New Economics Papers
on Efficiency and Productivity
Issue of 2010‒03‒06
eleven papers chosen by

  1. A Productivity analysis of Eastern European banking taking into account risk decomposition and environmental variables By Karligash Kenjegalieva; Richard Simper
  2. Do Competition and Ownership Matter? Evidence from Local Public Transport in Europe By Marcella Nicolini; Andrea Boitani; Carlo Scarpa
  3. Age, Wage and Productivity By van Ours, Jan C.; Stoeldraijer, Lenny
  4. Bank cost efficiency in Kazakhstan and Russia By Peresetsky, Anatoly
  5. Public Support for Innovation, Intangible Investment and Productivity Growth in the UK Market Sector By Haskel, Jonathan; Wallis, Gavin
  6. Accounting for China's Growth By Brandt, Loren; Zhu, Xiaodong
  7. Malmquist and Törnqvist Productivity Indexes: Returns to Scale and Technical Progress with Imperfect Competition By Diewert, Erwin; Fox, Kevin J.
  8. Productivity Growth and the Labor Market By Schaik, A.B.T.M. van; Klundert, T.C.M.J. van de
  9. Measuring Productivity in the Public Sector: Some Conceptual Problems By Diewert, Erwin
  10. Electronic Networking Technologies, Innovation Misfit, and Plant Performance By Robert G. Fichman; Nigel P. Melville
  11. Further evidence on the (in-) efficiency of the U.S. housing market By Schindler, Felix

  1. By: Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University)
    Abstract: This paper develops a new Luenberger productivity which is applied to a technology where the desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted for ‘risk and environment’, ‘risk management’ and ‘environmental effects’. The method is applied to Central and Eastern European banks operating during 1998–2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement, which, in the beginning of the analysed period, hinged on the banks’ ability to capitalise on advanced technology and successfully take into account risk and environmental factors. Whereas, in the later sampled periods, we show that one of the most important factors of technological improvement/decline is risk management. Finally, the tests employed confirm previous findings, such as Pasiouras (2008) in this journal, that different input/output methodologies produce statistically different productivity results. Indeed, we also find that external factors, such as a risk in the economy and banking production, and a ‘corruption perception’ affect the productivity of banks.
    Keywords: Luenberger productivity index; DEA; banking; undesirable outputs; negative data.
    JEL: C14 G2 L1
    Date: 2010–01
  2. By: Marcella Nicolini (Fondazione Eni Enrico Mattei); Andrea Boitani (Catholic University); Carlo Scarpa (University of Brescia and Fondazione Eni Enrico Mattei)
    Abstract: This paper investigates how the ownership and the procedure for the selection of firms operating in the local public transport sector affect their productivity. In order to compare different institutional regimes, we carry out a comparative analysis of 72 companies operating in large European cities. This allows us to consider firms selected either through competitive tendering or negotiated procedures. The analysis of the data on 77 European firms over the period 1997-2006 indicates that firms operate under constant returns to scale. Retrieving the residuals we obtain a measure of total factor productivity, which we regress on firm and city characteristics. We find that when firms are totally or partially in public hands their productivity is lower. Moreover, firms selected through competitive tendering display higher total factor productivity.
    Keywords: Local Public Transport, Public Ownership, Translog Production Function
    JEL: C33 K23 L25 L33 L91
    Date: 2010–01
  3. By: van Ours, Jan C. (Tilburg University); Stoeldraijer, Lenny (Tilburg University)
    Abstract: Previous empirical studies on the effect of age on productivity and wages find contradicting results. Some studies find that if workers grow older there is an increasing gap between productivity and wages, i.e. wages increase with age while productivity does not or does not increase at the same pace. However, other studies find no evidence of such an age related pay-productivity gap. We perform an analysis of the relationship between age, wage and productivity using a matched worker-firm panel dataset from Dutch manufacturing covering the period 2000-2005. We find little evidence of an age related pay-productivity gap.
    Keywords: age, wage, productivity
    JEL: J23 J31
    Date: 2010–02
  4. By: Peresetsky, Anatoly (BOFIT)
    Abstract: The Kazakhstan banking system is increasingly viewed as more advanced than the Russian system. Kazakhstan adopted the International Accounting System (IAS) in 2003 and the Basel II norms in 2005, while Russia has yet to fully adopt either IAS or Basel II. In this paper, bank data for 2002-2006 are used to estimate models of bank cost efficiency. In contrast to most previous papers, no significance difference is found for the average cost efficiency scores of banks for the two countries during 2002-2006. How banks are ranked for efficiency depends upon the chosen model (input and output sets). An interesting insight is the finding that most banks in both countries are below optimal size.
    Keywords: cost efficiency; banks; stochastic frontier approach
    JEL: D21 F30 G21
    Date: 2010–02–26
  5. By: Haskel, Jonathan (Imperial College London); Wallis, Gavin (University College London)
    Abstract: Pressure on public finances has increased scrutiny of public support for innovation. We examine two particular issues. First, there have been many recent calls for the (relatively new) UK R&D subsidy to be extended to other “research” activities, such as software. Second, argument still rages about the efficacy of direct public spending on R&D via spending on academic research councils, universities, and government undertaken work on civil and military R&D. To evaluate these questions we use data on market sector productivity, R&D and non-R&D intangible assets, and public sector R&D spending. We look for evidence of market sector spillovers from intangible investment and from public R&D. We find (a) no evidence of spillover effects from intangible investment at the market sector level, including from R&D, (b) strong evidence of market sector spillovers from public R&D spend on research councils, and (c) no evidence of market sector spillovers from public spending on civil or defence R&D. Our findings tentatively suggest that for maximum market sector productivity impact government innovation policy should focus on direct spending on research councils.
    Keywords: intangible assets, productivity, R&D, spillovers
    JEL: O47 E22
    Date: 2010–02
  6. By: Brandt, Loren (University of Toronto); Zhu, Xiaodong (University of Toronto)
    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. 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 points to the role of rising rates of investment. Because labor reallocation 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 dynamic 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 from agriculture and capital deepening, and identify rising TFP in the non-state non-agricultural sector as the key driver of growth. We also find significant misallocation of capital: The 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 re-balance its growth. Finally, in light of important concerns over data, we examine the robustness of our key results to alternative data sets.
    Keywords: China, investment, growth, productivity, capital market distortions
    JEL: E2 O4
    Date: 2010–02
  7. By: Diewert, Erwin; Fox, Kevin J.
    Abstract: Caves, Christensen and Diewert proposed a method for estimating a theoretical productivity index for a firm using Törnqvist input and output indexes, augmented by exogenous estimates of local returns to scale. However, in order to implement their method, they assumed that the firm maximized revenue in each period, conditional on the observed input vector in each period, taking output prices as fixed. This assumption is not warranted when there are increasing returns to scale. Thus in the present paper, it is assumed that the firm solves a monopolistic profit maximization problem when there are increasing returns to scale and the results of Caves, Christensen and Diewert are modified in accordance with this assumption.
    Keywords: Productivity, index numbers, Malmquist indexes, Törnqvist indexes, returns to scale, non-competitive behavior, flexible functional forms.
    JEL: C43 D24 E23
    Date: 2010–02–17
  8. By: Schaik, A.B.T.M. van; Klundert, T.C.M.J. van de (Tilburg University, Center for Economic Research)
    Abstract: The productivity slowdown in Europe since the mid-1990s is a reason for concern. Labour market rigidity, hampering innovation, may be a cause of the slowdown. In the paper this argument is placed in a broader perspective. Labour force participation is an important factor in explaining differences in productivity and welfare over time and across regions as can be illustrated by comparing the US and the EU-15. Moreover, technological change is not entirely exogenous. Dynamic increasing returns as introduced by Kaldor and Verdoorn may boost productivity. For countries other than the US catching up appears to be of importance. The question is then to what extent labour market institutions account for productivity growth. Regression analysis on a panel of 21 OECD countries covering the period 1960-2005 reveals that employment protection is relevant but that the impact is qualitatively different before and after 1980. The reason is that in the first sub-period technological change is driven in most countries by imitation, whereas in the second sub-period innovation becomes the predominant factor everywhere.
    Keywords: Labour productivity growth;catching-up;labour force participation;employment protection
    JEL: O43 O47
    Date: 2010
  9. By: Diewert, Erwin
    Abstract: In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The paper analyzes three possible general methods to measure the price and quantity of nonmarket government outputs. If quantity information on nonmarket outputs is available, then the first two methods of price valuation rely on either purchaser based valuations or on cost based valuations. If little or no information on the quantity of nonmarket outputs produced is available, then the method recommended in the System of National Accounts 1993 must be used, where aggregate output growth is set equal to aggregate input growth. The paper also discusses various methods of adjusting for quality change.
    Keywords: Measurement of output, input and productivity, nonmarket sector, health, education, general government, cost functions, duality theory, marginal cost
    JEL: C43 D24 E23 H40 H51 H52 I12 I20
    Date: 2010–02–17
  10. By: Robert G. Fichman; Nigel P. Melville
    Abstract: Prior work on information technology (IT) adoption and economic impacts typically employs an instrumental logic in which firms lead with innovation when they possess characteristics that make it economically beneficial to do so and lag when they do not. However, firms may deviate from this idealized picture when they possess characteristics of an innovation laggard but exhibit the behavior of an innovation leader (or vice versa), with implications for the returns to IT investment. This study develops a conceptual framework and hypotheses regarding the implications of such deviations, which we call innovation misfits. Using a data set comprising measures of the adoption of electronic networking technologies (ENT) in over 25,000 U.S. manufacturing plants, productivity regression estimation reveals a consistent pattern that the association between IT and productivity is diminished in the presence of innovation misfit. We discuss the implications of innovation misfit for scholarship and management practice, which are numerous.
    Date: 2010–02
  11. By: Schindler, Felix
    Abstract: Extending the controversial findings from relevant literature on testing the efficient market hypothesis for the U.S. housing market, the results from the monthly and quarterly transaction-based Case-Shiller indices from 1987 to 2009 provide further empirical evidence on the rejection of the weak-form version of efficiency in the U.S. housing market. In addition to conducting parametric and non-parametric tests, we apply technical trading strategies to test whether or not the inefficiencies can be exploited by investors earning excess returns. The empirical findings suggest that investors might be able to obtain excess returns from both autocorrelation- and moving average-based trading strategies compared to a buy-and-hold strategy. --
    Keywords: Housing market,weak-form market efficiency,random walk hypothesis,variance ratio tests,runs test,trading strategies
    JEL: G12 G14 G15 R31
    Date: 2010

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