New Economics Papers
on Efficiency and Productivity
Issue of 2011‒08‒29
sixteen papers chosen by

  1. Working Paper 18-10 - Comparaison des composantes de la croissance de la productivité : Belgique, Allemagne, France et Pays-Bas 1996-2007 By Bernadette Biatour; Chantal Kegels
  2. Firm Heterogeneity and Development: Evidence from Latin American countries By Han-Hsin Chang; Charles van Marrewijk
  3. Foreign Investment Effects on the Banking Sector in Georgia By Grigol, Modebadze
  4. Long-Term Barriers to the International Diffusion of Innovations By Spolaore, Enrico; Wacziarg, Romain
  5. Efficiency of islamic and conventional banks in countries with islamic banking By KABLAN, S; YOUSFI, O
  6. Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: The case of Japanese firms By ITO Keiko
  7. Measuring regional environmental efficiency: A directional distance function approach By Halkos, George; Tzeremes, Nickolaos
  8. Sensitivity analysis of efficiency rankings to distributional assumptions: applications to Japanese water utilities By Yane, Shinji; Berg, Sanford
  9. Does it pay to be productive ?The case of age groups By Alessandra Cataldi; Stephan K. S. Kampelmann; François Rycx
  10. How Efficient Are Banks in Hungary? By Margit Molnár; Dániel Holló
  11. The revealed competitiveness of U.S. exports By Massimo Del Gatto; Filippo di Mauro; Joseph Gruber; Benjamin R. Mandel
  12. International Trade and Firm Performance: A Survey of Empirical Studies since 2006 By Wagner, Joachim
  13. The Impact of Trade on Organization and Productivity By Lorenzo Caliendo; Esteban Rossi-Hansberg
  14. A meta-regression analysis of benchmarking studies on water utilities market structure By Carvalho, Pedro; Marques, Rui Cunha; Berg, Sanford
  15. How to Move Product Market Regulation in New Zealand Back Towards the Frontier By Paul Conway
  16. Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power By Lucas W. Davis; Catherine Wolfram

  1. By: Bernadette Biatour; Chantal Kegels
    Keywords: Labour productivity, Growth accounting, Total factor productivity
    JEL: C82 D24 E22 E32 F43
    Date: 2010–10–21
  2. By: Han-Hsin Chang; Charles van Marrewijk
    Abstract: Motivated by the work of Melitz (2003), Helpman, et al. (2004) and Yeaple (2005), micro-firm data provided by the World Bank Enterprise Survey is used to study the empirical productivity distribution across 15 Latin American countries. This paper differs from previous work in identifying four types of firms by their ownership characteristics and their exporting status. We compare the productivity distribution of these four types of firms to reflect on theoretical modeling deficiencies. First, the productivity distributions for each type show no sign of a productivity cut-off at the lower end, contrary to current theoretical modeling. Second, we see that exporting activities are nonexclusive to firms with high productivity. In other words, by distinguishing groups of firms with different degrees of international involvement (domestic producers, exporters, nationally-owned and foreign-owned firms), we find that the productivity distributions of different groups of firms overlap with one another. This contradicts with the modeling in Melitz (2003), which suggests sorting into different international engagement according to productivity level. Third, we find a superior productivity distribution among foreign-owned firms as compared to domestic firms. The foreign ownership premium is significant and more prevailing in the services sectors than the manufacturing sectors. Exporters also show superior productivity, but this productivity premium is only enjoyed by the nationally-owned manufacturers. The premium is not constant over the quantiles. Lastly, with the cross-country data, we find a positive relationship between the overall productivity level and a country's development level, as often found in other research. However, we find that firms with low productivity in a given sector are more constrained by the macroeconomic development level of the country than firms with higher productivity, which seem to be able to advance productivity with individual micro- firm characteristics.
    Keywords: Firm heterogeneity; Productivity distribution; Exporting; Development; Latin America
    JEL: O12 D20 F14 O54
    Date: 2011–08
  3. By: Grigol, Modebadze
    Abstract: Using data from 2004 – 2008, we investigate the effect of foreign ownership on banks efficiency and financial performance. The data is a balanced panel consisting of 16 banks and 640 observations. In random effect regression, to investigate the influence of foreign ownership type banks’, we use the efficiency measures ROA (return on asset) and ROE (return on equity). Appling stochastic frontier analysis, we estimate banks cost efficiency. The efficiency analysis reveals that banks with foreign strategic ownership or international financial institutions involvement (EBRD or IFC) are more cost efficient than their domestic counterparts. The study also found that foreign strategic ownership positively affects the return on equity but negatively affects the banks’ return on assets. Investigation of how efficiently foreign majority owned banks are using their inputs showed that banks with foreign majority ownership are significantly less cost efficient than those with foreign strategic ownership. We find that foreign majority ownership has ambiguous effects on financial performance — it increases the return on assets but decreases the return on equity. This research highlights the importance for bank performance of a large strategic shareholder who takes a controlling interest in the bank.
    Keywords: Foreign Ownership; Banking; Cost Efficiency; Stochastic Frontier Analysis
    JEL: L25 G34 G32 G21
    Date: 2011–08–01
  4. By: Spolaore, Enrico; Wacziarg, Romain
    Abstract: We document an empirical relationship between the cross-country adoption of technologies and the degree of long-term historical relatedness between human populations. Historical relatedness is measured using genetic distance, a measure of the time since two populations’ last common ancestors. We find that the measure of human relatedness that is relevant to explain international technology diffusion is genetic distance relative to the world technological frontier (“relative frontier distance”). This evidence is consistent with long-term historical relatedness acting as a barrier to technology adoption: societies that are more distant from the technological frontier tend to face higher imitation costs. The results can help explain current differences in total factor productivity and income per capita across countries.
    Keywords: genetic distance; technological adoption; technological frontier; total factor productivity
    JEL: F43 O33 O57
    Date: 2011–08
    Abstract: Our study aims at analyzing Islamic banks efficiency over the period 2001-2008. We found that they were efficient at 78.9%. The level of efficiency could however vary according to regions. Asia displays the highest score with 84.64%. Indeed, country like Malaysia and Pakistan implemented reforms in order to allow Islamic banks to better cope with the existing financial system. On the contrary countries with Islamic banking system do not necessarily display efficiency scores superior to the average. Further analyses on commercial banks, in the selected countries strengthen the conclusion for a regulatory environment suiting Islamic banking. Besides, the subprime crisis did not impact Islamic banks as evidenced by the dummy variable. Market power and profitability have negative impact on Islamic banks efficiency. Concentration leads to higher costs through slacks and inefficiency. Again other results from robustness checks appear to stress the specificity of Islamic banks, like their first aim for financing rural population.
    Keywords: Islamic Finance, Islamic Banks, performance, efficiency, stochastic frontier analysis
    JEL: G15 G24 G21
    Date: 2011–07
  6. By: ITO Keiko
    Abstract: This paper examines whether and how the entry of foreign multinational firms affects productivity growth of domestically owned firms, using Japanese firm-level data for the period 2000-2007. Although there are a considerable number of studies conducting productivity analyses on foreign multinationals and domestic firms for the manufacturing sector, there are few such studies for the service sector. Against this background, the present paper focuses on the role of foreign entry in the service sector, where cross-border trade is often difficult and firms are therefore less likely to be exposed to international competition.<br />The results of the analysis suggest that foreign multinationals perform better than domestically owned firms in many sectors. However, although the productivity levels of the former tend to be higher than those of the latter, no significant difference in productivity growth rates is found. Moreover, once firm-fixed effects are controlled for, foreign presence in a particular industry tends to negatively affect the productivity growth rate of domestically owned firms in the industry. However, firms that are catching up with the productivity frontier enjoy positive FDI spillovers, implying that foreign entry accelerates productivity catch-up.
    Date: 2011–08
  7. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: This paper by applying a directional distance function approach measures the UK regions’ municipality waste performance. In addition the paper constructs conditional stochastic kernels trying to determine nonparametrically the association of regions’ GDP per capita levels with their calculated regional environmental efficiencies. There are evidences of regional environmental inefficiencies for the majority of UK regions regardless their regional GDP per capita levels.
    Keywords: Regional environmental performance; Directional distance function; Conditional stochastic kernel
    JEL: C6 Q5 O13
    Date: 2011
  8. By: Yane, Shinji; Berg, Sanford
    Abstract: This paper examines the robustness of efficiency score rankings across four distributional assumptions for trans-log stochastic production-frontier models, using data from 1,221 Japanese water utilities (for 2004 and 2005). One-sided error terms considered include the half-normal, truncated normal, exponential, and gamma distributions. Results are compared for homoscedastic and doubly heteroscedastic models, where we also introduce a doubly heteroscedastic variable mean model, and examine the sensitivity of the nested models to a stronger heteroscedasticity correction for the one-sided error component. The results support three conclusions regarding the sensitivity of efficiency rankings to distributional assumptions. When four standard distributional assumptions are applied to a homoscedastic stochastic frontier model, the efficiency rankings are quite consistent. When those assumptions are applied to a doubly heteroscedastic stochastic frontier model, the efficiency rankings are consistent when proper and sufficient arguments for the variance functions are included in the model. When a more general model, like a variable mean model is estimated, efficiency rankings are quite sensitive to heteroscedasticity correction schemes.
    Keywords: stochastic production frontier models; Japanese water utilities; heteroscedasticity
    JEL: L95 C20
    Date: 2011
  9. By: Alessandra Cataldi; Stephan K. S. Kampelmann; François Rycx
    Abstract: Using longitudinal matched employer-employee data for the period 1999-2006, we investigate the relationship between age, wage and productivity in the Belgian private sector. More precisely, we examine how changes in the proportions of young (16-29 years), middle-aged (30-49 years) and older (more than 49 years) workers affect the productivity of firms and test for the presence of productivity-wage gaps. Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that workers older than 49 are significantly less productive than prime age and young workers. In contrast, the productivity of middle-age workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly and monotonically with age. Overall, this leads to the conclusion that young workers are paid below their marginal productivity while older workers appear to be “overpaid” and lends empirical support to theories of deferred compensation over the life-cycle (Lazear, 1979).
    Keywords: Wages; productivity; aging; matched panel data
    JEL: J14 J24 J31
    Date: 2011–08–18
  10. By: Margit Molnár; Dániel Holló
    Abstract: Apparent characteristics of the Hungarian banking market such as large profits and high margins suggest weak competitive pressures. Weak competition in turn, may reduce efficiency in a lack of pressures to converge to marginal cost and to stimulate managerial efforts to reduce X-inefficiency. Such conditions call for a gauging of efficiency of banks to better assess what is needed for a competitive and well-functioning banking system. Although the level of efficiency is only an indirect measure of competitive pressures, it may be superior to other ones available for international comparison. Concentration ratios are only a very imperfect measure, moreover, the Hungarian banking market structure with one larger and several somewhat smaller banks of similar sizes would suggest an even playing field. In fact, different market segments show very different degrees of concentration and several conditions for a competitive market are missing. Moreover, interest margins, particularly on mortgage loans are high in international comparison and the downward stickiness and lagged reaction of retail lending rates to money market rates also suggests weak competitive pressures. In a lack of readily available data to obtain mark-ups, which would be a better measure of competition than concentration measures or interest margins, this paper estimates cost efficiency scores that allow for grasping the size of competitive pressures indirectly. Cost efficiency is estimated in the EU 25 context given that cross-border competition can be important in some market segments and that cross-border lending is significant in Hungary. The paper uses the stochastic frontier analysis with a Fourier-flexible specification of the cost function and a time-varying decay model. A specific feature of the methodology is that bank lending is corrected for non-performing loans. This way, the categorising of banks that boost their loan portfolio by excessive risk-taking - i.e. produce large amounts of bad loans - as efficient can be partly avoided. The results show that in Hungary, bank efficiency is not particularly high in either European or regional comparison. Competition could be the major push for efficiency gains and the paper lists a series of measures that could be adopted to boost competitive pressures.<p> This paper relates to the 2010 Economic Survey of Hungary.<P>Les banques hongroises sont-elles efficientes ?<BR>Les caractéristiques apparentes du marché bancaire hongrois, comme l'importance des bénéfices et des marges financières, évoquent un manque de pressions concurrentielles. Cette faiblesse de la concurrence peut elle-même réduire l'efficience de ce marché, faute de pressions incitant à converger vers le coût marginal et à stimuler les efforts des dirigeants pour réduire l?inefficience-X. Cette situation invite à une évaluation de l'efficience des banques afin de mieux mesurer les conditions nécessaires à l?existence d'un système bancaire concurrentiel et fonctionnant bien. Bien que le niveau de l'efficience ne soit qu'un indicateur indirect des pressions concurrentielles, il présente peut-être plus d?intérêt que d'autres mesures disponibles pour effectuer des comparaisons internationales. Les ratios de concentration ne sont en effet qu'un instrument très imparfait ; de plus la structure du marché bancaire hongrois, marquée par la présence d'une plus grande banque et de plusieurs autres établissements plus petits de tailles similaires, semble témoigner de l'existence de conditions de concurrence équitables. En fait, les différents segments du marché présentent des concentrations très variées et il manque plusieurs conditions pour pouvoir parler d'un marché concurrentiel. De plus, les marges financières, notamment sur les prêts hypothécaires, sont élevées par rapport aux autres pays et la viscosité à la baisse et les réactions tardives des taux débiteurs des banques de réseau à l'évolution des taux du marché monétaire indiquent également un manque de pressions concurrentielles. En l'absence de données immédiatement disponibles permettant de calculer les marges bénéficiaires, qui constituerait un meilleur indicateur de la concurrence que les mesures de concentration ou les marges financières, cet article procède à une estimation des scores d'efficience coût qui permet de mieux saisir de façon indirecte l'importance des pressions concurrentielles. L'efficience coût est estimée dans le contexte de l'UE-25 car la concurrence transnationale peut être importante dans certains segments du marché et les opérations transnationales de crédit sont considérables en Hongrie. Cet article fait appel à l?analyse de frontière stochastique avec une forme flexible de Fourier de la fonction de coût et un modèle d?obsolescence variable en fonction du temps. Les caractéristiques spécifiques de la méthodologie utilisée tiennent au fait que le crédit bancaire est corrigé des prêts non productifs. De cette façon, on évitera en partie de considérer comme des établissements efficients les banques qui gonflent leur portefeuille de prêts en prenant des risques excessifs – et génèrent donc des volumes considérables de créances irrécouvrables. Les résultats montrent qu'en Hongrie, l'efficience des banques n'est pas particulièrement élevée au regard de la situation européenne ou régionale. La concurrence pourrait être un facteur majeur d'efficience et cet article énumère une série de mesures de nature à stimuler les pressions concurrentielles.<p> Ce document se rapporte à l?Étude économique de l’OCDE de la Hongrie.
    Keywords: Hungary, stochastic frontier analysis, banking efficiency, banking competition, Fourier-flexible form, Hongrie, analyse de frontière stochastique, efficience des banques, concurrence des banques, forme flexible de Fourier
    JEL: G21
    Date: 2011–03–08
  11. By: Massimo Del Gatto; Filippo di Mauro; Joseph Gruber; Benjamin R. Mandel
    Abstract: The U.S. share of world merchandise exports has declined sharply over the last decade. Using data at the level of detailed industries, this paper analyzes the decline in U.S. share against the backdrop of alternative measures of the competitiveness of the U.S. economy. We document the following facts: (i) only a few industries contributed to the decline in any meaningful way, (ii) a large part of the drop was driven by the changing size of U.S. export industries and not the size of U.S. sales within those industries, (iii) in a gravity framework, the majority of the decline in the U.S. export share within industries was due to the declining U.S. share of world income, and (iv) in a computed structural measure of firm productivity, average U.S. export productivity has generally maintained its high level versus other countries over time. Overall, our analysis suggests that the dismal performance of the U.S. market share is not a sufficient statistic for competitiveness.
    Keywords: Exports - United States ; Industrial Productivity - United States ; Competition
    Date: 2011
  12. By: Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: The literature on international trade and firm performance grows exponentially. This paper attempts to summarize what we learn from this literature to guide both future empirical and theoretical work in this area, and public debates and policy makers, in an evidence-based way. The focus is on the empirical part of the literature that consists of recently published papers using data for firms from manufacturing or services industries to study the links between international trade (exports and imports) and dimensions of firm performance (productivity, wages, profitability and survival). It discusses recent add-ons to the box of tools for empirical investigation in this field and suggests topics for future research.
    Keywords: international trade, firm performance, empirical studies, survey
    JEL: F14
    Date: 2011–08
  13. By: Lorenzo Caliendo; Esteban Rossi-Hansberg
    Abstract: A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%.
    JEL: D21 D24 F12 F13
    Date: 2011–08
  14. By: Carvalho, Pedro; Marques, Rui Cunha; Berg, Sanford
    Abstract: This paper updates the literature on water utility benchmarking studies carried out worldwide, focusing on scale and scope economies. Using meta-regression analysis, the study investigates which variables from published studies influence these economies. Our analysis led to several conclusions. The results indicate that there is a higher probability of finding diseconomies of scale and scope in large utilities; however, only the results for scale economies are significant. Diseconomies of scale and scope are more likely to be found in publicly-owned utilities than when the ownership is mostly private; as would be expected, multi-utilities are more likely to have scale and scope economies.
    Keywords: economies of scale; economies of scope; meta-regression analysis; water utilities
    JEL: L95 C1
    Date: 2011–08
  15. By: Paul Conway
    Abstract: From the mid-1980s, New Zealand was widely considered to be a leader in liberalising product market regulation (PMR). However, the reform of PMR has lost momentum over recent years. Many areas of PMR are still consistent with best practice, but New Zealand is no longer assessed to be at the forefront of regulatory policy making. Although economic geography clearly offers a partial explanation for the relative underperformance of the NZ economy, restrictive policies in some areas are also likely to be constraining growth in GDP per capita. Indeed, it is likely that being small and distant exacerbates the negative impact of restrictive product market policies on New Zealand’s economic performance. This implies a genuine need to shift the regulatory framework back towards the OECD frontier. Ongoing improvements in regulatory governance, minimising the government’s influence in competitive markets and lowering barriers to trade and FDI, including ongoing policy harmonisation and mutual recognition with trading partners where appropriate, would all help in this regard. This Working Paper relates to the 2011 Economic Survey of New Zealand (<P>Replacer la réglementation des marchés de produits en Nouvelle-Zélande à la pointe des pays de l'OCDE<BR>Depuis le milieu des années 80, la Nouvelle-Zélande a été considérée comme le leader dans la libéralisation de la réglementation des marchés de produits (RMP). Cependant, la réforme des RMP s’est essoufflée au cours de ces dernières années. Dans nombre de domaines, les PMR sont encore en phase avec les meilleures pratiques mais la Nouvelle-Zélande n’est plus considérée comme étant à l’avant-garde de la politique de réglementation. Certes, la géographie économique explique en partie la relative sous-performance de l’économie néo-zélandaise, mais des politiques restrictives dans certains domaines sont susceptibles de brider la croissance du PIB par habitant. Le fait d’être un petit pays excentré aggrave probablement l’impact négatif d’une réglementation restrictive des marchés de produits sur la performance économique néo-zélandaise. La Nouvelle-Zélande a donc le plus grand besoin de ramener son cadre réglementaire vers la frontière des pays de l’OCDE. Continuer d’améliorer la gouvernance de la réglementation, réduire autant que possible l’influence de l’État sur les marchés concurrentiels et abaisser les obstacles aux échanges et à l’IDE, notamment par une plus grande harmonisation des politiques et, le cas échéant, par des accords de reconnaissance mutuelle avec les partenaires commerciaux sont autant d’actions qui seraient utiles à cet égard. Ce document se rapporte à l’Étude économique de l’OCDE de la Nouvelle-Zélande 2011 (éland e).
    Keywords: product market regulation, productivity, institutions, New Zealand, indicators, productivité, institutions, indicateurs, réglementation des marchés de produits, réformes, Nouvelle-Zélande
    JEL: D D24 K23 L11 L12 L25 L43 L5
    Date: 2011–07–13
  16. By: Lucas W. Davis; Catherine Wolfram
    Abstract: For the first four decades of its existence the U.S. nuclear power industry was run by regulated utilities, with most companies owning only one or two reactors. Beginning in the late 1990s electricity markets in many states were deregulated and almost half of the nation’s 103 reactors were sold to independent power producers selling power in competitive wholesale markets. Deregulation has been accompanied by substantial market consolidation and today the three largest companies control more than one-third of all U.S. nuclear capacity. We find that deregulation and consolidation are associated with a 10 percent increase in operating efficiency, achieved primarily by reducing the frequency and duration of reactor outages. At average wholesale prices the value of this increased efficiency is approximately $2.5 billion annually and implies an annual decrease of almost 40 million metric tons of carbon dioxide emissions.
    JEL: D21 D40 L51 L94 Q48
    Date: 2011–08

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