New Economics Papers
on Efficiency and Productivity
Issue of 2011‒06‒11
23 papers chosen by

  1. Total Factor Productivity and Technical Efficiency of Indian Manufacturing: The Role of Infrastructure and Information & Communication Technology By Arup Mitra; Chandan Sharma; Marie-Ange Veganzones
  2. The Impact of Higher Education Institution-Firm Knowledge Links on Firm-level Productivity in Britain By Richard Harris; Qian Cher Li; John
  3. Does Competition Raise Productivity Through Improving Management Quality? By John Van Reenen
  4. The Cyclicality of Productivity Dispersion By Matthias Kehrig
  5. Hospital Productivity: An analysis at medical-area level (Japanese) By MORIKAWA Masayuki
  6. Production factor returns : the role of factor utilisation. By Gilbert Cette; Nicolas Dromel; Rémy Lecat; Anne-Charlotte Paret
  7. A rational road to effectiveness attainment By Zervopoulos, Panagiotis; Vargas, Francisco; Cheng, Gang
  8. The impact of higher education institution-firm knowledge links on establishment-level productivity in British regions By Richard Harris; Qian Cher Li; John Moffat
  9. Innovation, Research and Development Investment and Productivity in Colombian Firms By Maria Angelica Arbelaez; Monica Parra Torrado
  10. Applying conditional DEA to measure football clubs’ performance: Evidence from the top 25 European clubs By Halkos, George; Tzeremes, Nickolaos
  11. Complexity and Technological Change: Knowledge Interactions and Firm Level Total Factor Productivity By Antonelli Cristiano; Scellato Giuseppe
  12. Medición de cambios en productividad con indicador de Luenberger en el sector de seguros en Argentina a la salida de la crisis By Gustavo Ferro; María Eugenia Labaronnie; Carlos A. Romero
  13. Market Size, Competitiveness and Technological Frontier - the Impact of Trade Integration with the UE on Productivity in Polish Manufacturing Sectors By Aleksandra Parteka; Joanna Wolszczak-Derlacz
  14. Reforms, labour market functioning and productivity dynamics: a sectoral analysis for Italy. By Cceilia Iona Lasino; Giovanna Vallanti
  15. External productivity and utility effects of city airports. By Ahlfeldt, Gabriel M.; Maennig, Wolfgang
  16. Intangible capital and Productivity Growth in European Countries By Cecilia Iona Lasinio; Massimiliano Iommi; Stefano Manzocchi
  17. Export and Productivity Under Different Market Condition: Evidence from Japan By YASHIRO Naomitsu; HIRANO Daisuke
  18. Knowledge Governance Pecuniary Knowledge Externalities And Total Factor Productivity Growth By Antonelli cristiano
  19. Anatomy of a Paradox: Management Practices, Organisational Structure and Energy Efficiency By Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
  20. Temporary Agency Work and Firm Competitiveness - Evidence from a panel data set of German manufacturing enterprises By Sebastian Nielen; Alexander Schiersch
  21. Size and The City: Productivity, Match Quality and Wage Inequality By YIP, Chi Man
  22. Compensation and Incentives in german Corporations By Moritz Heimes; Steffen Seemann
  23. Enhancing the Efficiency of Water Supply – Product Market Competition versus Trade By Foellmi, Reto; Meister, Urs

  1. By: Arup Mitra (University of Delhi - University of Delhi - University of Delhi); Chandan Sharma (Institue of Financial management - Institue of Financial management - Institue of Financial management); Marie-Ange Veganzones (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Drawing on a recent dataset of the Indian manufacturing industry for 1994 to 2008, this paper shows for eight sectors that core infrastructure and Information & Communication Technology (ICT) matter for Total Factor Productivity (TFP) and Technical Efficiency (TE).In the analysis, we use a range of advanced estimation techniques to overcome problems of non-stationary, omitted variables, endogeneity and reverse causality (such as System-GMM, panel cointegration and FMOLS). Estimation results suggest that the impact of core infrastructure is rather strong on TFP and TE (elasticity of 0.32 and 0.17 respectively), while the effect of ICT appears slightly smaller (0.12 and 0.08, respectively). This finding is of particular importance in the Indian context of infrastructure bottlenecks. It strongly supports the idea that a lack of infrastructure can hamper growth in developing countries. Our results also reveal that the impact of infrastructure and ICT varies among the industries. Interestingly, Transport Equipments, Metal & Metal Products and Textile, which are sectors relatively more exposed to foreign competition, are also found to be more sensitive to infrastructure endowment. This result can be extended to the Chemical industry for TE. This finding implies that improving core and ICT infrastructure would proportionally benefit more to these sectors, which could play a leading role in the competitiveness and the industrial growth of the Indian economy.
    Keywords: infrastructure;Manufacturing Industry;India;Information and Communication Technology;total factor productivity;Technical efficiency
    Date: 2011–06–01
  2. By: Richard Harris (Department of Economics, University of Glasgow); Qian Cher Li (Imperial College, London.); John (Strathclyde University)
    Abstract: This paper estimates whether knowledge links with universities impacts on establishment-level TFP. Using propensity score matching, the results show a positive and statistically significant impact although there are across production and non-production industries and domestically- and foreign-owned firms.
    Keywords: Universities, Firm-level productivity
    JEL: D24 I23
    Date: 2010–09
  3. By: John Van Reenen
    Abstract: A classic question in industrial organization is whether competition raises productivity and if so, through what mechanism? I discuss recent empirical evidence from both large-scale databases and specific industries which suggests that tougher competition does indeed raise productivity and one of the main mechanisms is through improving management practices. To establish this, I report on new research seeking to quantify management. I relate this to theoretical perspectives on the economics of competition and management, arguing that management should be seen at least in part as a transferable technology. A range of recent econometric studies suggest that (i) competition increases management quality and (ii) improved management quality boosts productivity.
    Keywords: management, productivity, organization
    JEL: L2 M2 O32 O33
    Date: 2010–12
  4. By: Matthias Kehrig
    Abstract: Using plant-level data, I show that the dispersion of total factor productivity in U.S. durable manufacturing is greater in recessions than in booms. This cyclical property of productivity dispersion is much less pronounced in non-durable manufacturing. In durables, this phenomenon primarily reflects a relatively higher share of unproductive firms in a recession. In order to interpret these findings, I construct a business cycle model where production in durables requires a fixed input. In a boom, when the market price of this fixed input is high, only more productive firms enter and only more productive incumbents survive, which results in a more compressed productivity distribution. The resulting higher average productivity in durables endogenously translates into a lower average relative price of durables. Additionally, my model is consistent with the following business cycle facts: procyclical entry, procyclical aggregate total factor productivity, more procyclicality in durable than non-durable output, procyclical employment and countercyclicality in the relative price of durables and the cross section of stock returns.
    Keywords: Productivity, Plant-level Risk, Entry and Exit, Business Cycles, Manufacturing, Plant-Level Data
    JEL: D24 E32 L11 L25 L60
    Date: 2011–05
  5. By: MORIKAWA Masayuki
    Abstract: Medical services have become an important sector in recent years as Japan aims to deal with its aging population. This paper estimates hospital productivity by using panel data of prefectures and secondary medical areas. The major focus of this study is on the economies of scale at medical-area level and hospital level. The average length of stay is used as a measure of medical quality. We avoid effects of case-mix by using data of medical areas instead of hospital-level data. By using panel data, we can control unobservable regional characteristics. Disparity of price among regions is eliminated through the use of quantity data. Results show that hospital size affects productivity-the larger the hospital, the higher the productivity. The magnitude of the hospital size effect is economically significant: hospital productivity increases by more than 10% when the size of hospital doubles. The size effects are absent when we do not control the average length of stay. The policy implication is that the consolidation of hospitals through economies of scale contributes to an improvement in productivity.
    Date: 2010–07
  6. By: Gilbert Cette (Banque de France et Université de la Méditerrannée (DEFI)); Nicolas Dromel (Centre d'Economie de la Sorbonne - Paris School of Economics); Rémy Lecat (Banque de France); Anne-Charlotte Paret (Banque de France - ENSAE)
    Abstract: Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilisation. Thanks to original French firm-level data (1992-2008), we show how increasing returns to scale disappear when working time, capacity utilisation rate and mainly capital operating time are introduced in the production function.
    Keywords: Production function, productivity, factor returns.
    JEL: D24 E22 O40
    Date: 2011–05
  7. By: Zervopoulos, Panagiotis; Vargas, Francisco; Cheng, Gang
    Abstract: Operational effectiveness goes beyond efficiency while it incorporates exogenous variables, non-controllable by the service units. Effectiveness is a fundamental driver for the success of an operational unit within a competitive environment. In this context, we seek to identify the active units that meet both the high or technical efficiency and the perceived high quality criteria. We also aim to develop a roadmap for effectiveness for every operational unit and we consider the feasibility of the results produced by the effectiveness assessment process in the short run. The target values uncovered by comparative optimization techniques (e.g. Data Envelopment Analysis) for efficiency and effectiveness measurement generally have limited managerial implications due to production constraints, available resources, and legal status. This paper introduces a modified Quality-driven – Efficiency-adjusted Data Envelopment Analysis (MQE-DEA) model to assess effectiveness and provide a step-by-step path to achieve high quality and high efficiency in every operational unit under evaluation. The MQE-DEA model has particular applicability to the effectiveness assessment of homogenous service units in which an inverse relationship underlies the two dimensions of effectiveness embraced in this study (e.g. bank branches, restaurant chain stores, governmental one-stop-shops).
    Keywords: Data Envelopment Analysis (DEA); Context-dependent DEA; Effectiveness; Efficiency; Perceived Quality
    JEL: B21 C02 C61
    Date: 2011–05–30
  8. By: Richard Harris (Department of Economics, University of Glasgow); Qian Cher Li (Imperial College, London); John Moffat (University of Strathclyde)
    Abstract: This paper estimates whether sourcing knowledge from and/or cooperating on innovation with higher education institutions impacts on establishment-level TFP and whether this impact differs across domestically-owned and foreign-owned establishments and across the regions of Great Britain. Using propensity score matching, the results show overall a positive and statistically significant impact although there are differences in the strength of this impact across production and non-production industries, across domestically-owned and foreign-owned firms, and across regions. These results highlight the importance of absorptive capacity in determining the extent to which establishments can benefit from linkages with higher education institutions.
    Keywords: Universities; University-Industry knowledge links; Firm-level productivity
    JEL: D24 I23
    Date: 2010–09
  9. By: Maria Angelica Arbelaez; Monica Parra Torrado
    Abstract: This paper attempts to establish a formal relationship between innovation and productivity using Colombian firm-level data. It is found that the production of goods and services new to the firm and to the domestic market enhances firms` sales per worker, and innovation that results in introducing new goods and services to the international market boosts both sales and Total Factor Productivity (TFP). Innovation in processes likewise improves firms` productivity and sales. Finally, innovation in marketing and management increases sales per worker and enhances TFP when investment is made in Research and Development. The paper also studies the factors behind firms` decision to invest in innovation, the intensity of such investment and the returns to investment in innovation.
    JEL: C21 C31 C34 C35 L60 O31 O32 O14 O47
    Date: 2011–05
  10. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: This paper applies a probabilistic approach to investigate how the top European football clubs’ current value and debt levels influence their performance. Specifically, a bootstrapped conditional data envelopment analysis (DEA) is used in order to measure the effect of football clubs’ current value and debt levels on their obtained efficiency performances. The results indicate that football clubs’ current value levels have a positive influence up to a certain point. But as the current value increases the effect is neutral to football clubs’ performance. At the same time, the empirical evidence suggests that there is no influence on football clubs’ efficiencies associated with lower and medium football clubs’ debt levels while higher debt levels appear to have a direct negative effect.
    Keywords: European football clubs; Data Envelopment Analysis; Nonparametric regression; Bootstrapping; Probabilistic approach
    JEL: C69 C14 L83
    Date: 2011–06
  11. By: Antonelli Cristiano; Scellato Giuseppe (University of Turin)
    Abstract: The analysis of social interactions as drivers of economic dynamics represents a growing field of the economics of complexity. Social interactions are a specific form of interdependence whereby the changes in the behavior of other agents affect utility functions for households and production functions for producers. In this paper, we apply the general concept of social interactions to the area of the economics of innovation and we articulate the view that knowledge interactions play a central role in the generation of new technological knowledge so that innovation becomes the emergent property of a system, rather then the product of individual actions. In particular, we articulate and test the hypothesis that different layers of knowledge interactions play a crucial role in determining the rate of technological change that each firm is able to introduce. The paper presents an empirical analysis of firm level total factor productivity (TFP) for a sample of 7020 Italian manufacturing companies observed during the years 1996-2005 that is able identify the distinctive role of regional, inter-industrial and localized intra-industrial knowledge interactions as distinctive and significant determinants, together with internal research and innovation efforts, of changes in firm level TFP
    Date: 2011–03
  12. By: Gustavo Ferro (Instituto de Economía UADE and CONICET - FACE UADE); María Eugenia Labaronnie (Departamento de Contabilidad UADE - UADE); Carlos A. Romero (Instituto de Economía UADE - UADE)
    Abstract: A severe macroeconomic crisis resets economic sectors. This is so when the GDP growth rates move between great falls and important recoveries, and when relative prices vary importantly. The insurance sector in Argentina offers an interesting laboratory to explore with Luenberger Productivity Analysis what happened to a sector very sensitive to the macroeconomic performance, inflation and currency depreciation. The methodology was chosen because it confers flexibility, since presupposes profit maximization, on one hand, but do not constrain the orientation of the model (i.e., input-oriented, output-oriented), allowing to study productivity changes due to both, input and output adjustments. Moreover, we use output and input monetary measures (in constant values), aiming to increase the flexibility in the adjustment to higher profits. The results show according to different models a sector with scarce productivity growth or stagnated, with important variability between better and worse results. The indicator in use permits to split changes in efficiency and in technical change.
    Date: 2011–06–02
  13. By: Aleksandra Parteka (Gdansk University of Technology, Faculty of Management and Economics); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Faculty of Management and Economics)
    Abstract: This paper addresses the relationship between growth of relative productivity in Polish manufacturing sectors and forces stemming from trade integration with the EU. We look at the productivity growth from the perspective of relations between Polish manufacturing sectors and the foreign ones, focusing on partner countries from the enlarged EU. Empirical analysis is based on sector level bilateral data concerning both domestic (Polish) and foreign market characteristics and degree of openness in the period 1995-2006. Main results indicate that, both in the short and long run, growth in domestic openness (independently on the direction of trade flows) exert positive effect on growth of relative productivity in Poland, while the opposite impact is exhibited by foreign openness. In addition, expansion in relative size of Polish sectors versus foreign ones is also among positive determinants of domestic labour productivity growth. The results suggest that domestic openness and market size effects have stimulated movement of Polish sectors towards the technological frontier with respect to the partner countries from the EU.
    Keywords: labour productivity, trade, integration
    JEL: F14 F15 F16
    Date: 2011
  14. By: Cceilia Iona Lasino (Istat and Luiss Lab); Giovanna Vallanti (Università Luiss "Guido Carli")
    Abstract: Over the last two decades Italy registered notable improvements in the functioning of labour market. However, such improvements have been accompanied by a deterioration in terms of productivity and competitiveness. This paper provides some evidence in this respect evaluating to what extent labour market reforms might have influenced the poor productivity performance of the Italian economy over the period 1980-2008. We show that labour market deregulation had a negative effect on aggregate labour productivity through both the within and the reallocative components. Our results show that the increased flexibility in the use of temporary contract has led to a lower productivity (level and to a lesser extent growth rate) in all sectors, with a higher impact on those industries with a higher flexibility need. Conversely, the use of temporary contracts has a significant lower effect in industries with higher skill content. The negative effect of the reforms on the reallocative capacity is stronger in those industries with a higher flexibility need that are also the relatively lower productivity sectors in the period 1993-2008.
    Keywords: Productivity, Growth, Labour Market Institutions
    JEL: J08 J23 J24
    Date: 2011
  15. By: Ahlfeldt, Gabriel M.; Maennig, Wolfgang
    Abstract: This paper uses a micro-level data set for residential and commercial property transactions to investigate external utility and productivity effects for three (city) airports in Berlin, Germany in a spatial hedonic analysis. We find strong evidence of adverse noise effects on property prices and a discontinuity at approximately 55dB. Marginal price effects decrease significantly in the presence of alternative noise sources, which can lead to biased estimates if the interaction effect is not accounted for appropriately. Given that there is less evidence of positive accessibility effects, our result questions the justification for locating airports in citycentres.
    Date: 2011
  16. By: Cecilia Iona Lasinio (Istat and Luiss Lab); Massimiliano Iommi (ISTAT); Stefano Manzocchi (Università Luiss "Guido Carli")
    Abstract: This paper provides evidence about the diffusion of intangible investment across the EU27 member countries and investigates the role of intangible capital as a source of growth to improve our understanding of the international differences in the mix of drivers of productivity growth across Europe. Our study shows that the capitalization of intangible assets, allow identifying additional sources of long-run growth. We show that intangibles have been a relevant source of growth across European countries and that they cannot be omitted from national accounts. In particular, the ?unexplained? component of macro-economic dynamics, the Total Factor Productivity, becomes less important, while physical capital turns out to be strongly complementary with intangible capital.
    Keywords: Intangible capital, Productivity Growth, European countries
    JEL: O3 O4 O5
    Date: 2011
  17. By: YASHIRO Naomitsu; HIRANO Daisuke
    Abstract: We use a large dataset of Japanese manufacturing firms to compare the effects of export entry on productivity under different export market conditions. Using the established econometric procedures of Propensity Score Matching and Difference-in-Differences, we explicitly estimate the effects of export entry during two periods with fairly different export market conditions: from 2002 to 2005, corresponding to the earlier period of global economic expansion that ended in 2007, and from 1998 to 2001, the period which witnessed the aftermath of the Asian financial crisis. We find that export entry is associated with significantly higher ex-post productivity growth vis-à-vis non-entrants only during the period with favourable export market conditions. We also find that such advantage in productivity growth is long lasting and is found only for entrants exporting to high-income markets. Furthermore, export entry is associated with higher growth in R&D expenditure only during this period. These findings suggest that the effect of export entry in enhancing productivity growth, sometimes referred to as "learning-by-exporting," depends on good market conditions.
    Date: 2011–05
  18. By: Antonelli cristiano (University of Turin)
    Abstract: Building upon both the Schumpeterian and the Marshallian legacies, this paper elaborates a model of localized technological change cum pecuniary knowledge externalities to provide a systemic explanation for total factor productivity. The generation of technological knowledge consists in the recombination of existing bits of heterogeneous technological knowledge that are necessarily possessed by a myriad of agents. As such much technological knowledge used in the generation of further knowledge is external to each agent. Nevertheless external knowledge is an essential input into the recombinant generation of new technological knowledge. In this context knowledge governance mechanisms play a key role in the identification, recollection and provision of the specific item of technological knowledge, external to each agent, at each point in time. Consequently, effective knowledge governance mechanisms engender pecuniary knowledge externalities. The latter explain the levels and the growth of total factor productivity when existing units of external knowledge can be bundled and used –again- at costs that are below reproduction ones.
    Date: 2011–03
  19. By: Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
    Abstract: This paper presents new evidence on managerial and organizational factors that explain firm level energy efficiency and TFP. We interviewed managers of 190 randomly selected manufacturing plants in the UK and matched their responses with official business microdata. We find that 'climate friendly' management practices are associated with lower energy intensity and higher TFP. Firms that adopt more such practices also engage in more R&D related to climate change. We show that the variation in management practices across firms can be explained in part by organizational structure. Firms are more likely to adopt climate friendly management practices if climate change issues are managed by the environmental or energy manager, and if this manager is close to the CEO. Our results support the view that the "energy efficiency paradox" can be explained by managerial factors and highlight their importance for private-sector innovation that will sustain future growth in energy efficiency.
    Keywords: climate policy, energy efficiency, firm behavior, management practices, manufacturing,microdata, organizational structure
    JEL: M20 M14 Q41 Q54 Q58
    Date: 2010–12
  20. By: Sebastian Nielen (Schumpeter School of Business and Economics at the University of Wuppertal); Alexander Schiersch (German Institute for Economic Research, Berlin)
    Abstract: This paper addresses the relationship between the utilization of temporary agency workers by firms and their competitiveness measured by unit labor costs, using a rich, newly built, data set of German manufacturing enterprises. The analysis is conducted by applying different panel data models while taking the inherent selection problem into account. Making use of dynamic panel data models allows us to control for firm specific fixed effects as well as for potential endogeneity of explanatory variables. The results indicate a U-shaped relationship between the extent that temporary agency workers are used and the competitiveness of firms.
    Keywords: temporary agency work, competitiveness, firm performance, manufacturing
    JEL: D24 J24 L60
    Date: 2011–06
  21. By: YIP, Chi Man
    Abstract: This paper elucidates the impact of city growth on wage and wage inequality using a search-theoretical approach. Firms differ in capital intensity and land intensity of the jobs created. When a worker meets a job via a matching technology, a match-specific productivity level is realized and they sign a job contract when they agree with the bargaining wage. A rise in population density leads to rental increment. As a consequence, a higher expected flow profit is required for the creation of a good job. Rent-sharing ensures an increase of the average wage in the good-job sector. This, in turn, increases the reservation wage of workers in the equilibrium. Although the rental increment does not affect the setup costs in the bad-job sector, higher realized productivity level is required to cover higher reservation wage. Since only job contacts with realized productivity levels exceeding reservation productivity threshold are observed, such increase in the threshold raises also the average wage in the bad-job sector. Hence, the average productivity, the match quality and wage go up in each sector unambiguously, giving rise to urban wage premium. In addition, this paper predicts that urbanization widens residual wage inequality of a city. Existing empirical evidence is presented to support the implications of this model.
    Keywords: Urban Wage Premium; Match Quality; Job Match
    JEL: J31 O15 J64
    Date: 2011–04–11
  22. By: Moritz Heimes (Department of Economics, University of Konstanz, Germany); Steffen Seemann (Department of Economics, University of Konstanz, Germany)
    Abstract: In this paper we analyze executive compensation in Germany for the period 2005-2009. We use a self-collected dataset on compensation arrangements in German corporations to estimate the impact of firm performance and firm risk on executive pay. To be in line with earlier studies in this literature, we first measure firm performance and firm risk based on stock market returns. Our findings support the prediction from agency theory that incentive pay decreases with firm risk. We find, however, that stock market returns have no explanatory power in the presence of accounting based performance measures. Based on accounting data we also find a positive impact of firm performance on executive pay and a negative relationship between firm risk and incentive pay for our sample period. We conclude that shareholders use accounting measures rather than stock market data to evaluate and pay for manager performance. We also find that with accounting data we can explain short-term bonus payments but not long-term oriented compensation in German corporations.
    Keywords: Pay for Performance, Executive Compensation, Incentives
    JEL: G30 J33 M12
    Date: 2010–05–31
  23. By: Foellmi, Reto; Meister, Urs
    Abstract: In most developed countries, the provision of water is organized at a local level. The costs and tariffs vary significantly, even between adjacent water utilities. Such heterogeneity is an obvious indication of the sector’s overall inefficiency and stresses a need for institutional adjustments. We show that cooperation by water trade and the introduction of competition by common carriage between adjacent utilities are valuable alternatives to improve the industry’s efficiency, even when mergers are not feasible. Because both approaches require the physical connection of neighboring networks, they may have similar effects. This paper analyzes and compares the relevant welfare gains and shows that production efficiency and retail prices may differ depending on the initial cost differential, the application of regulations and the distribution of bargaining power. Using a theoretical model, we show that at higher initial production cost differentials, welfare is higher under competitive conditions, even in a lower-bound benchmark case without any regulation.
    Keywords: Bargaining; Networks; Product-Market Competition; Trade; Water
    JEL: D21 L43 L95 Q25
    Date: 2011–06

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