New Economics Papers
on Efficiency and Productivity
Issue of 2010‒11‒06
thirteen papers chosen by

  1. Production Efficiency in Indian Agriculture: An Assessment of the Post Green Evolution Years By Subhash C. Ray; Arpita Ghose
  2. The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies By Abegaz, Berhanu; Basu, Arnab K.
  3. Does Exporter Turnover Contribute to Aggregate Productivity Growth? Evidence from Malaysian Manufacturing. By Ergun Dogan; Koi Nyen Wong; Michael Meow-Chung Yap
  4. Which Portuguese Manufacturing Firms Learn by Exporting? By Armando Silva; Óscar Afonso; Ana Paula Africano
  5. Revisiting the Returns to U.S. Public Agricultural Research: New Measures, Models, Results, and Interpretation By Alston, Julian M.; Andersen, Matt A.; James, Jennifer S.; Pardey, Philip G.
  6. Informal sector, productivity, and tax collection By Leal Ordóñez, Julio C.
  7. Citizens' control and the efficiency of local public services By Núria Bosch Roca; Marta Espasa Queralt; Antoni Mora Corral
  8. The Nexus between Schooling and Growth: International Evidence since 1870 By Jakob B. Madsen; Isfaaq Timol
  9. Quality-adjusted Human Capital and Productivity Growth By Md. Rabiul Islam
  10. Does the Size and Quality of the Government Explain the Size and Efficiency of the Financial Sector? By Arusha Cooray
  11. Aggregation versus Heterogeneity in Cross-Country Growth Empirics. By Markus Eberhardt; Francis Teal
  12. Divide and Privatize : Firms Break-up and Performance By Evžen Kočenda; Jan Hanousek
  13. The Determinants of International Financial Integration Revisited: The Role of Networks and Geographic Neutrality. By Pérez García Francisco; Tortosa-Ausina Emili; Arribas Fernández Iván

  1. By: Subhash C. Ray (University of Connecticut); Arpita Ghose (Jadavpur University)
    Abstract: In this paper we use the nonparametric approach of Data Envelopment Analysis (DEA) to obtain Pareto-Koopmans measures of technical efficiency of individual states in India over the years 1970-71 through 2000-01 in a multi-output, multi-input model of agricultural production. The Pareto-Koopmans measure is a complete measure of efficiency that reflects all unrealized potential for increasing \textit{any} output and decreasing \textit{any} input that the firm has failed to exploit. In our empirical analysis, we disaggregate overall efficiency into two distinct components representing output and input efficiencies and identify the contributions of individual outputs and inputs to the measured level of overall efficiency. Because introduction of modern inputs has been a major component of the process of modernization of Indian agriculture, we examine to what extent different states succeeded in utilizing the modern inputs compared to the traditional inputs. Finally, we use regression analysis to explain variations in efficiency across states in terms of differences in various infra-structural, institutional, and demographic factors.
    Keywords: Data Envelopment Analysis; Pareto-Koopmans Efficiency; Modern and traditional inputs.
    JEL: Q16 C61 O33
    Date: 2010–10
  2. By: Abegaz, Berhanu; Basu, Arnab K.
    Abstract: Using a model that admits variable returns and imperfect competition, we investigate the impact on total factor productivity of trade liberalization in six emerging economies. Regressions based on panel data for 28 three-digit manufacturing industries show that productivity growth is insensitive to tariff reduction. These results are at variance with country-specific studies which, using firm-level data, generally find a positive association between liberalization and productivity growth. While aggregation effects may matter, our results can also be explained thusly: significant productivity gains by latecomers via technological assimilation do take time and require appropriate sequencing of reforms of trade and industrial policies.
    Keywords: Production Economics,
    Date: 2010–10
  3. By: Ergun Dogan; Koi Nyen Wong; Michael Meow-Chung Yap
    Abstract: Malaysia’s economic success is to a significant extent underpinned by its export-oriented manufacturing sector. The sector has a large foreign presence, with MNCs attracted by the open trade and investment regime, and FDI-friendly policies. Using unpublished manufacturing census data for 2000 and 2005, we apply the methodology by Foster et al. (1998) to decompose productivity growth. The analysis shows that exporters were more productive than domestic-oriented establishments, and were distinctly more competitive. The empirical evidence also shows that establishment turnover is important in boosting productivity growth. In particular, we find that turnover of exporters made a larger contribution to aggregate productivity growth compared to domestic-oriented establishments during the period from 2000 to 2005. Surviving establishments (those that operated in both years), on the other hand, made a negative contribution. It is noteworthy that entrants to export markets were more productive than surviving non-exporters and even surviving exporters. Exiters from export markets or “export failuresâ€, on the other hand, were less productive than continuing exporters. Given the importance of turnover to productivity growth, the government should ensure unrestricted entry to the export sectors for both foreign and domestic investors. Continuing with pro-FDI policies is also important, given the keener global competition.
    Keywords: Exporting; plant turnover; productivity; manufacturing; Malaysia
    JEL: F14 L60 O40
    Date: 2010–05
  4. By: Armando Silva (Escola Superior de Estudos Industriais e de Gestão do Instituto Politécnico do Porto); Óscar Afonso (Universidade do Porto, Faculdade de Economia); Ana Paula Africano (Universidade do Porto, Faculdade de Economia)
    Abstract: Using a longitudinal database (1996-2003) at the plant level, this paper aims to shed light on the causal nexus between international trade engagement and productivity in Portugal. We analyse in particular the learning-by-exporting hypotheses. In line with recent empirical literature, we apply mainly the Propensity Score Matching and a differences-in-differences estimator. In post-entry years we find a higher growth of labour productivity and total factor productivity for new exporting firms when compared to firms that, although having similar characteristics, have decided not to begin exporting in that year. Moreover, in an attempt to uncover the channels through which the learning effects are driven to new exporters, we applied the same methodology to some sub-samples. We found that learning effects are higher for new exporters that are also importers or start importing at the same time. Other important factors influencing that learning ability are found in firms that export to more developed markets, in those that achieve a certain threshold of export intensity and particularly for those firms that belong to sectors in which Portugal is at a comparative disadvantage
    Keywords: Exports, Imports, Self-Selection, Learning-by-exporting, Matching
    JEL: F14 D24
    Date: 2010–09
  5. By: Alston, Julian M.; Andersen, Matt A.; James, Jennifer S.; Pardey, Philip G.
    Abstract: Studies of the returns to agricultural R&D are severely constrained by data limitations, and vulnerable to specification biases resulting from modeling choices made to address those constraints. This article makes use of a newly constructed set of uncommonly rich and detailed state-level data on both U.S. agricultural productivity and federal and state-government investments in agricultural R&D to explore the consequences of common modeling choices and their implications for measures of research returns. Particular attention is paid to the specification of the research lag structure and spatial spillovers. The results indicate that state-to-state spillover effects are important, that the R&D lag is longer than many studies have allowed, and that misspecification of these aspects can give rise to significant biases. Our modeling choices imply benefit-cost ratios (or rates of return) that are much smaller than typically reported in the literature, but nonetheless large and indicating a significant pervasive underinvestment. We present heuristic arguments and evidence to show why our results are plausible given the high value of agricultural productivity growth compared with annual R&D investments.
    Keywords: Spatial technology spillovers, knowledge stocks, R&D lags, public agricultural R&D, U.S. states, Research and Development/Tech Change/Emerging Technologies,
    Date: 2010–10
  6. By: Leal Ordóñez, Julio C.
    Abstract: The informal sector is a prominent characteristic of many developing countries. Most of the literature has focused on understanding the determinants of informality. The connection between the informal sector and economic development is, nonetheless, relatively less understood. One of the most important determinants of informality is the tax enforcement quality of a country which, some authors argue, additionally distorts firms' decisions and creates inefficiency. In this paper, I assess the quantitative importance of the effects of incomplete tax enforcement on aggregate output and productivity. I use a dynamic general equilibrium framework to study effects that have received little attention in the literature. I calibrate the model using data for Mexico, an economy where 31% of the employees work in informal establishments. I then investigate the effects of improving enforcement. My main finding is that under complete enforcement, Mexico's labor productivity and output would be 17% higher.
    Keywords: Informal Sector; Productivity; tax enforcement; TFP; Heterogeneous plants
    JEL: O47 O17 E26
    Date: 2010–02
  7. By: Núria Bosch Roca (Universitat de Barcelona & IEB); Marta Espasa Queralt (Universitat de Barcelona & IEB); Antoni Mora Corral (Universitat Internacional de Catalunya & IEB)
    Abstract: It is generally accepted that fiscal decentralization increases citizens’ control over politicians, fostering accountability and increasing efficiency. This article identifies the socioeconomic characteristics of citizens (potential voters) that increase their control over local policy-makers and thus generate greater efficiency in a decentralized context. We also highlight the fiscal characteristics of local governments that influence this control and efficiency. The study examines a sample of Spanish municipalities, applying a methodology based on the conventional procedure of two-stage estimation. In the first stage we estimate the efficiency of local public services by calculating a new version of a global output indicator using the DEA technique. In the second stage, using a Tobit type estimation (censored models) and bootstrap methods, we show how the factors mentioned may influence efficiency. The results suggest that strong presence of retailers, retired people, and people entitled to vote favour citizens’ control, which fosters accountability and efficiency. A factor that facilitates this control, and therefore greater efficiency, is the presence of low opportunity costs for obtaining information regarding local public service management.
    Keywords: Technical efficiency, local governments, citizens' control, socioeconomic and fiscal variables
    JEL: H11 H71 H72
    Date: 2010
  8. By: Jakob B. Madsen; Isfaaq Timol
    Abstract: The growth effects of schooling are often assumed to be exaggerated because of feedback effects from growth to schooling. This paper investigates the nexus between productivity growth and schooling at different levels using a sample of 19 OECD countries over the period 1870 to 2006. The empirical estimates show 1) that schooling is independent of expected growth and most other variables that are associated with the present value of schooling; 2) a one-way causality from schooling to growth; and 3) that the growth effects of schooling are increased rather than reduced when schooling is instrumented.
    Keywords: Schooling and growth; endogenous growth models; reverse causality
    JEL: O3 O4
    Date: 2010–05
  9. By: Md. Rabiul Islam
    Abstract: Both the quality and quantity of human capital are important for growth. Although the quality aspects of human capital may have greater potential in explaining growth, given that the quantity effects of human capital have been found to be ambiguous, they have long been ignored in empirical growth literature. This paper empirically tests the joint effects of both the quantity and quality of human capital in stimulating productivity growth for a panel of 89 countries over the period 1970-2007. Based on different measures of human capital quantity and quality, the results show that the growth effects of educational attainment can be significantly enhanced when the quality of schooling is improved. The joint effect of human capital quality and quantity is found to be stronger in developing countries.
    Keywords: quantity, quality, human capital, growth, world
    JEL: I20 O30 O40
    Date: 2010–05
  10. By: Arusha Cooray
    Abstract: This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that while increased quality of the government as measured by governance and legal origin positively influence both financial sector size and efficiency, that the size of the government proxied by government expenditure and government ownership of banks, has a negative effect on financial sector efficiency, however, a positive impact on financial sector size, particularly in the low income economies.
    JEL: O11 O16 O43 O57
    Date: 2010–10
  11. By: Markus Eberhardt; Francis Teal
    Abstract: The cross-country growth literature commonly uses aggregate economy datasets such as the Penn World Table (PWT) to estimate homogeneous production function or convergence regression models. Against the background of a dual economy framework this paper investigates the potential bias arising when aggregate economy data instead of sectoral data is adopted in macro production function regressions. Using a unique World Bank dataset we estimate production functions in agriculture and manufacturing for a panel of 41 developing and developed countries (1963-1992). We employ novel empirical methods which can accommodate technology heterogeneity, variable nonstationarity and the breakdown of the standard crosssection independence assumption. We then investigate the potential for biased estimates due to aggregation and empirical misspecification, relying on both theory and Monte Carlo simulations. We confirm substantial bias in the technology coefficients using data for a stylised aggregate economy made up of agricultural and manufacturing sectors and a matched PWT dataset.
    JEL: C23 O47 O11
    Date: 2010
  12. By: Evžen Kočenda (Osteuropa-Institut, Regensburg (Institut for East European Studies)); Jan Hanousek
    Abstract: We analyze the long-term effects of divesture and ownership change on corporate per-formance. We employ a unique data set for a large number of Czech firms spanning the period 1996–2005. We employ a propensity score matching procedure to deal with endogeneity problems. Our results, which are generally in line with the positive effects of divestiture found in the developed-market literature, show that the initial effects of di-vestiture are positive but after a certain point they quickly diminish over time.
    Keywords: firm divestiture, corporate performance, ownership changes, privatization, emerging markets, endogeneity, propensity score matching procedure
    JEL: D23 G32 G34 L20 M21 P47
    Date: 2010–10
    Abstract: Over the last two decades, the degree of international financial integration has increased substantially, becoming an important area of research for many financial economists. This working paper explores the determinants of the asymmetries in the international integration of banking systems. We consider an approach based on both network analysis and the concept of geographic neutrality. Our analysis focuses on the banking systems of 18 advanced economies between 1999 and 2005. Results indicate that banking integration should be assessed from the perspective of both inflows and outflows, given that they show different patterns for different countries. Using standard techniques, our results reinforce previous findings by the literature-especially the remarkable role of both geographic distance and trade integration. Nonparametric techniques reveal that the effect of the covariates on banking integration is not constant over the conditional distribution, which (in practical terms) implies that the sign of the relationship varies across countries.
    Keywords: Banking integration, geographic neutrality, network analysis, nonparametric regression.
    Date: 2009–11

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.