New Economics Papers
on Efficiency and Productivity
Issue of 2011‒08‒09
eighteen papers chosen by

  1. Malmquist Productivity Analysis using DEA frontier in Stata By Choonjoo Lee
  2. Esemplificazione della Data Envelopment Analysis per la valutazione di efficienza in una grande azienda ospedaliera universitaria By Francesco Copello; Cristiana Pellicanò
  3. Productivity in China's high technology industry: Regional heterogeneity and R&D By Zhang, Rui; Sun, Kai; Delgado, Michael; Kumbhakar, Subal
  4. Risk and Regulation: The Efficiency of Italian Cooperative Banks By Cristian Barra; Sergio Destefanis; Giuseppe Lubrano Lavadera
  5. Labour Productivity of Unincorporated Sole Proprietorships and Partnerships: Impact on the Canada-United States Productivity Gap By Baldwin, John R.; Leung, Danny; Rispoli, Luke
  6. Impact of the business environment on output and productivity in Africa By Bah, El-hadj M.; Fang, Lei
  7. Efficiency in Saving Infant Lives: the Influence of Water and Sanitation Coverage By Gustavo Ferro; Carlos A. Romero; Ignacio Castiglione,
  8. Overconfidence Increases Productivity By Yusuke Kinari; Noriko Mizutani; Fumio Ohtake; Hiroko Okudaira
  9. Offshoring and company characteristics: some evidence from the analysis of Spanish firm data By Angels Pelegrín; Catalina Bolancé
  10. Attracting FDI in Business Services to Improve Manufacturing Performance and Competitiveness: Evidence from the Italian Provinces By Massimo Armenise; Giorgia Giovannetti; Gianluca Santoni
  11. On Measuring the Efficiency of Monetary Policy By Walter Briec; Emmanuelle Gabillon; Laurence Lasselle; Hermann Ratsimbanierana
  12. What happened to efficiency in electricity industries after reforms? By Erdogdu, Erkan
  13. Estimation of a Health Production Function: Evidence from East-European Countries. By Bichaka Fayissa; Anca Traian
  14. Entrepreneurship capital and technical efficiency : the role of new business / firms as a conduit of knowledge spillovers By Laborda, Leopoldo; Guasch, Jose Luis; Sotelsek, Daniel
  15. Entrepreneurial Scientists and their Publication Performance. An Insight from Belgium By Malwina Mejer
  16. Development in the Midst of Drought: Evaluating an Agricultural Extension and Credit Program in Nicaragua. By Mullally, Conner
  17. Disentangling the Link Between Stock and Accounting Performance in Acquisitions By Andre Betzer; Marc Goergen
  18. Education Production Function and Class-Size Effects in Japanese Public Schools By Masakazu Hojo

  1. By: Choonjoo Lee (Korea National Defense University)
    Abstract: In this presentation, the author presents a procedure and an illustrative application of a user-written Malmquist Productivity Analysis(MPA) using Data Envelopment Analysis (DEA) frontier in Stata. MPA measures the productivity changes for units between time periods. MPA has been used widely for assessing the productivity changes of public and private sectors, such as banks, airlines, hospitals, universities, defense firms, and manufacturers when the panel data are available. The MPA using DEA frontier in Stata will allow Stata users to conduct not only the stochastic approach for productivity analysis using SFA frontier but also non-stochastic approach using DEA frontier also suggested by the author. The user-written MPA approach in Stata will provide some possible future extensions of Stata programming in the productivity analysis.
    Date: 2011–07–20
  2. By: Francesco Copello (Controllo di Gestione, Azienda Ospedaliera Universitaria “San Martino” di Genova, Italy); Cristiana Pellicanò (Controllo di Gestione, Azienda Ospedaliera Universitaria “San Martino” di Genova, Italy)
    Abstract: The Data Envelopment Analysis (DEA) is applied by the management control of a huge teaching hospital to evaluate the relative efficiency of human resources. The authors show an experimental approach based on geometrical methods and simple statistical techniques that can be easily performed by basic software procedures. The results are then related to the cost of diagnostic procedures, standardized by the case-mix, and both scatterplot and cluster analysis are produced to find out related area of performance and to plan a strategy for the continuous quality improvement
    Keywords: data envelopment analysis, production frontier, cluster analysis, human resources efficiency, SWOT analysis
    JEL: D61 C81 C02 D24 I19
    Date: 2011–07
  3. By: Zhang, Rui; Sun, Kai; Delgado, Michael; Kumbhakar, Subal
    Abstract: This paper analyzes the impact of Research and Development (R&D) on the productivity of China's high technology industry. In order to capture important differences in the effect of R&D on output that arise from geographic and socioeconomic differences across three major regions in China, we use a novel semiparametric approach that allows us to model heterogeneities across provinces and time. Using a unique provincial level panel dataset spanning the period 2000-2007, we find that the impact of R&D on output varies substantially in terms of magnitude and significance across different regions. Results show that the eastern region benefits the most from R&D investments, however it benefits the least from technical progress, while the western region benefits the least from R&D investments, but enjoys the highest benefits from technical progress. The central region benefits from R&D investments more than the western region and benefits from technical progress more than the eastern region. Our results suggest that R&D investments would significantly increase output in both the eastern and central regions, however technical progress in the central region may further compound the effects of R&D on output within the region.
    Keywords: China; Research and Development; Productivity; Semiparametric smooth coefficient model
    JEL: C14 L00
    Date: 2011–06–30
  4. By: Cristian Barra (Università di Salerno); Sergio Destefanis (Università di Salerno, CELPE and CSEF); Giuseppe Lubrano Lavadera (Università di Salerno)
    Abstract: In this paper we analyse the determination of cost efficiency in a sample of Italian small banks located in different geographical areas and including two great institutional categories: cooperative banks (CB’s) and other banks. We highlight the effect of environmental factors (asset quality, local GDP per capita) on banks’ performance, and provide novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997). Local GDP per capita strongly affects the territorial differentials for technical efficiency, especially for CB’s. This can be easily rationalised, as current regulations hamper CB’s vis-à-vis other banks in their capability to diversify territorially. Our estimates provide us with a tentative quantitative measure of the costs of missing diversification, ranging between 2 and 7 percentage points. Correspondingly, our evidence suggests that there is potentially strong endogeneity in some currently available bank performance indicators.
    Keywords: Cooperative banks, Cost efficiency, Local shocks, Territorial diversification
    JEL: D24 G21 L89
    Date: 2011–07–28
  5. By: Baldwin, John R.; Leung, Danny; Rispoli, Luke
    Abstract: This paper asks how the performance of self-employed unincorporated businesses affects the size of the gap in labour productivity between Canada and the United States. To do so, the business sector in each country is divided into unincorporated and corporate businesses, and estimates of labour productivity are generated for each sector. The productivity performance of the unincorporated sector relative to the corporate sector is much lower in Canada than in the United States. As a result, when the unincorporated sector is removed from the estimates for the business sector in each country and only the corporate sectors for the two countries are compared, the gap in the level of productivity between Canada and the United States is reduced. The unincorporated sector consists of both sole proprietorships and partnerships. This paper also investigates the impact of just sole proprietorships on the Canada-United States productivity gap. Sole proprietorships in the two countries more closely resemble one another than do partnerships, as U.S. partnerships are much larger than their Canadian counterparts. When sole proprietorships are removed from the business-sector estimates of each country (allowing a comparison of sole proprietorships to the rest of the business sector, which consists of partnerships and the corporate sector), the gap in labour productivity between Canada and the United States also declines but by only about half as much as when both sole proprietorships and partnerships are removed. The lower productivity of the unincorporated sector (both sole proprietorships and partnerships) accounted for almost the entire productivity gap between Canada and the United States in 1998. Since then, the productivity of the corporate sector in Canada has fallen relative to that of the corporate sector in the United States and the unincorporated sector no longer accounts for the entire gap.
    Keywords: Business performance and ownership, Economic accounts, Business ownership, Productivity accounts, Small and medium-sized businesses, Current conditions
    Date: 2011–07–28
  6. By: Bah, El-hadj M.; Fang, Lei
    Abstract: We develop a general equilibrium model to assess the quantitative effects of the business environment, including regulation, crime, corruption, infrastructure and access to finance, on output and total factor productivity (TFP) for 30 Sub-Saharan African countries. The first four dimensions create inefficiencies at the firm level and are modeled as a tax on output. From the data, we find that on average firms in Africa lose a fifth of their sales due to those inefficiencies. On the other hand, poor access to credit affects the reallocation of resources across firms, capital formation and production scale. We find that the quantitative effects of these dimensions of the business environment are large, leading to decreases in output and TFP in the range of 40 to 77 percent and 18 to 44 percent respectively. Overall, they explain 67 percent of the variation in income per worker relative to the US.
    Keywords: Business environment, Investment Climate, African Development, Productivity, Credit Constraints
    JEL: O47 L23 O16
    Date: 2011–07–12
  7. By: Gustavo Ferro (Instituto de Economía UADE and CONICET - FACE UADE); Carlos A. Romero (Instituto de Economía UADE - UADE); Ignacio Castiglione, (Departamento de Economía UADE - FACE)
    Abstract: In this paper, we aim to assess the relationship between water and sanitation coverage and saved infant lives. Our hypothesis is that extended coverage implies measurable results in terms of reduced infant mortality. Moreover, we suspect that with the same resources, ceteris paribus, different countries can achieve better or worst results depending on the efficiency which the resources are used. We explore the policy consequences, simulating the effects that improvements in efficiency can yield in terms of the reduction in child mortality. Our approach is first to explore with a database of Latin American countries the "production function" of survivor infants on 1,000 births. Once we identify the causal relationship with an econometric model, we estimate a production frontier with Data Envelopment Analysis in order to determine the best performers: countries which can do better with the same "inputs". Finally, we simulate the consequence of catching up to the frontier in each country. The impressive quantitative results are interesting for policy concerns, since efficiency is reconciled with equity (in the sense that the winners of the coverage increases and the health improvements are the poorer).
    Keywords: water; sanitation; health
    Date: 2011–08–01
  8. By: Yusuke Kinari; Noriko Mizutani; Fumio Ohtake; Hiroko Okudaira
    Abstract: Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects exhibiting progressively higher degrees of overconfidence solve more mazes. This result shows a positive aspect of overconfidence, which usually has been examined in its negative aspect as an expectation bias.
    Date: 2011–08–01
  9. By: Angels Pelegrín (Universitat de Barcelona & IEB); Catalina Bolancé (University of Barcelona & RFA-IREA)
    Abstract: This article investigates firm characteristics associated with the probability of relocating activities in a foreign country. Using manufacturing firms’ micro data for the 1999-2005 period, we find evidence that cost-cutting objectives are the main determinants for offshoring production. The analysis reveals that firms that are larger and have higher productivity, more research and development activity and greater human capital intensity are more likely to relocate activity abroad. Thus, ‘the best’ firms self-select to offshoring activities. We note the special prominence of foreign firms among those that engage in offshoring. Our results show that self-selection of ‘the best’ firms are much more significant in foreign firms.
    Keywords: Offshoring determinants, best firms, firm characteristics, foreign firms
    JEL: F21 F23
    Date: 2011
  10. By: Massimo Armenise (Fondazione Manlio Masi); Giorgia Giovannetti (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Gianluca Santoni
    Abstract: Foreign Direct Investment (FDI) increase the productivity of domestic firms through spillovers and incentives to innovate. Hence, the capacity of local firms to absorb new technological knowledge emerges as a crucial factor for a country to benefit from FDI. This process might take time, especially if firms are small and medium as those prevailing in Italy. Between 2001 and 2007 the number of foreign firms in Italy has decreased, showing a particularly negative dynamic. However, in the same period, FDI in business services increased. The number of foreign firms investing in professional business services in Italy passed from 1277 in 2001 to 1700 in 2007, with a concurrent increase in the average dimension of firms. The aim of this paper is to test the effect of FDI in Business Services on the efficiency (Total Factor Productivity and Labor Productivity). Hence, the paper tests whether firms located in provinces better equipped to attract FDI in business services have received a premium in terms of productivity, profitability and other dimensions. Preliminary results show that while it is important to attract FDIs to improve the performance of domestic firms, the capacity of a province to keep the foreign direct inflows has an even more relevant effect. This relationship becomes even more evident for the traditional "Made in Italy" firms.
    JEL: C23 D24 F23
    Date: 2011
  11. By: Walter Briec; Emmanuelle Gabillon; Laurence Lasselle; Hermann Ratsimbanierana
    Abstract: Cecchetti et al. (2006) develop a method for allocating macroeconomic performance changes among the structure of the economy, variability of supply shocks and monetary policy. We propose a dual approach of their method by borrowing well-known tools from production theory, namely the Farrell measure and the Malmquist index. Following Färe et al (1994) we propose a decomposition of the efficiency of monetary policy. It is shown that the global efficiency changes can be rewritten as the product of the changes in macroeconomic performance, minimum quadratic loss, and efficiency frontier.
    Keywords: efficiency frontier, inflation variability, Farrell measure, Malmquist index.
    JEL: E52 E58
    Date: 2011–01
  12. By: Erdogdu, Erkan
    Abstract: The last two decades have witnessed widespread power market reforms in both developed and developing countries that have cost billions of dollars. Among the key aims (and assumptions) of these reforms, there has always been realization of improvements in power sector efficiency. This paper questions the validity of this hypothesis. Using panel data from 92 countries covering the period 1982–2008, empirical models are developed and analyzed. The research findings suggest that the impact of the reforms on electricity industry performance is statistically significant but also limited. The results imply that, after controlling for country-specific variables, application of liberal market models in electricity industries slightly increases efficiency in power sector. Besides, we detect a positive relationship between reform process and the percentage share of network (transmission and distribution) losses in total electricity supplied; meaning that as countries take more reform steps the network losses as a fraction of power generated tend to increase. Moreover, the study puts forward that income level and other country specific features are more important determinants of industry efficiency than the reform process. Overall, contrary to expectations of substantial increases in sector efficiency, the paper concludes that introducing a decentralized market model with competition in the electricity sector has a limited increasing effect on power industry performance.
    Keywords: Models with panel data (C33); model construction and estimation (C51); electric utilities (L94); power market reform; electricity industry efficiency
    JEL: C51 L11 O13 L94
    Date: 2011–07
  13. By: Bichaka Fayissa; Anca Traian
    Abstract: The purpose of this study is to estimate a health production function for the 13 East European countries including Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Ukraine. Using panel data from 1997 to 2005 on a diverse array of economic, demographic, environmental, and lifestyles factors as inputs, we analyze a health production function at the macro level in order to determine the most efficient way of allocating limited resources for improving the overall health status of countries in the sample. To control for individual country heterogeneity, we employ panel analytic methods of fixed effects, random effects, and Arellano – Bond estimator. The results indicate that economic growth as measured by GDP per capita growth, investment in human capital formation, and residence in urban areas significantly reduce infant mortality and thus improve the health status of countries in the sample. These findings are useful, not only for serving as background for health care policy decisions, but also for a better understanding of the factors that affect the health condition of the region.
    Keywords: Health Status, Eastern European Countries, Fixed-Effects, Random-Effects, Arellano-Bond estimator
    JEL: I12 I20
    Date: 2011–07
  14. By: Laborda, Leopoldo; Guasch, Jose Luis; Sotelsek, Daniel
    Abstract: Increasingly, entrepreneurship is being discussed and considered as a source of high economic growth and competitiveness. A conceptual process of creative construction that characterizes the dynamics between entrants and incumbents can prove quite useful to analyze the impact of countries'entrepreneurship capital on economic performance and can be a guide for economic policy. This paper applies a Stochastic Frontier Analysis approach to test the hypothesis that entrepreneurship capital promotes economic performance by serving as a conduit of knowledge spillovers. In addition, kernel density functions are employed to analyze convergence (or divergence) in the efficiency estimated for individual countries. The empirical evidence and results here tend to support the hypothesis. Specifically, the empirical analysis shows that the rate of expenditure on research and development in relation to new businesses registered has a positive and significant effect in increasing technical efficiency. These factors facilitate the dissemination of existing knowledge, develop entrepreneurship capital, and thus provide the missing link to economic performance -- entrepreneurship capital. The authors also show the trends and dynamics of changes in countries’ technical efficiency.
    Keywords: Economic Theory&Research,Agricultural Knowledge&Information Systems,Labor Policies,E-Business,Knowledge for Development
    Date: 2011–07–01
  15. By: Malwina Mejer
    Abstract: Intensification of university-industry interactions raises concerns about the potential negative impact it may have on the pace of scientific progress. This paper analyzes the relationship between academic patenting, research collaboration and quality of scientic output in a panel of 268 patenting and non-patenting life-science researchers from five universities in Belgium. Results suggest that scientists benefit from research collaboration with industry as witnessed by higher productivity and higher annual citation frequencies. Patenting positively correlates with higher quality of scientific output, except when industry is directly involved in the patenting process. In contrast to previous studies we do not end a positive relationship between patenting and citations.
    Keywords: patenting; scientific publication; quality; collaboration
    JEL: I21 I23 O33 O34
    Date: 2011–07
  16. By: Mullally, Conner
    Abstract: This essay is an evaluation of year one of the Rural Business Development (RBD) program for small rice farmers in León, Nicaragua. The RBD program is administered by the Millennium Challenge Corporation, and is designed to deliver agricultural extension advice and affordable credit in the form of inputs to farm households. This essay estimates the average impact of the program on rice yields and revenues utilizing inverse propensity score weighting combined with linear regression. In conducting statistical inference, it also accounts for the fact that agricultural outcomes are likely correlated over space in a small area such as the one studied here. The results suggest that the program had no impact on average, likely due to the presence of a severe drought during the 2008 â 2009 rice growing season, but that poorer households may have done better than their wealthier counterparts. This does not account for program costs, which when factored in would likely make the overall net benefit of the program negative. There may very well be long term benefits to exploiting extension advice and better access to credit created by the RBD program, and the it appears to have shielded poorer farmers somewhat from the impact of the drought. But the results highlight the danger of introducing programs aimed at raising productivity and incomes in areas subject to system unanticipated shocks. Incorporating risk management techniques or insurance against systemic risk into extension programs may improve welfare and encourage broader participation in agricultural productivity programs going forward.
    Keywords: Development, program evaluation, agricultural extension., International Development,
    Date: 2011–07
  17. By: Andre Betzer (University of Wuppertal); Marc Goergen (Cardiff Business School and European Corporate Governance Institute (ECGI))
    Abstract: While empirical studies that use event-study methodology find on average that the gains from mergers and acquisitions are positive, those focusing on accounting figures tend to find a significant drop in performance. We argue that each of the four possible combinations between positive or negative abnormal stock returns and accounting performance is due to a distinct acquisition motive. We find strong empirical evidence in support of this claim.
    Keywords: Mergers and acquisitions, performance measurement, synergies, preemption, overvaluation, corporate governance, agency problems
    JEL: G34 G3 G14
    Date: 2011–07
  18. By: Masakazu Hojo
    Abstract: Education production functions are estimated using student-level achievement data for Japanese students, with emphasis on estimating the causal effect of class size on students' academic performance. The empirical results show that students‟ test scores are strongly affected by individual and family backgrounds, whereas school resource variables and teacher characteristics have a more limited impact. The causal effect of class size, which is currently being politically debated in Japan, is investigated using a regression discontinuity design. The estimation results suggest that class-size reduction has a weak impact on the academic performance of Japanese students.
    Keywords: Education production function, Class size, Regression discontinuity design, Japan
    JEL: I21 I28
    Date: 2011–07

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