New Economics Papers
on Efficiency and Productivity
Issue of 2010‒11‒20
fifteen papers chosen by

  1. Do Product Market Regulations in Upstream Sectors Curb Productivity Growth? Panel Data Evidence for OECD Countries By Renaud Bourlès; Gilbert Cette; Jimmy Lopez; Jacques Mairesse; Giuseppe Nicoletti
  2. Agglomeration Elasticities and Firm Heterogeneity By Daniel J. Graham; David C. Maré
  3. Worker Absence and Productivity: Evidence from Teaching By Mariesa A. Herrmann; Jonah E. Rockoff
  4. Financial constraints and innovation: Why poor countries don't catchup By Yuriy Gorodnichenko; Monika Schnitzer
  5. Trade Liberalisation, Market Power abd Scale Efficiency in Indian Industry By Pulapre Balakrishnan; K. Pushpangadan; M. Suresh Babu
  6. Cause and effect relationship between post-merger operating performance changes and workforce adjustments By Kuvandikov, Azimjon
  7. Towards Measuring the Volume Output of Education and Health Services: A Handbook By Paul Schreyer
  8. Tax audit productivity in New York State By Niu, Yongzhi
  10. The Impact of Trade Openness on Technical Efficiency in U.S. Agriculture By Miljkovic, Dragan; Shaik, Saleem
  11. Cherry Picking or Driving Out Bad Management: Foreign Acquisitions in Turkish Banking By Canan Yildirim
  12. Does returns to farming depend on Caste? New evidence from India By Singh, Ashish
  13. Contracting for Canola in the Great Plains States By Wilson, William; Bruce, Dahl
  14. Analysis of PISA 2006 Preferred Items Ranking Using the Percent-Correct Method By Ray Adams; Alla Berezner; Maciej Jakubowski
  15. Measures of fixed capital in agriculture By Butzer, Rita; Mundlak, Yair; Larson, Donald F.

  1. By: Renaud Bourlès; Gilbert Cette; Jimmy Lopez; Jacques Mairesse; Giuseppe Nicoletti
    Abstract: Based on an endogenous growth model, we show that intermediate goods markets imperfections can curb incentives to improve productivity downstream. We confirm such prediction by estimating a model of multifactor productivity growth in which the effects of upstream competition vary with distance to frontier on a panel of 15 OECD countries and 20 sectors over 1985-2007. Competitive pressures are proxied with sectoral product market regulation data. We find evidence that anticompetitive upstream regulations have curbed MFP growth over the past 15 years, more strongly so for observations that are close to the productivity frontier.
    JEL: C23 L16 L5 O43 O57
    Date: 2010–11
  2. By: Daniel J. Graham; David C. Maré
    Abstract: This paper estimates the relationship between agglomeration and multi factor productivity atthe one digit industry level and by region using longitudinal firm level data for New Zealand.A key focus of the paper is on methods to represent firm level heterogeneity and non-randomsorting of firms. The panel structure of the data allows us to control for it at the level of localindustries or enterprises. We obtain a cross-sectional agglomeration elasticity of 0.171, whichfalls by 70% when we use local industry controls, and by 90% when we impose enterprisefixed effects. Using industry specific production functions, we find that the "within localindustry" estimates are similar, though slightly larger than the cross sectional estimates(~0.070), suggesting negative sorting between areas, combined with positive sorting withinareas. The within-enterprise estimates yield a small elasticity of 0.010. Our results indicatethat the imposition of a common production technology across all industries is not a validassumption. While cross-sectional estimates may overstate the true impact of agglomerationon productivity in the presence of positive bias from sorting, the within enterprise approach(which is increasingly common in the literature) can suffer from identification problems dueto the highly persistent nature of agglomeration variables and may understate the true causaleffect of agglomeration on productivity. We thus rely on the "within local industry" estimatesas providing the most reliable indication of agglomeration elasticities.
    Keywords: Agglomeration, urban density, productivity
    JEL: L25 R12 R3
    Date: 2010–02
  3. By: Mariesa A. Herrmann; Jonah E. Rockoff
    Abstract: A significant amount of work time is lost each year due to worker absence, but evidence on the productivity losses from absenteeism remains scant due to difficulties with identification. In this paper, we use uniquely detailed data on the timing, duration, and cause of absences among teachers to address many of the potential biases from the endogeneity of worker absence. Our analysis indicates that worker absences have large negative impacts: the expected loss in daily productivity from employing a temporary substitute is on par with replacing a regular worker of average productivity with one at the 10th–20th percentile of productivity. We also find daily productivity losses decline with the length of an absence spell, consistent with managers engaging in costly search for more productive substitutes and temporary workers learning on the job. While illness is a major cause of absenteeism among teachers, we find no evidence that poor health also causes lower on-the-job productivity.
    JEL: J22 J24 J45
    Date: 2010–11
  4. By: Yuriy Gorodnichenko (University of California); Monika Schnitzer (University of Munich)
    Abstract: We examine micro-level channels of how financial development can affect macroeconomic outcomes like the level of income and export intensity. We investigate theoretically and empirically how financial constraints affect a firm's innovation and export activities, using unique firm survey data which provides direct measures for innovations and firm-specific financial constraints. We find that financial constraints restraint heability of domestically owned firms to innovate and export and hence to catch up to the technological frontiers. This negative effect is amplified as financial constraints force export and innovation activities to become substitutes although they are generally natural complements.
    Keywords: innovation, productivity, financial constraint, export, technology frontier, BEEPS
    JEL: O3 O16 F1 G3
    Date: 2010–11
  5. By: Pulapre Balakrishnan; K. Pushpangadan; M. Suresh Babu
    Abstract: Using information on listed firms in each of the industry groups at the two-digit level within Manufacturing this study investigates whether the radical shift in trade policy in India in 1991 resulted in a reduction in market power and/or an improvement in scale efficiency. They estimate a group-wise production function allowing for firm-specific effects. A plausible estimate of market power is obtained and the assumption of constant returns to scale is mostly rejected. As regards the effects of the trade-policy shock of 1991, evidence of a move to a more competitive market structure or of an improvement in scale efficiency is not widespread across Indian manufacturing. [Working Paper No. 336]
    Keywords: Trade liberalisation; Market power; Scale Economies
    Date: 2010
  6. By: Kuvandikov, Azimjon
    Abstract: Prior empirical research provides substantial evidence showing that mergers and acquisitions lead to operating performance decline (Ghosh, 2001). At the same time such transactions involve workforce reductions, as reported in the public media. However, systematic empirical evidence on the association between operating performance and workforce adjustments is inconclusive. On the one hand workforce reductions may be undertaken to improve efficiency and firm profitability (Cascio et al., 1997) or to arrest further performance deterioration. On the other, post-takeover layoffs may be undertaken to create shareholder value and to regain premiums paid to targets. Consequently, it is suggested that such layoffs destroy the human capital of acquired firms and thereby negatively affect firm performance post-merger (Krishnan et al., 2007). Thus, the answers to (1) whether post-takeover performance decline leads to workforce reductions and (2) whether such layoffs positively or negatively affect firm performance are unknown. This chapter aims to provide new empirical evidence on these two questions. Empirical evidence on these questions would clarify whether post-merger labour management decisions are made to further enhance efficiency and firm profitability.
    Date: 2010–08
  7. By: Paul Schreyer
    Abstract: The measurement of volumes of health and education services constitutes a challenge for national accountants and price statisticians. In the past, such services have typically been measured by the inputs used to provide them but such an approach neglects any productivity changes in service provision. An increasing number of countries is now working towards output-based measures of the volume of these services. The present document summarises country practices and provides methodological guidance for output-based approaches in the measurement of health and education services. The handbook deals with volume changes over time within a country as well as with volume differences at a particular point in time across countries.<BR>La mesure des volumes de services de la santé et de l’éducation constitue un défi pour les comptables nationaux et les statisticiens des prix. Dans le passé, de tels services ont été typiquement mesurés par les entrants employées pour les fournir mais une telle approche néglige tous les changements de productivité dans la production de service. Un nombre croissant de pays travaille maintenant vers des mesures basées sur une notion de ‘output’ de ces services. Le présent document récapitule des pratiques en matière de pays et fournit des conseils méthodologiques pour des approches ‘output’ dans la mesure des services de santé et d'éducation. Le manuel traite des changements de volume temporels au sein d’un pays aussi bien que les différences de volume à un moment particulier à travers des pays.
    Date: 2010–04–28
  8. By: Niu, Yongzhi
    Abstract: This study employs both linear and non-linear approaches to examine tax audit productivity in New York State. The linear approach shows a positive relationship between audit revenue and the number of audit staff within the New York State Department of Taxation and Finance’s Audit Division. Using a narrower definition of “direct staff” which excludes upper level supervisors (staff at grade level 27 or higher, we find that the impact of an additional auditor is $590 thousand; using a broader definition of “direct staff”, which includes upper level supervisors (staff at grade level 27 or higher), the impact is $496 thousand. The non-linear approach discovers the diminishing marginal returns. At the current direct staff level (877 as of November 2008, the narrower definition) in the Audit Division, the marginal return of an extra direct staff member is $602 thousand, which is consistent with the results of the linear model. The results also show that in order to maximize net audit revenue the State needs to increase the number of auditors to 1,522, assuming the marginal cost of an additional auditor is constant at $200 thousand. The non-linear model provides a convenient way to determine the optimal level of staff, given the marginal cost of an additional auditor. Hence policymakers can use this non-linear model as a tool to maximize the State’s net audit revenue.
    Keywords: tax; audit productivity; diminishing returns; non-linear approach; audit output measures; audit input measures; optimal level; reciprocal model; impact lags
    JEL: H83 H71 H00 H26
    Date: 2010–11–12
  9. By: Nerhagen, Lena (VTI); Li, Chuan-Zhong
    Abstract: Emissions from traffic impose negative effects on human health, and recent evidence indicates that particulate matters (PM) are the detrimental air pollutant that causes most life years lost. To improve the efficiency of resource allocation, various mitigation measures have been proposed for reducing these emissions. However, whether or not the policy instruments are welfare improving, and if yes, how much more efficient they can be remain to be studied. To answer the questions, we need to both assess the economic cost of emission control and the health benefit due to the reduced PM emission by all proposed control instruments. This paper focuses on the cost efficiency for reaching pre-determined emission targets. We are concerned with reducing the concentrations of PM in Stockholm by local policy measures. Contrary to other cost-efficiency studies we have in this study included adaptations in behaviour in addition to the conventional technical measures alone. <p> Since there are different emissions of PM, targeting PM10 may not be a good indicator of the health benefits. We therefore compare the performance of targeting PM and of targeting years of life lost (YOLL) and found interesting differences. We find that if the ultimate objective is to save lives or say life-years, it should be more appropriate to target YOLL, provided that YOLL can be properly predicted. Moreover, since the collected data on the effectiveness and cost of the policy instruments involve large uncertainty, we have employed a stochastic control model to explore the implications of the degree of uncertainty. We find that the higher fulfilment probability, the larger the marginal cost as expected. Also, for a given fulfilment probability, the more uncertain we are about the true effectiveness parameters, the larger the marginal costs.
    Keywords: emission control; cost-effective analysis; human health; uncertainty; stochastic control
    JEL: D62
    Date: 2010–11–11
  10. By: Miljkovic, Dragan; Shaik, Saleem
    Abstract: This study addresses the impact of trade openness on technical efficiency in the U.S. agricultural sector. The results indicate that trade protectionism illustrated with a decrease in the share of agricultural imports in agricultural GDP led to an increase in technical efficiency. A change in the share of agricultural exports in agricultural GDP had no impact on technical efficiency. These results are partially consistent with the premise of the new trade theory, but also seem to be driven by the intricacies of the agricultural sector and agricultural policy in the United States and internationally.
    Keywords: Agricultural Finance, International Relations/Trade,
    Date: 2010–04
  11. By: Canan Yildirim (Department of International Finance, Kadir Has University)
    Abstract: This paper analyzes the determinants of cross-border acquisitions and the impact of foreign acquisitions on performance in the Turkish banking sector. The results suggest that foreign banks target relatively better performing banks to acquire, and that post-acquisition performance of the targets does not improve. There is some evidence that both established and newly acquired foreign banks focus on expanding their market shares. Concerning static-ownership effects, the results also show that, in general, foreign-owned and state-owned banks perform as well as private-owned domestic banks. The only exception is with respect to non-performing loans, in that state-owned banks seem to suffer from asset quality problems.
    Date: 2010–11
  12. By: Singh, Ashish
    Abstract: This paper analyses the relationship between net farm income per unit of land cultivated and caste divisions in India using a micro unit recorded and nationally representative survey conducted in 2004-05. Findings suggest that the groups that are generally considered disadvantaged (Scheduled Castes/Scheduled Tribes) have, after controlling for other factors, substantially lower farm returns compared to the advantaged (Others) castes, whereas the ‘Other Backward Castes’ occupy position in between. Decomposition of overall net farm income inequality using mean-log deviation indicates that caste based inequality forms a substantial part of it. Results call for policies for neutralizing the impact of caste on agricultural returns in addition to the general policy of land redistribution.
    Keywords: Caste; returns to farming; farm income inequality; Caste based inequality; India
    JEL: D63
    Date: 2010–07–26
  13. By: Wilson, William; Bruce, Dahl
    Abstract: Canola has become an important crop in the last decade in the U.S. Production of canola is risky and competes with other crops which have a range of risk reduction mechanisms. Alternative contracting strategies were evaluated by comparing returns to labor and management for growers and gross margins for processors. Alternative contracting strategies included no contract, fixed price with and without act of god provisions, and an oil premium contract. Grower returns and processor gross margins were simulated and resulting distributions were evaluated using stochastic efficiency with respect to a function. We estimated certainty equivalents and ranked contract preferences for both growers and processors by region in North Dakota. Grower and processor risk preferences varied by region. Producers and processors preferences differed for contract alternatives in the Northwest, Northeast and Eastcentral regions and were in agreement in the Northcentral region. This suggests that development of a single contract that would be widely adopted across the state would likely have to be altered by region to be acceptable to growers and processors.
    Keywords: Canola, Grower, Processor, Contracting, Risk, Stochastic Efficiency (SERF)., Agricultural Finance, Crop Production/Industries,
    Date: 2010–07
  14. By: Ray Adams; Alla Berezner; Maciej Jakubowski
    Abstract: This paper uses an approximate average percent-correct methodology to compare the ranks that would be obtained for PISA 2006 countries if the rankings had been derived from items judged by each country to be of highest priority for inclusion. The results reported show a remarkable consistency in the country rank orderings across different sets of countries’ preferred items when comparing with the rank reported in the PISA 2006 initial report (OECD, 2007). On average, only few countries systemically go up or down in their ranking position. As these countries are in a group of moderate performers with very comparable outcomes, these shifts in the ranking would probably be associated with minor changes in mean performance on the final PISA scale. The analysis suggests that PISA rankings are noticeably stable thanks to the large enough pool of test items able to accommodate diverse preferences. The paper shows how important it is to base a choice of test items on a properly structured process which allows different experts and countries to equally contribute. The evidence presented demonstrates that in PISA, average rank positions of countries across different sets of preferred items are apparently stable and experts are not able to predict which items can elevate performance of their countries in the final test.<BR>Le présent document repose sur une méthodologie fondée sur la moyenne des pourcentages de réponses correctes. Il vise à déterminer le rang que les pays auraient obtenu à l’évaluation PISA 2006 si le classement avait été réalisé à partir des items considérés comme prioritaires par chaque pays. Sur les différents groupes d’items préférés des pays, les résultats montrent une cohérence remarquable avec le classement réel qui figure dans le rapport initial PISA 2006 (OCDE, 2007). En moyenne, peu de pays gagnent ou perdent des places systématiquement. Étant donné que ces pays font partie d’un groupe de niveau moyen avec des résultats très comparables, les décalages dans le classement s’accompagneraient probablement de changements mineurs dans la performance moyenne sur l’échelle finale PISA. L’analyse suggère que les classements PISA sont manifestement stables grâce à l’existence d’un vivier d’items de tests suffisamment important pour autoriser toutes les préférences. Ce document montre qu’il est important de fonder le choix des items de tests sur un processus bien structuré, ce qui permet aux pays et aux experts de contribuer de la même façon. Les observations présentées ici établissent que pour PISA, le classement des pays selon les différents groupes d’items de premier choix est apparemment stable et les experts ne peuvent pas prédire quels items pourraient gonfler la performance de leur pays dans les tests finals.
    Date: 2010–03–31
  15. By: Butzer, Rita; Mundlak, Yair; Larson, Donald F.
    Abstract: Capital is a fundamental component of agricultural production, and the accumulation of capital is key to growth in agriculture and the process of development. Unfortunately, cross-country data sets on agricultural fixed capital are rare. Using a common methodology that allows comparisons across countries, as well as over time, this paper introduces a data series on fixed capital in agriculture, based on national accounts data. The fixed capital measure differs remarkably from the Food and Agriculture Organization's data series on tractors, which has been widely utilized as a proxy for agricultural fixed capital. The authors construct comparable measures of capital in livestock and tree stock. They examine the evolution of the capital stocks from 1970 to 2000, paying particular attention to the changing composition of agricultural capital, as well as differences in the accumulation of capital for high-income and middle and lower-income countries. Using the capital measures in agricultural productivity analyses, the data yield estimated input elasticities substantially different from those found previously in the literature. The authors show explicitly that this is due to the improved data set on agricultural capital stocks, as well as the methodology used in the study.
    Keywords: Economic Theory&Research,Investment and Investment Climate,Rural Development Knowledge&Information Systems,Economic Growth,Emerging Markets
    Date: 2010–11–01

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