New Economics Papers
on Efficiency and Productivity
Issue of 2011‒03‒12
twelve papers chosen by

  1. Econometric Estimation of Distance Functions and Associated Measures of Productivity and Efficiency Change By C.J. O’Donnell
  2. How efficient is the Italian hospitality sector? A window DEA and truncated-Tobit analysis By JG. Brida; Claudio Detotto; Manuela Pulina
  3. CAP Reform and Its Impact on Structural Change and Productivity Growth: A Cross Country Analysis By Andrius Kazukauskas; Carol Newman; Johannes Sauer
  4. How Does Size Matter? Investigating the Relationships Among Plant Size, Industrial Structure, and Manufacturing Productivity By Joshua Drucker
  5. War and Creativity: Solving the War-Art Puzzle for Classical Music Composition By Karol Jan Borowiecki
  6. On modeling pollution-generating technologies By Sushama Murty; R. Robert Russell; Steven B. Levkoff
  7. Going multinational and ownership:evidence from French matched firms. By Alexandre Gazaniol; Frédéric Peltrault
  8. Geographic Clustering and Productivity: An Instrumental Variable Approach for Classical Composers By Karol Jan Borowiecki
  9. Cyclical fiscal policy, credit constraints, and industry growth By Philippe Aghion; David Hemous; Enisse Kharroubi
  10. Medical Technology and the Production of Health Care By Baltagi, Badi H.; Moscone, Francesco; Tosetti, Elisa
  11. Unconventional factors of efficiency in public transport. A case study and theory. By Beria, Paolo; Grimaldi, Raffaele
  12. Exogenous Productivity Shocks and Capital Investment in Common-pool Resources By Fissel, Benjamin E; Glibert, Ben

  1. By: C.J. O’Donnell (CEPA - School of Economics, The University of Queensland)
    Abstract: The economically-relevant characteristics of multi-input multi-output production technologies can be represented using distance functions. The econometric approach to estimating these functions typically involves factoring out one of the outputs or inputs and estimating the resulting equation using maximum likelihood methods. A problem with this approach is that the outputs or inputs that are not factored out may be correlated with the composite error term. Fernandez, Koop and Steel (2000, p. 58) have developed a Bayesian solution to this so-called ‘endogeneity’ problem. O'Donnell (2007) has adapted the approach to the estimation of directional distance functions. This paper shows how the approach can be used to estimate Shephard (1953) distance functions and an associated index of total factor productivity (TFP) change. The TFP index is a new multiplicatively-complete index that satisfies most, if not all, economically-relevant tests and axioms from index number theory. The fact that it is multiplicatively-complete means it can be exhaustively decomposed into a measure of technical change and various measures of efficiency change. The decomposition can be implemented without the use of price data and without making any assumptions concerning either the optimising behaviour of firms or the degree of competition in product markets. The methodology is illustrated using state-level quantity data on U.S. agricultural inputs and outputs over the period 1960-2004. Results are summarised in terms of the characteristics (e.g., means) of estimated probability densities for measures of TFP change, technical change and output-oriented measures of efficiency change.
    Date: 2011–03
  2. By: JG. Brida; Claudio Detotto; Manuela Pulina
    Abstract: This paper analyses the Italian regional efficiency of the hospitality sector using a data envelopment analysis (DEA), for the time span 2000-2004. Via a window DEA, pure technical efficiency is computed. The Lombardy region presents the best relative performance. Overall Italian regions denote important sources of inefficiency mostly related to their inputs. Via a truncated-Tobit analysis, the rate of utilisation and regional intrinsic features positively are found to affect hospitality efficiency. Nevertheless, empirical evidence does not support spill-over effects amongst Italian regions.
    Keywords: Regional hospitality sector; window DEA; double bootstrap; spatial heterogeneity.
    JEL: C14 C24 L83 R11
    Date: 2011
  3. By: Andrius Kazukauskas (Department of Economics, Trinity College Dublin); Carol Newman (Department of Economics, Trinity College Dublin); Johannes Sauer (School of Social Sciences, University of Manchester)
    Abstract: The decoupling of direct payments from production, introduced in the recent reform of the Common Agricultural Policy (CAP) is expected to make production decisions more market-oriented and farmers more productive. However, ex-post analyses of the productivity of farms have yet to uncover any evidence of a positive impact of the decoupling policy on farm productivity. Using Irish, Danish and Dutch farm level data, we identify whether the decoupling policy has contributed to productivity growth in agriculture and to what extent enterprise switching and specialisation are important productivity improving mechanisms. We find some evidence that the decoupling policy and related farm enterprise specialisation had significant positive effects on farm productivity.
    Keywords: productivity, subsidy decoupling, semi-parametric estimation, switching, specialisation
    JEL: D24 Q12 Q18
    Date: 2011–02
  4. By: Joshua Drucker
    Abstract: Industrial concentration and market power have been studied extensively at the national scale, in fields ranging from economics and industrial organization to regional science and economic development. At the regional scale, however, industrial structure and firm size relationships have received little attention outside of non-generalizable case studies, primarily because accurate measurements require difficult-to-obtain plant- or firm-level information. Readily available secondary data sources on establishment size distributions (such as County Business Patterns or the Census of Manufactures) cannot be linked to performance information for particular establishments or firms. Yet region-specific industrial structure may be a crucial determinant of firm performance and thus regional economic fortunes as well (Chinitz 1961; Christopherson and Clark 2007). This paper examines how industrial concentration and agglomeration economies impact plant performance, focusing on the influence of establishment size in mediating these effects. The Longitudinal Research Database of the U.S. Census Bureau is accessed to construct production functions for three manufacturing industries nationwide. These production functions, specified at the establishment level, incorporate characteristics of establishments, industries, and regions, including spatially-differentiated measures of agglomeration economies. Establishment size is evaluated both as an absolute metric and relative to other regional industry plants, as theory suggests that absolute size may be most pertinent to agglomeration benefits but relative size more relevant to industrial structure (Caves and Barton 1990; Bothner 2005). The research builds on earlier work by the author that establishes a direct link between regional industry concentration and the productivity of manufacturing establishments.
    Date: 2011–03
  5. By: Karol Jan Borowiecki (Department of Economics, Trinity College Dublin)
    Abstract: The relationship between conflict and artistic output is ambiguous. This paper proposes an explanation for the contradiction in research, which we term the war-art puzzle. We employ a global sample of 115 prominent classical composers born after 1800 and link their annual productivity with the incidence of wars. We construct age-productivity profiles and find that the impact of wars on creative production is markedly heterogeneous - composers’ productivity was significantly higher during defensive or victorious international wars and lower during intra-state conflicts, offensive or lost international wars. the long-run.
    Keywords: productivity, conflict, war, innovation, composer
    JEL: D24 D74 J24 F51 O31 N40 Z10
    Date: 2011–03
  6. By: Sushama Murty (Department of Economics, University of Exeter); R. Robert Russell (Department of Economics, University of California); Steven B. Levkoff (Department of Economics, University of California)
    Abstract: Distinguishing between intended ("good") production and unintended or residual ("bad") generation, we introduce the concept of by-production. In by-production technologies, pollution is an output that satises a "costly disposability" assumption and violates standard free disposability with respect to pollution-causing inputs. Our approach therefore differs substantially from standard approaches to modeling pollution-generating technologies. We show how by-production can be modeled using data envelopment analysis (DEA) methods. With an electric power plant database, we illustrate shortcomings under by-production of two popular eciency indexes: the hyperbolic index and the directional distance function. We propose and implement an alternative eciency index with superior properties.
    Keywords: pollution-generating technologies, free disposability, weak disposability, data envelopment analysis, environmental and technical eciency measurement
    JEL: D20 D24 D62 Q50
    Date: 2011
  7. By: Alexandre Gazaniol (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD); Frédéric Peltrault (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)
    Abstract: (english) This paper estimates the impact of initiating production abroad on firms’ home performance. The analysis covers French manufacturers over the 1996 – 2007 period, and uses propensity-score matching techniques to compare firms which start to invest abroad (“switchers”) to similar domestic firms. The main particularity of our work is to distinguish the impact of initiating production abroad by firm ownership: we separately investigate the performance effect for independent switchers, switchers that own affiliates in France, and French- and foreign-owned switchers. Our first general result is that going multinational has a positive impact on sales, value added, employment, exports and profitability at home. However, we also find evidence that this impact is not independent of ownership. First, firms at the head of business groups are more likely to go multinational, even after controlling for size, Total Factor Productivity (TFP) and industry. Second, we find that parent companies and independent firms do not benefit from improved performance when going multinational: this may reflect that these firms face higher fixed costs than do affiliates of business groups when investing abroad (lack of experience in foreign markets, managerial costs, monitoring and coordinating affiliates, developing and/or adapting support functions etc.). Affiliates of domestic French business groups significantly improve their performance when switching, whereas the performances of foreign-owned firms and affiliates of multinational French groups remain relatively stable. This could show that firms which are already part of multinational groups have little to gain from going multinational themselves, since their group already provides them with skills and network effects, the security of supplies, and knowledge of foreign markets. _________________________________ (français) Ce travail étudie l’impact de l’implantation à l’étranger sur les performances des entreprises françaises du secteur manufacturier au cours de la période 1996-2007. A l’aide d’une méthode d’appariement, les performances des firmes qui s’implantent pour la première fois sont comparées à celles des entreprises domestiques ayant des caractéristiques similaires. La particularité de notre travail est de caractériser l’effet de l’implantation à l’étranger selon l’appartenance à un groupe : nous étudions ainsi séparément l’effet sur les entreprises indépendantes, les entreprises françaises ayant une filiale en France et les entreprises filiales de groupes français et étrangers. L’étude montre que l’implantation à l’étranger a un impact positif en France sur le chiffre d’affaires, la valeur ajoutée, les effectifs, les exportations et la rentabilité. Cependant, il s’avère que le résultat dépend de l’appartenance à un groupe. Tout d’abord, les entreprises têtes de groupe ont une plus forte propension à s’implanter à l’étranger, une fois que l’on tient compte de la taille, de la productivité totale des facteurs (PTF) et du secteur. Ensuite, nous montrons que les têtes de groupes et les entreprises indépendantes n’améliorent pas leurs performances quand elles s’implantent à l’étranger. Ce résultat peut s’expliquer par le fait que ces entreprises supportent des coûts fixes d’implantation plus élevés que les filiales de groupe. Enfin, nous montrons que les entreprises françaises filiales de groupes français améliorent significativement leurs performances alors que celles des filiales de groupes étrangers restent relativement stables. Les entreprises déjà intégrées dans une multinationale pourraient obtenir des gains plus faibles de leur propre implantation à l’étranger dans la mesure où leur groupe leur offre déjà l’accès à un réseau international.
    Keywords: multinational, ownership, firm heterogeneity.
    JEL: D23
    Date: 2011–01
  8. By: Karol Jan Borowiecki (Department of Economics, Trinity College Dublin)
    Abstract: It is difficult to estimate the impact of geographic clustering on productivity because of endogeneity issues. I use birthplace-cluster distance as an instrumental variable for the incidence of clustering of prominent classical composers born between 1750 and 1899. I find that geographic clustering strongly impacts the productivity of the clustering individuals: composers were approx. 33 percentage points more productive while they remained in a geographic cluster. Top composers and composers who migrated to the cluster are the greatest beneficiaries of clustering. The benefit depends on the clustering intensity and has a long-term impact.
    Keywords: geographic concentration, cities, mobility, productivity, urban history, composer
    JEL: D24 J24 J61 N90 O47 R11 Z19
    Date: 2011–03
  9. By: Philippe Aghion; David Hemous; Enisse Kharroubi
    Abstract: This paper analyzes the impact of cyclical fiscal policy on industry growth. Using Rajan and Zingales' (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980-2005, we show that industries with relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (both in terms of value added and of labor productivity growth) in countries which implement more countercyclical fiscal policies.
    Keywords: growth, financial dependence, fiscal policy, countercyclicality
    Date: 2011–02
  10. By: Baltagi, Badi H. (Syracuse University); Moscone, Francesco (Brunel University); Tosetti, Elisa (University of Cambridge)
    Abstract: This paper investigates the factors that determine differences across OECD countries in health outcomes, using data on life expectancy at age 65, over the period 1960 to 2007. We estimate a production function where life expectancy depends on health and social spending, lifestyle variables, and medical innovation. Our first set of regressions include a set of observed medical technologies by country. Our second set of regressions proxy technology using a spatial process. The paper also tests whether in the long-run countries tend to achieve similar levels of health outcomes. Our results show that health spending has a significant and mild effect on health outcomes, even after controlling for medical innovation. However, its short-run adjustments do not seem to have an impact on health care productivity. Spatial spill overs in life expectancy are significant and point to the existence of interdependence across countries in technology adoption. Furthermore, nations with initial low levels of life expectancy tend to catch up with those with longer-lived populations.
    Keywords: life expectancy, health care production, health expenditure, spatial dependence
    JEL: C31 C33 H51
    Date: 2011–03
  11. By: Beria, Paolo; Grimaldi, Raffaele
    Abstract: In this paper we analyse some possible unconventional factors of efficiency in public transport. The occasion for such analysis rises from a case study in the southern Italian region of Sicily. Most of the regional bus service is here historically franchised to some local private bus companies, without tenders or any other form of competition. The structure of the network has never been planned ex-ante, as it is the result of negotiations among bus companies, local and regional authorities. Though this situation is obviously quite far from indications of the regulation theory, it results in a surprisingly efficient system, with very low unit costs. An analysis of this situation is here carried out in order to understand which factors are forcing those companies to be efficient and which problems this situation may generate. The quality and effectiveness of the offered service is also reckoned. Two factors seem to be most relevant to this results: the relatively low level of subsidies together with the fact of being private operators (rather an exception than a rule in Italy). In order to improve their efficiency, those companies also merged together but eventually split again in the last decades in order to reach a more efficient size and suggesting the presence of possible diseconomies of scale in the sector. Taking for granted that a form of regulation is needed, it is here suggested that regulatory strategies should adapt to this counterintuitive fact and not destroy the incentives already effective in the present situation. Our suggestion is to prefer medium sized tenders rather than large ones, not only for granting more contestability, but also for financial reasons.
    Keywords: regulation; bus; economies of scale; public transport; tender
    JEL: R40 L92 L33
    Date: 2010–04
  12. By: Fissel, Benjamin E; Glibert, Ben
    Abstract: We model exogenous technology shocks in common-pool industries using a compound Poisson process for total factor productivity. Rapid di�usion of exogenous innovations is typical in the commons, but technology is rarely modeled this way. Technology shocks lower the equilibrium resource stock while causing capital buildup based on transitory pro�ts with myopic expectations. The steady state changes from a stable node to a shifting focus with boom and bust cycles, even if only technology is uncertain. A �sheries application is developed, but the results apply to many settings with discontinuous changes in value and open access with costly exit.
    Keywords: technology shocks
    Date: 2010–09–23

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