New Economics Papers
on Efficiency and Productivity
Issue of 2010‒10‒02
thirteen papers chosen by

  1. Does Urban Proximity Enhance Agricultural Productivity in China? By Chloe DUVIVIER
  3. Productivity Spreads, Market Power Spreads and Trade By Ralf Martin
  4. Technical Efficiency of Microfinance Institutions in India- A Stochastic Frontier Approach By Masood, Tariq; Ahmad, Mohd. Izhar
  5. Spatial Stochastic Frontier Models By Barrios, Erniel B.; Lavado, Rouselle F.
  6. Spillovers in Space: Does Geography Matter? By Sergey Lychagin; Joris Pinkse; Margaret E. Slade; John Van Reenen
  7. Is Privatization Enough? Finding Performance Breaks for UK Power Plants By Triebs, T.P.; Pollitt, M.G.
  8. General Purpose Technologies and Economic Growth: Electricity Diffusion in the Manufacturing Sector Before WWII By Ristuccia, C.A.; Solomou, S.
  9. Nonparametric Frontier Estimation from Noisy Data By Florens, Jean-Pierre; Schwarz, Maik; Van Bellegem, Sébastien
  10. The Impact of the Diffusion of a Financial Innovation on Company Performance: An Analysis of SWIFT Adoption By Susan Scott; John Van Reenen; Markos Zachariadis
  11. Public Capital,Employment and Productivity:An Empirical Investigation for Greece By Koumparoulis, Dimitrios
  12. The Effect of Unobserved Heterogeneity in Stochastic Frontier Estimation: Comparison of Cross Section and Panel with Simulated Data for The Postal Sector By Cazals, Catherine; Dudley, Paul; Florens, Jean-Pierre; Jones, Michael
  13. Nonparametric stochastic frontier estimation via profile By Carlos Martins-Filho; Feng Yao

  1. By: Chloe DUVIVIER
    Abstract: We study whether rural areas close to urban centers enjoy a more productive agricultural sector than remote ones. We try to answer three questions: (1) Do rural areas close to urban centers and remote areas share the same agricultural technology? (2) Are rural areas close to urban center technically more efficient? (3) Do they enjoy a faster technical progress? The empirical examination is realized at the county level on a sample covering three provinces of the south-east of China from 2002 to 2007. Several interesting results are obtained. On the one hand, the type of agricultural technology adopted varies with the distance between the rural area and the urban center. On the other hand, urban proximity has a positive effect on agricultural productivity. Finally, our results confirm a previous finding: the most important component of total factor productivity growth in China is technical progress, whereas technical efficiency decreases it.
    Keywords: Agricultural productivity, urban proximity, latent class stochastic frontier model, technical change.
    JEL: R11 Q10 O18 O13
    Date: 2010
  2. By: Steven F. Koch (Department of Economics, University of Pretoria); Jean D. Slabbert (Department of Economics, University of Pretoria)
    Abstract: A purposive sample of South African specialist surgeons was used to nonparametrically estimate production relations for single ouptut and multiple output production processes. The analysis was further extended to incorporate parametric assumptions associated with stochastic frontier analysis to provide estimates of technical efficiency within surgical practices. The results point to high levels of inefficiency, as well as consistency between single output and multiple output models.
    Keywords: Local-linear, Cross-validation, Semiparametric, Stochastic Frontier Analysis.
    Date: 2010–09
  3. By: Ralf Martin
    Abstract: Much of recent Trade theory focuses on heterogeneity of firms and the differential impacttrade policy might have on firms with different levels of productivity. A common problem isthat most firm level dataset do not contain information on output prices of firms which makesit difficult to distinguish between productivity differences and differences in market powerbetween firms. This paper develops a new econometric framework that allows estimatingboth firm specific productivity and market power in a semi-parametric way based on acontrol function approach. The framework is applied to Chilean firm level data from the early1980, shortly after the country underwent wide ranging trade reforms. The finding is that inall sectors of the economy market power declined and productivity increased. In sectors withhigher import penetration productivity particularly at the bottom end of the distributionincreased faster. At the same time market power declined particularly so at the top end of themarket power distribution. We also show, that ignoring the effect on market power leads toan underestimation of the positive effects of increased import penetration on productivity.
    Keywords: Trade policy, productivity measurement, imperfect competition, productivitydispersion, productivity spread
    JEL: C81 D24 L11 L25
    Date: 2010–09
  4. By: Masood, Tariq; Ahmad, Mohd. Izhar
    Abstract: Study attempts to measure the efficiency level and its determinants of a sample of microfinance institutions operating in India by applying stochastic frontier approach for unbalanced panel of 40 microfinance institutions for the 2005-08. It has been found that mean efficiency level of microfinance institutions is quite low but it increases over the period of study. Age of microfinance institutions is positive determinant of efficiency level but size does not matter much. Higher outreach is associated with higher efficiency which negates the general perception of trade off between outreach and efficiency. Microfinance institutions operating in southern states are more efficient than their counterparts. It has been found that regulated microfinance institutions are less efficient.
    Keywords: Microfinance Institutions; Technical Efficiency; Stochastic Frontier Method; India
    JEL: C23
    Date: 2010–03–15
  5. By: Barrios, Erniel B.; Lavado, Rouselle F.
    Abstract: The stochastic frontier model with heterogeneous technical efficiency explained by exogenous variables is augmented with a sparse spatial autoregressive component for a cross-section data, and a spatial-temporal component for a panel data. An estimation procedure that takes advantage of the additivity of the model is proposed, computational advantages over simultaneous maximum likelihood estimation of all parameters is exhibited. The technical efficiency estimates are comparable to existing models and estimation procedures based on maximum likelihood methods. A spatial or spatial-temporal component can improve estimates of technical efficiency in a production frontier that is usually biased downwards.
    Keywords: technical efficiency, stochastic frontier model, Philippines, spatial externalities, spatial-temporal model, backfitting
    Date: 2010
  6. By: Sergey Lychagin; Joris Pinkse; Margaret E. Slade; John Van Reenen
    Abstract: We simultaneously assess the contributions to productivity of three sources of research anddevelopment spillovers: geographic, technology and product- market proximity. To do this,we construct a new measure of geographic proximity that is based on the distribution of afirm's inventor locations rather than its headquarters, and we report both parametric andsemiparametric estimates of our geographic-distance functions. We find that: i) Geographicspace matters even after conditioning on horizontal and technological spillovers; ii)Technological proximity matters; iii) Product-market proximity is less important; iv)Locations of researchers are more important than headquarters but both have explanatorypower; and v) Geographic markets are very local.
    Keywords: geographic proximity, R&D spillovers, semiparametric and technological proximity
    JEL: C23 L60 O33
    Date: 2010–08
  7. By: Triebs, T.P.; Pollitt, M.G.
    Abstract: The literature shows that for most UK industries privatization might be necessary but is not sufficient to produce economic benefits. Often prior changes in management or later changes in market structure and regulation have larger impacts than privatization itself. We ask what changes around privatization had the greatest impact on efficiency for UK electricity generators. We analyse the effects of privatization and other changes in incentives on plant efficiency using a newly compiled unbalanced panel of about 60 plants for the years 1980 to 2004. We measure efficiency as input demands for two standard inputs, fuel and labour as well as three air emissions, CO2, SO2, and NOx. We model the change in efficiency as a single intercept break and allow for the break to occur at an unknown date. Inference for breaks and break dates relies on Quandt-Andrews type tests. We find breaks associated with efficiency increases for fuel and labour. Breaks and efficiency changes for the three emissions are generally related to fuel efficiency though there are instances where efficiencies move in opposite directions suggesting trade-off between fuel efficiency and emissions exist. There are no breaks prior to privatization. All breaks occur after privatization. Efficiency increases first for labour and later for fuel. We conclude that electricity privatization like other UK privatizations was a unique event. Privatization was important to prepare the ground but it seems that only the subsequent restructuring of the industry, the reduction of political interference in fuel choice, and investment in new and more efficient generation technologies increased efficiency.
    Keywords: Privatization, efficiency, structural breaks
    JEL: L33 L16 L51 L94
    Date: 2010–09–22
  8. By: Ristuccia, C.A.; Solomou, S.
    Abstract: This paper evaluates the diffusion of electricity within the context of a GPT perspective. The paper develops a new comparative data set on the usage of electricity in the manufacturing sectors of the US, Britain, France, Germany and Japan and proceeds to evaluate the hypotheses of a productivity slowdown and of a productivity bonus as postulated by many existing GPT models.
    Keywords: Copyright; General Purpose Technologies, Economic Growth, Economic History, Productivity, Long Swings
    JEL: N11 N12 N13 N14 N60 O40
    Date: 2010–04–30
  9. By: Florens, Jean-Pierre; Schwarz, Maik; Van Bellegem, Sébastien
    Abstract: A new nonparametric estimator of production a frontier is defined and studied when the data set of production units is contaminated by measurement error. The measurement error is assumed to be an additive normal random variable on the input variable, but its variance is unknown. The estimator is a modification of the m-frontier, which necessitates the computation of a consistent estimator of the conditional survival function of the input variable given the output variable. In this paper, the identification and the consistency of a new estimator of the survival function is proved in the presence of additive noise with unknown variance. The performance of the estimator is also studied through simulated data.
    Date: 2010–05
  10. By: Susan Scott; John Van Reenen; Markos Zachariadis
    Abstract: How does a major financial network innovation influence firm performance? Despite muchspeculation we have little hard quantitative evidence about the impact of technology diffusionin financial services. In this paper we use the entire adoption history for SWIFT (the Societyfor Worldwide Interbank Financial Telecommunication - standards provider and messagingcarrier) matched to bank-level panel data for the US, Canada and 27 European countries. Ourdataset covers almost 7,000 banks (including 1,689 SWIFT adopters) between 1998 and2005. We find that adoption appears to have large effects on profitability, but it takes severalyears before any positive return is discernible, consistent with the idea of significantcomplementarities between new technologies and firm organization. The profitability effectoperates by both raising sales and decreasing operating costs and is greater for smaller firmsthan larger firms. Although the long-run effects are similar, US and UK banks appear to reapthe benefits from adoption more quickly than their Continental European counterparts. This isconsistent with the idea that the impact of information and communication technologies isstronger in the US than Europe due to lower adjustment costs.
    Keywords: Diffusion, profitability, banks, SWIFT
    JEL: O33 N20
    Date: 2010–08
  11. By: Koumparoulis, Dimitrios
    Abstract: Scope: The aim of this study is to bring out the importance of public employment, in the Greek economy’s productivity and competitiveness. Method: A brief introduction followed by a literature review, the model adopted, the estimates and analysis of results and brief concluding remarks. Expected results: Identification of the possibilities of redistribution of employment from the public to the private sector of the economy, in the case of Greece. Originality: Better understanding of the productivity improvement and its side effects on international competitiveness and sustainable development. Usefulness for combined stabilization and sustainable development strategies.
    Keywords: public capital; public employment; economic development
    JEL: O11 C51 O38
    Date: 2010
  12. By: Cazals, Catherine; Dudley, Paul; Florens, Jean-Pierre; Jones, Michael
    Date: 2010
  13. By: Carlos Martins-Filho (Department of Economics, University of Colorado); Feng Yao (Department of Economics, West Virginia University)
    Abstract: We consider the estimation of a nonparametric stochastic frontier model with composite error density which is known up to a finite parameter vector. Our primary interest is on the estimation of the parameter vector, as it provides the basis for estimation of firm specific (in)efficiency. Our frontier model is similar to that of Fan et al. (1996), but here we extend their work in that: a) we establish the asymptotic properties of their estimation procedure, and b) propose and establish the asymptotic properties of an alternative estimator based on the maximization of a conditional profile likelihood function. The estimator proposed in Fan et al. (1996) is asymptotically normally distributed but has bias which does not vanish as the sample size n??. In contrast, our proposed estimator is asymptotically normally distributed and correctly centered at the true value of the parameter vector. In addition, our estimator is shown to be efficient in a broad class of semiparametric estimators. Our estimation procedure provides a fast converging alternative to the recently proposed estimator in Kumbhakar et al. (2007). A Monte Carlo study is performed to shed light on the finite sample properties of these competing estimators.
    Keywords: stochastic frontier models; nonparametric frontiers; profile likelihood estimation.
    JEL: C14 C22
    Date: 2010

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