nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2011‒01‒30
fifteen papers chosen by
Angelo Zago
University of Verona

  1. The Impact of Plant-level Resource Reallocations and Technical Progress on U.S. Macroeconomic Growth By Amil Petrin; T. Kirk White; Jerome P. Reiter
  2. Firm-Level Productivity and Technical Efficiency in MENA Manufacturing Industry: The Role of the Investment Climate By Tidiane Kinda; Patrick Plane; Marie-Ange Veganzones
  3. Productivity spillovers and regional differences: some evidence on the italian manufacturing sector By IMBRIANI, Cesare; REGANATI, Filippo
  4. Dairy productivity in the Waikato region, 1994-2007 By Cameron, Michael P.; Bell, Kendon
  5. Life Cycle of the Centrally Planned Economy: Why Soviet Growth Rates Peaked in the 1950s By Vladimir Popov
  6. Assessing the Productive Efficiency of Non-Profit Organisations: a Comparative Analysis By DESTEFANIS, Sergio Pietro; MAIETTA, Ornella Wanda
  7. Matching Efficiency and Labour Market Reform in Italy. A Macroeconometric Assessment By DESTEFANIS, Sergio Pietro; FONSECA, Raquel
  8. The Golden Rule of Public Finance and the Productivity of Public Capital By Terezie Výprachtická
  9. The Effects of the Internationalisation of Firms on Innovation and Productivity By Siedschlag, Iulia; Zhang, Xiaoheng; Cahill, Brian
  10. Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity By Nicholas Bloom; Mirko Draca; John Van Reenen
  11. Productivity and age: Evidence from work teams at the assembly line By Börsch-Supan, Axel; Weiss, Matthias
  12. Multi-product Firms and Product Basket Adjustments in Ethiopian Manufacturing By Admasu Shiferaw
  13. Can better governance increase university efficiency? By Néstor Duch-Brown; Montserrat Vilalta
  14. Economies of scale and scope of university research and technology transfer: a flexible multi-product approach By Néstor Duch-Brown; Martí Parellada-Sabata; Jose Polo-Otero
  15. Tender prices in local bus transport in Germany - an application of alternative regression techniques By Beck, Arne; Walter, Matthias

  1. By: Amil Petrin; T. Kirk White; Jerome P. Reiter
    Abstract: We build up from the plant level an "aggregate(d)" Solow residual by estimating every U.S. manufacturing plant's contribution to the change in aggregate final demand between 1976 and 1996. Our framework uses the Petrin and Levinsohn (2010) definition of aggregate productivity growth, which aggregates plant-level changes to changes in aggregate final demand in the presence of imperfect competition and other distortions/frictions. We decompose these contributions into plant-level resource reallocations and plant-level technical efficiency changes while allowing in the estimation for 459 different production technologies, one for each 4-digit SIC code. On average we find positive aggregate productivity growth of 2.2% in this sector during this period of declining share in U.S. GDP. We find that aggregate reallocation made a larger contribution to growth than aggregate technical efficiency. Our estimates of the contribution of reallocation range from 1.7% to 2.1% per year, while our estimates of the average contribution of aggregate technical efficiency growth range from 0.2% to 0.6% per year. In terms of cyclicality, the aggregate technical efficiency component has a standard deviation that is roughly 50% to 100% larger than that of aggregate total reallocation, pointing to an important role for technical efficiency in macroeconomic fluctuations. Aggregate reallocation is negative in only 3 of the 20 years of our sample, suggesting that the movement of inputs to more highly valued activities on average plays a stabilizing role in manufacturing growth. Our results have implications for both the theoretical literature on growth and alternative indexes of aggregate productivity growth based only on technical efficiency.
    JEL: E32 L6 O47
    Date: 2011–01
  2. By: Tidiane Kinda (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Patrick Plane (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Marie-Ange Veganzones (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper investigates the relationship between firm-level productivity and investment climate (IC) for a large number of countries (23) and manufacturing industries (8). We first propose three measures of firms' productive performances: Labor Productivity (LP), Total Factor Productivity (TFP), and Technical Efficiency (TE). We reveal that enterprises in MENA perform in average poorly, compared to other countries of the sample. The exception is Morocco, whose various measures of firm-level productivity rank close to the ones of the most productive countries. We show at the same time that firms' competitiveness in MENA is handicapped by high Unit Labor Cost, compared to main competitors like China and India. The empirical analysis also reveals that the investment climate matters for firms productive performances. This is true (depending on the industry) for the quality of a large set of infrastructures, the experience and level of education of the labor force, the cost and access to financing, as well as to a lower extent, different dimensions of the government-business relation. These findings bear important policy implication by showing which dimension of the investment climate could help manufacturing firms in MENA to be more competitive on the world market.
    Keywords: cerdi
    Date: 2011–01–17
  3. By: IMBRIANI, Cesare (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy); REGANATI, Filippo (Dipartimento Sociologia e Comunicazione, Università di Roma La Sapienza)
    Abstract: This work examines the main theoretical and empirical interpretations regarding the effects of foreign direct investment on productivity of local firms and, in particular, in which way productivity spillovers are related to the existence of regional differences. By taking into consideration the Italian manufacturing sector and using cross-section data, we find that although at a national level productivity levels are higher in the domestic sectors where multinational firms account for larger shares, productivity spillovers are concentrated only in the north-western area of Italy.
    Keywords: foreign direct investment; productivity spillovers
    JEL: F23 O30
    Date: 2011–01–18
  4. By: Cameron, Michael P.; Bell, Kendon
    Abstract: The dairy industry is a major contributor to both the New Zealand economy as a whole and to the Waikato regional economy in particular. The industry is experiencing a period of considerable change, with increases in dairy conversion, increased intensification, and increasing use of nitrogen fertilisers, each of which has an associated environmental cost. In this paper the productivity performance of the mature dairy industry in the Waikato region is investigated, using panel data at the sub-regional level from 1994 to 2007. Overall we show that, under a range of specifications, productivity growth independent of increasing land use and herd numbers has been significantly below the four percent industry target. This suggests that, if the four percent goal were to be met in the absence of significant technological progress, further increases in fertiliser use, land use, and/or farming intensity would be required.
    Keywords: Productivity, dairy industry, Waikato., Agricultural and Food Policy, Environmental Economics and Policy, Farm Management, Land Economics/Use, Productivity Analysis,
    Date: 2010–08
  5. By: Vladimir Popov (New Economic School, Moscow)
    Abstract: The highest rates of growth of labor productivity in the Soviet Union were observed not in the 1930s (3% annually), but in the 1950s (6%). The TFP growth rates by decades increased from 0.6% annually in the 1930s to 2.8% in the 1950s and then fell monotonously becoming negative in the 1980s. The decade of 1950s was thus the “golden period” of Soviet economic growth. The patterns of Soviet growth of the 1950s in terms of growth accounting were very similar to the Japanese growth of the 1950s-70s and to Korean and Taiwanese growth in the 1960-80s – fast increases in labor productivity counterweighted the decline in capital productivity, so that the TFP increased markedly. However, high Soviet economic growth lasted only for a decade, whereas in East Asia it continued for three to four decades, propelling Japan, South Korea and Taiwan into the ranks of developed countries. This paper offers an explanation for the inverted U-shaped trajectory of labor productivity and TFP in centrally planned economies (CPEs). It is argued that CPEs under-invested into the replacement of the retiring elements of the fixed capital stock and over-invested into the expansion of production capacities. The task of renovating physical capital contradicted the short-run goal of fulfilling plan targets, and therefore Soviet planners preferred to invest in new capacities instead of upgrading the old ones. Hence, after the massive investment of the 1930s in the USSR, the highest productivity was achieved after the period equal to the average service life of fixed capital stock (about 20 years) – before there emerged a need for the massive investment into replacing retirement. Afterwards, the capital stock started to age rapidly reducing sharply capital productivity and lowering labor productivity and TFP growth rates.
    Date: 2010–11
  6. By: DESTEFANIS, Sergio Pietro (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy); MAIETTA, Ornella Wanda (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy)
    Abstract: Empirical evidence on the productive efficiency of non-profit organisations is at present scarce and not conclusive. In the present work, we analyse this issue by relying on a new data-set about Italian for-profit and non-profit organisations engaged in the provision of communal services. While most of the existing evidence relates to health-care organisations only, our data-set also surveys organisations involved in other communal services. The results indicate that the efficiency of non-profit organisations does not significantly differ from that of other organisations, and shed some light about the determination of their performance. The selection procedures adopted in hiring labour are found to be very relevant. We also find that the production of relational goods (measured by two different proxies) is related to organisational efficiency and to the promotion efforts of non-profit organisation.
    Keywords: non-profit organisations; efficiency;
    JEL: D23 J41 L31
    Date: 2011–01–18
  7. By: DESTEFANIS, Sergio Pietro (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy); FONSECA, Raquel (RAND Corporation)
    Abstract: A matching theory approach is utilised to assess the impact on the Italian labour market of the 1997 legge Treu, which considerably eased the regulation of temporary work and favoured its growth in Italy. We re-parameterise the matching function as a Beveridge Curve and estimate it as a production frontier. We find huge differences in matching efficiency between the South and the rest of the country. The legge Treu appears to have reduced unemployment in the more developed regions of the country but did not greatly affect the matching efficiency of the regional labour markets.
    Keywords: temporary contracts; matching efficiency; regional disparities
    JEL: C24 J64 J69
    Date: 2011–01–18
  8. By: Terezie Výprachtická (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper concentrates on the golden rule of public finance. It reviews the main advantages and disadvantages of the potential implementation of this rule in the European Union. Often the question of the productivity of public capital is at the heart of the rule’s discussions. As this issue has mostly been investigated for the United States, we try to estimate the productivity of public capital using data on the current member states of the European Union. Working both with data on net capital stocks and gross capital formation, we come to the conclusion that there is a cointegrating relationship between capital and output and that this relationship is in most cases positive. However, as there are also other expenditures classified as current spending that have a positive effect on the output in the long run, we argue that the golden rule should not be introduced in the European Union if the current definition of public capital investment does not change for the rule’s purposes.
    Keywords: Golden rule of public finance, European Union, Cointegration, Productivity of capital, Cobb-Douglas production function
    JEL: C23 E22 E62 H52 H62
    Date: 2011–01
  9. By: Siedschlag, Iulia; Zhang, Xiaoheng; Cahill, Brian
    Abstract: This paper examines the effects of the internationalisation of firms via foreign direct investment and trade on their innovation and productivity performance. Our econometric results suggest that foreign affiliates and domestic exporters were more likely to invest in innovation and furthermore that they were more likely to be more successful in terms of innovation output and higher productivity than firms that served only the domestic market. On average, innovation output was positively associated with labour productivity over and above other determinants. Access to external knowledge flows explain to a large extent the innovation performance of firms, in particular co-operation with suppliers, with consultants, commercial labs or private R&D institutes, with universities or other higher education institutions.
    Keywords: Productivity/Foreign direct investment/investment/exporters/education
    Date: 2010–12
  10. By: Nicholas Bloom; Mirko Draca; John Van Reenen
    Abstract: We examine the impact of Chinese import competition on patenting, IT, R&D and TFP using a panel of up to half a million firms over 1996-2007 across twelve European countries. We correct for endogeneity using the removal of product-specific quotas following China’s entry into the World Trade Organization. Chinese import competition had two effects: first, it led to increases in R&D, patenting, IT and TFP within firms; and second it reallocated employment between firms towards more innovative and technologically advanced firms. These within and between effects were about equal in magnitude, and appear to account for around 15% of European technology upgrading between 2000-2007. Rising Chinese import competition also led to falls in employment, profits, prices and the skill share. By contrast, import competition from developed countries had no effect on innovation. We develop a simple “trapped factor” model of innovation that is consistent with these empirical findings.
    JEL: F14 L25 L60 O33
    Date: 2011–01
  11. By: Börsch-Supan, Axel; Weiss, Matthias (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: This paper studies the relation between workers’ age and their productivity in work teams. We explore a unique data set that combines data on errors occurring in the production process of a large car manufacturer with detailed information on the personal characteristics of workers responsible for the errors. We do not find evidence that productivity declines with age.
    JEL: J24 J14 D24
    Date: 2011–01–19
  12. By: Admasu Shiferaw (Georg-August-University Göttingen)
    Abstract: This paper analyzes firm level adjustment of the product mix and its implications for aggregate output growth. Using firm level panel data from Ethiopian manufacturing during the period 1996-2007, it shows that about 30% of firms adjust their ‘extensive margin’ annually by adding and/or dropping at least one product and about half of those firms undertake such adjustment only through product adding. At the aggregate level, about 30% of annual growth in sales is accounted for by the adjustment of the extensive margin which is more than four times the net contribution of firm entry and exit. The paper also shows that the likelihood of adding a product tends to decline with firm size and increases dramatically with the incidence of large investment outlays. While the level of productivity does not seem to increase the probability of adding a product, a net increase in the number of products is strongly associated with subsequent growth in sales, productivity and capital stock at the firm level.
    Keywords: Product Switching; Multiproduct Firms; Extensive Margin; Intensive Margin; Ethiopian Manufacturing
    JEL: D21 E23 L11 L60
    Date: 2010–12–31
  13. By: Néstor Duch-Brown (University of Barcelona & IEB); Montserrat Vilalta (Escola Universitària del Maresme - UPF)
    Abstract: This paper links governance reforms with potential improvements in efficiency in Spanish universities. Taking the classic DEA model as our starting-point, we focus on the study of efficient units to identify the ones that present atypical behaviour (outliers) and should be removed from the analysis, and then to order the remaining institutions in terms of what is known as robust efficiency. Moreover, we use a second stage regression analysis and a three-stage adjusted values non-parametric model to analyse the influence of environmental factors on the efficiency scores obtained. Once environmental factors are taken into account, the remaining unexplained inefficiency is attributed to governance failures. Our results indicate that the observed inefficiency in Spanish public universities is mainly determined by deficient governance. Thus, there is scope for improvements in efficiency through governance reform.
    Keywords: Efficiency, governance, universities
    JEL: C14 I23 L31
    Date: 2010
  14. By: Néstor Duch-Brown (University of Barcelona & IEB); Martí Parellada-Sabata (University of Barcelona & IEB); Jose Polo-Otero (University of Barcelona & IEB & CYD foundation)
    Abstract: This paper empirically analyzes economies of scale and of scope in the production of research and technology transfer outputs in the Spanish public university system. We employ the flexible fixed cost quadratic function which relates total university R&D expenditure and the budget of the technology transfer offices with different outputs of research and technology transfer, from which we then compute the ray economies of scale, the specific economies of scale and the economies of scope. Our results indicate that ray economies of scale and research specific economies of scale hold up to 100% of current mean expenditure. The technology transfer product specific economies of scale hold up to 150% of current mean of the R&D expenditure. Our results also show that cost subadditivity acts a positive constraint, from which we infer the presence of economies of scope.
    Keywords: Multi-product cost function, economies of scale and scope, research and technology transfer
    JEL: I21 I23
    Date: 2010
  15. By: Beck, Arne; Walter, Matthias
    Abstract: Competitive tendering of local bus services in Germany has received increased attention. Employing Seemingly Unrelated Regression analyses, we observe that prices have regionally varying determinants; for example, while prices throughout most of the federal state of Hesse increase over time, prices in the Munich area decrease. Optimisation of bus utilisation in general has a cost-decreasing impact, confirming that public transport authorities can reduce prices via adequate transport planning. Furthermore, Stochastic Frontier Analysis shows that tender prices in Hesse are slightly less efficient. Moreover we conclude that the public transport authority's experience has an efficiency-increasing impact which supports the introduction of overarching authorities. --
    Keywords: public transport,bus,tendering,price,region,SUR analysis,SFA
    JEL: C12 C13 C31 H57 K23 L16 L92 R32 R48
    Date: 2010

This nep-eff issue is ©2011 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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.