papers chosen by

  1. The Impact of Training on Productivity and Wages: Firm Level Evidence By Konings, Jozef; Vanormelingen, Stijn
  2. Factor Employment, Sources and Sustainability of Output Growth: Analysis of Indian Manufacturing By Arvind Virmani; Danish A. Hashim
  3. Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing By Debaere, Peter; Görg, Holger; Raff, Horst
  4. Fractional regression models for second stage DEA efficiency analyses By Esmeralda A. Ramalho,; Joaquim J.S. Ramalho; Pedro D. Henriques
  5. Firm Heterogeneity in the Choice of Offshoring: Evidence from Korean Manufacturing Firms By Hea-Jung Hyun
  6. What Determines Productivity? By Chad Syverson
  7. Entry Barriers in Retail Trade By Fabiano Schivardi; E. Viviano
  8. Risk Management and Managerial Efficiency in Chinese Banks: A Network DEA Framework By Matthews, Kent
  9. Management Practices and Firm Performance in Japanese and Korean Firms By Young Gak Kim
  10. The Impact of Information Technology on Productivity in Developing Countries By Ronia Hawash; Guenter Lang
  11. Pesticides and Productivity – a Study of Vegetable Farming in Nepal By Ratna Kumar Jha; Adhrit Prasad Regmi
  12. Macroeconomic implications of agglomeration By Morris A. Davis; Jonas D. M. Fisher; Toni M. Whited

  1. By: Konings, Jozef (Catholic University of Leuven); Vanormelingen, Stijn (Catholic University of Leuven)
    Abstract: This paper uses firm level panel data of firm 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: 2010–01
  2. By: Arvind Virmani; Danish A. Hashim
    Abstract: The manufacturing sector in India is crucial for two main reasons: It has significant potential to provide modern employment to a growing labour force, especially that of less skilled type and second by its own healthy growth, stimulate and provide a foundation for, organic growth in other sectors of the economy. On both these counts, however, the manufacturing sector has so far not performed to its potential. In an attempt to identify the factors responsible for this phenomenon, the present study examines in detail the main determinants of factor employment, their shares, and output growth. The framework used is a CES production function estimated using ASI time-series data for the organised manufacturing industry spanning a period from 1973/74 to 2001/02. The study also dwells on the subject of sustainability of high growth in output on the back of raising capital labour ratio. [Working Paper No.3 /2009-DEA].
    Keywords: industry, sustainability, labour-surplus, CES, production function, manufcturing sector, India, development policy, Asian countries, total factor productivity (TFP), output growth, employment, India, labour force, economy, capital labour ratio,
    Date: 2010
  3. By: Debaere, Peter (University of Virginia); Görg, Holger (Kiel Institute for the World Economy); Raff, Horst (Kiel Institute for the World Economy)
    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 monopolistic-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 firm’s 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
  4. By: Esmeralda A. Ramalho, (Departamento de Economia, Universidade de Evora and CEFAGE-UE); Joaquim J.S. Ramalho (Departamento de Economia, Universidade de Evora and CEFAGE-UE); Pedro D. Henriques (Departamento de Economia, Universidade de Evora and CEFAGE-UE)
    Abstract: TData envelopment analysis (DEA) is commonly used to measure the relative efficiency of decision-making units. Often, in a second stage, a regression model is estimated to relate DEA efficiency scores to exogenous factors. In this paper, we argue that the traditional linear or tobit approaches to second-stage DEA analysis do not constitute a reasonable data-generating process for DEA scores. Under the assumption that DEA scores can be treated as descriptive measures of the relative performance of units in the sample, we show that using fractional regression models are the most natural way of modeling bounded, proportional response variables such as DEA scores. We also propose generalizations of these models and, given that DEA scores take frequently the value of unity, examine the use of two-part models in this framework. Several tests suitable for assessing the specification of each alternative model are also discussed.
    Keywords: Second-stage DEA; Fractional data; Specification tests; One outcomes; Two-part models.
    JEL: C12 C13 C25 C51
    Date: 2010
  5. By: Hea-Jung Hyun (Korea Institute for International Economic Policy)
    Abstract: Using firm-level data on offshoring of Korean manufacturers, the paper examines the relationship between firm heterogeneity and the probability of adopting offshoring. The results of the paper suggest that firm productivity may not be an important determinant for Korean firms’ offshoring decision. Firm’s global sourcing decision may rather depend on other characteristics such as factor intensity, R&D intensity, ICT level, and affiliation with foreign markets, when industry specificity is controlled for.
    Keywords: Offshoring, Outsourcing, Insourcing, Firm Heterogeneity.
    JEL: F23 L23 D21
    Date: 2009
  6. By: Chad Syverson
    Abstract: Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This finding has shaped research agendas in a number of fields, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production practices—and therefore over which producers have some direct control, at least in theory—as well as from producers’ external operating environments. After evaluating the current state of knowledge, I lay out what I see are the major questions that research in the area should address going forward.
    JEL: D2 D24 E2 E23 F1 L1 L11 L2 L23
    Date: 2010–01
  7. By: Fabiano Schivardi; E. Viviano
    Abstract: <p>The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT, increases employment and compresses labor costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices.</p>
    Keywords: entry barriers; productivity growth; retail trade
    JEL: L81 L5 L11
    Date: 2009
  8. By: Matthews, Kent (Cardiff Business School)
    Abstract: Risk Management in Chinese banks has traditionally been the Cinderella of its internal functions. Political stricture and developmental imperative have often overridden standard practice of risk management resulting in large non-performing loan (NPL) ratios. One of the stated aims of opening up the Chinese banks to foreign strategic investment is the development of risk management functions. In recent years NPL ratios have declined through a mixture of recovery, asset management operation and expanded balance sheets. However, the training and practice of risk managers remain second class compared with foreign banks operating in China. This paper evaluates bank performance using a Network DEA approach where an index of risk management practice and an index of risk management organisation are used as intermediate inputs in the production process. The two indices are constructed from a survey of risk managers in domestic banks and foreign banks operating in China. The use of network DEA aids the manager in identifying the stages of production that need attention.
    Keywords: Risk management; risk organisation; managerial efficiency; Network DEA
    JEL: D23 G21 G28
    Date: 2010–02
  9. By: Young Gak Kim (Japan Center For Economic Research)
    Abstract: The US economy had accelerated economic growth since the late 1990s. At first, many economists and policy makers believed that the rapid growth in the IT industry and IT investment contributed to the acceleration in US economic growth and many advanced countries supported the IT industry and IT investment in their own countries. However, the gap in rates of economic or productivity growth between the US and other advanced countries has remained even in the early 2000s. Since then, many economists have paid attention to the complementary role in intangible assets in productivity growth, that is, they started to believe that without intangible assets, the IT assets does not contribute to productivity growth at the firm and aggregated level.
    Keywords: Japanese firms, Korean firms, management practices, firm performance
    JEL: D02 D21 D23 D24
    Date: 2009
  10. By: Ronia Hawash (Faculty of Management Technology, The German University in Cairo); Guenter Lang (Faculty of Management Technology, The German University in Cairo)
    Abstract: The information technology (IT) revolution has resulted in a digital divide evolving between nations that have the skills and capability to absorb these new technologies, and those without. Since developing countries have assumed that the adoption of IT may be their key engine of growth, they have exerted a lot of efforts in an attempt to overcome this digital gap. This study tests whether higher IT adoption results in higher total factor productivity (TFP) growth of developing countries or not, by conducting a panel data regression for 33 developing countries over the period 2002-2006. It also examines the relative importance of IT adoption in comparison to other technological aspects such as: Technology creation, technology transfer, and enhancing individuals’ technological absorptive capacities through higher educational levels. The study concludes that IT adoption and higher educational attainment tend to relatively be the most significant factors affecting TFP growth in developing countries.
    Keywords: Information Technology, Productivity, Digital Divide, Development
    JEL: O33 O47
    Date: 2010–02
  11. By: Ratna Kumar Jha; Adhrit Prasad Regmi
    Abstract: In Nepal, agriculture is commercializing day by day and levels of agro-chemical use are growing. This is beginning to raise concerns about the health and environmental impacts of farm chemicals such as pesticides.The brief looks at the effectiveness of pesticides in reducing crop losses amongst vegetable farmers in Nepal.
    Keywords: procutivity, vegetable farming, Nepal, chemicals, pesticides, farmers, agriculture, health, environmental, production, crop,
    Date: 2010
  12. By: Morris A. Davis; Jonas D. M. Fisher; Toni M. Whited
    Abstract: The authors construct a dynamic general equilibrium model of cities and use it to estimate the effect of local agglomeration on per capita consumption growth. Agglomeration affects growth through the density of economic activity: higher production per unit of land raises local productivity. Firms take productivity as given; produce using a technology that has constant returns in developed land, capital, and labor; and accumulate land and capital. If land prices are rising, as they are empirically, firms economize on land. This behavior increases density and contributes to growth. They use a panel of U.S. cities and our model's predicted relationship among wages, output prices, housing rents, and labor quality to estimate the net effect of agglomeration on local wages. The impact of agglomeration on the level of wages is estimated to be 2 percent. Combined with their model and observed increases in land prices, this estimate implies that agglomeration raises per capita consumption growth by 10 percent.
    Keywords: Balanced Growth, Economic Growth, Productivity, Externalities, Increasing Returns, Agglomeration, Density
    Date: 2010

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