nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2010‒02‒27
six papers chosen by
Angelo Zago
University of Verona

  1. The effects of entry on incumbent innovation and productivity. By Aghion, P.; Blundell, R.; Griffith, R.; Howitt, P.; Prantl, S.
  2. Graduating to Globalisation: A Study of Southern Multinationals By Dilek Demirbas; Ajay Shah; Ila Patnaik
  3. Are Happiness and Productivity Lower among University Students with Newly-Divorced Parents? An Experimental Approach By Proto, Eugenio; Sgroi, Daniel; Oswald, Andrew J.
  4. Investments in Intangible Assets and Australia's Productivity Growth By Paula Barnes; Andrew McClure
  5. Accounting for China's Growth By Loren Brandt; Xiaodong Zhu
  6. Innovation, Productivity and Economic Development in Latin America and the Caribbean By Christian Daude

  1. By: Aghion, P.; Blundell, R.; Griffith, R.; Howitt, P.; Prantl, S.
    Abstract: How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. In this paper we provide evidence that these correlations arise from a causal effect predicted by Schumpeterian growth theory—the threat of technologically advanced entry spurs innovation incentives in sectors close to the technology frontier, where successful innovation allows incumbents to survive the threat, but discourages innovation in laggard sectors, where the threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro panel data for the United Kingdom. We control for the endogeneity of entry by exploiting major European and U.K. policy reforms, and allow for endogeneity of additional factors. We complement the analysis for foreign entry with evidence for domestic entry and entry through imports.
    Date: 2009–02
  2. By: Dilek Demirbas; Ajay Shah; Ila Patnaik
    Abstract: FDI by firms in developing countries is a recent phenomenon and demands a study of relationship between firm productivity and different modes of globalisation activities. This paper attempts to understand this relationship through ordered probit models, examining two key hypotheses using firm level panel data from India. First, it is tested whether there are characteristic differences between domestic firms, exporting firms and firms engaging with FDI. [NIPFP WP No. 2010-65].
    Keywords: Outbound FDI, multinationals, Panel data, India, Ordered Probit models, firms, globalisation, developing countries, productivity,
    Date: 2010
  3. By: Proto, Eugenio (University of Warwick); Sgroi, Daniel (University of Warwick); Oswald, Andrew J. (University of Warwick)
    Abstract: We live in a high-divorce age. It is now common for university faculty to have students who are touched by a recent divorce. It is likely that parents themselves worry about effects on their children. Yet there has been almost no formal research into the important issue of how recent parental-divorce affects students at university. This paper designs such a study. In it, to avoid 'priming', we measure students' happiness with life before we inquire into their family background. We also measure student achievement in a randomized-trial productivity task. Our results seem both of scientific interest and of potential interest to parents. This study finds no evidence that students suffer after parental divorce
    Keywords: labor productivity, divorce, well-being, happiness, experimental economics
    JEL: J24 C91
    Date: 2010–02
  4. By: Paula Barnes; Andrew McClure (Productivity Commission)
    Abstract: Investment in capital is important for economic growth. But capital is not just physical assets; firms also invest in 'soft' capital such as knowledge, firm-specific skills, and better ways of doing business. This investment results in accumulation of 'intangible assets'. Intangible assets have been categorised as computerised information, innovative property (including R&D) and economic competencies (including firm-specific human capital and organisational capital), and most are difficult to measure. These assets can depreciate more rapidly than physical capital, but they are investments nonetheless, delivering benefits over time, not just in the period the expenditure was made. Many elements of spending on intangibles are treated as a current expense in the national accounts rather than as an investment. This leads to an understatement of investment in the economy. It also may affect measures of multifactor productivity (MFP) growth. Applying the methodology of Corrado, Hulten and Sichel (2006) found that intangible investment currently is almost half the size of tangible investment in the market sector of the Australian economy. While experimental in nature, the estimates suggest that - market sector investment in intangibles was $57 billion in 2005-06, 80 per cent of which is currently not treated as investment in the national accounts; average annual growth in intangible investment has been about 1.3 times that of tangibles since 1974-75; including intangible investment in total investment largely removes the past downward trend in the market sector ratio of investment to output (gross value added); investments in organisational capital (strategic planning, adaptation and reorganisation) and computerised information have grown at relatively high rates — making up 27 and 13 per cent of intangible investment in 2005-06. Treating investment in intangible assets as capital raises measured final output and measured capital inputs and alters the capital-labour ratio, hence the effect on measured MFP growth is complex. However, in Australia, adjusting for intangible investment not currently included in the national accounts does not have a large direct effect on the level or pattern of conventionally-measured MFP growth. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.
    Keywords: multifactor productivity (MFP) growth, organisational capital, Intangible assets, economic growth, computerised information, innovative property, R&D, economic competencies, human capital
    JEL: O
    Date: 2009–03
  5. By: Loren Brandt; Xiaodong Zhu
    Abstract: China has achieved impressive growth over the last three decades. However, there has been debate over the sources of the growth, and the role of the intensive versus extensive margin. Growth accounting exercises at the aggregate level (Rawski and Perkins, 2008; Bosworth and Collins, 2008) suggest an equal role for both. But for the non-agricultural sector, there have been doubts about the contribution of TFP improvements to growth. For the period between 1978 and 1998, Young (2003) stresses the role of labor deepening, including the reallocation from agriculture, while more recent analysis point to the role of rising rates of investment. Because labor reallocations across sectors, TFP growth at the sector level and investment are all inter-related, simple growth decompositions that are often used in the literature are not appropriate for quantifying their contributions to growth. In this paper, we develop a three sector model to quantify the sources of China's growth. The sectors include agriculture, and within non-agriculture, the state and non-state components. We find only a modest role for labor reallocation and capital deepening, and identify rising TFP in the non-state nonagricultural sector as the key driver of growth. We also find significant misallocation of capital: The much less efficient state sector continues to absorb more than half of all fixed investment. If capital had been allocated efficiently, China could have achieved the same growth performance without any increase in the rate of aggregate investment. This has important implications for China as it tries to rebalance its growth. Finally, in light of important concerns over data, we examine the robustness of our key results to alternative data
    Keywords: China, Growth, TFP, Investment, intensive vs extensive margins
    JEL: E2 O4
    Date: 2010–02–16
  6. By: Christian Daude
    Abstract: GDP per capita in Latin America has been falling behind high-income countries and other benchmarks for decades and the region’s mediocre growth performance is one of the main reasons why poverty reduction, and living standards more generally, in the region is well below that observed in peer countries. In this paper, we explore some of the potential roots of this poor performance by using development accounting techniques. The results point towards total factor productivity as the main culprit for the region’s lack of convergence. In order to investigate what causes the lack of productivity catch-up, we analyse the determinants of technology diffusion, in particular of internet and mobile phone technologies. The empirical results show that institutions, absorption capacity (human capital), and financial constraints are the main explanatory variables of the diffusion gaps in these technologies between the OECD and Latin America. We also explore the performance of the region in terms of health outcomes, reflected in the evolution of life expectancy, and the specific role played by technological innovation and adoption. Finally, a calibration exercise of an endogenous growth model allows us to assess the extent to which the region’s per capita income gap is due to problems in factor accumulation or distortions that reduce the incentives to innovate; the results point to very different situations across countries in the region. While for some countries we find evidence of ‚innovation shortfalls?, other countries’ problems concentrate around low factor accumulation.<BR>En Amérique latine, le PIB par habitant n’a eu de cesse depuis plusieurs décennies de reculer par rapport à celui des pays à hauts revenus et d’autres pays de références. Les mauvaises performances de la région en terme de croissance sont l’une des principales raisons pour lesquelles la réduction de la pauvreté, et de façon générale le niveau de vie, sont bien plus faibles que ceux observés dans les pays. Dans cet article, nous explorons certaines des raisons potentielles de cette mauvaise performance à l’aide de techniques comptables de développement. Les résultats tendent à montrer que la principale cause de l’absence de convergence de la région est la productivité totale des facteurs. Afin de rechercher pourquoi ces pays n’ont pas comblé leur retard de productivité, nous analysons les déterminants des technologies de diffusion, et en particulier internet et les technologies de téléphonie mobile. Les résultats empiriques montrent que les institutions, la capacité d’absorption (capital humain) et les contraintes financières sont les principales variables explicatives de l’écart qui existe entre les pays de l’OCDE et ceux de l’Amérique latine concernant la diffusion de ces technologies. Nous explorons également la performance de la région en matière de santé, mesurée par l’évolution de l’espérance de vie, et le rôle spécifique joué par l’innovation et l’adoption technologique. Finalement, un exercice de calibrage d’un modèle de croissance endogène nous permet d’évaluer jusqu’à quel point la différence de revenu par tête au sein de la région est due à des problèmes d’allocation des facteurs ou à des distorsions qui diminuent les incitations à innover. Les résultats varient fortement d’un pays à l’autre au sein de la région. Si pour certains pays nous mettons en évidence un « manque d’innovation », pour d’autres, la faible accumulation de facteurs demeure le principal problème.
    Keywords: economic growth, innovation, Latin America, total factor productivity, croissance économique, innovation, Amérique latine, productivité totale des facteurs
    JEL: O10 O30 O47
    Date: 2010–02

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