nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2011‒10‒22
ten papers chosen by
Angelo Zago
University of Verona

  1. When, where and how to perform efficiency estimation By Oleg Badunenko; Daniel J. Henderson; Subal C. Kumbhakar
  2. Investment Utilisation, Adjustment Costs, and Technical Efficiency in Danish Pig Farms By Jakob Vesterlund Olsen; Arne Henningsen
  3. Efficiency of broadband internet adoption in European Union member states By Pavlyuk, Dmitry
  4. The Real Effects of Hedge Fund Activism: Productivity, Risk, and Product Market Competition By Alon Brav; Wei Jiang; Hyunseob Kim
  5. Local Municipality Productive Efficiency and Its Determinants in South Africa By Nara F. Monkam
  6. Past dominations, current institutions and Italian regional economic performance By Adriana Di Liberto; M. Sideri
  7. The risk-taking channel of monetary policy in the USA: Evidence from micro-level data By Delis, Manthos D; Hasan, Iftekhar; Mylonidis, Nikolaos
  9. Italian economic dualism and convergence clubs at regional level By JG. Brida; N. Garrido; Francesco Mureddu
  10. The Impact of Trade Promotion Services on Canadian Exporter Performance By Chen, Shenjie; Van Biesebroeck, Johannes; Yu, Emily

  1. By: Oleg Badunenko (CGS, University of Cologne); Daniel J. Henderson (State University of New York-Binghamton); Subal C. Kumbhakar (State University of New York-Binghamton)
    Abstract: In this paper we compare two flexible estimators of technical efficiency in a cross-sectional setting: the nonparametric kernel SFA estimator of Fan, Li and Weersink (1996) to the nonparametric bias corrected DEA estimator of Kneip, Simar and Wilson (2008). We assess the finite sample performance of each estimator via Monte Carlo simulations and empirical examples. We find that the reliability of efficiency scores critically hinges upon the ratio of the variation in efficiency to the variation in noise. These results should be a valuable resource to both academic researchers and practitioners.
    Keywords: Bootstrap, Nonparametric Kernel, Technical Efficiency
    JEL: C1 C14 C33
    Date: 2011–09–15
  2. By: Jakob Vesterlund Olsen (Knowledge Centre for Agriculture, Aarhus (Denmark)); Arne Henningsen (Institute of Food and Resource Economics, University of Copenhagen)
    Abstract: In this paper, we present a theoretical model for adjustment costs and investment utilisation that illustrates their causes and types and shows in which phases of an investment they occur. Furthermore, we develop an empirical framework for analysing the size and the timing of adjustment costs and investment utilisation. We apply this methodology to a large panel data set of Danish pig producers with 9,281 observations between 1996 and 2008. The paper further contributes with a thorough discussion of the calculation and deflation of capital input from microeconomic data. We estimate an output distance function as a stochastic frontier model and explain the estimated technical inefficiencies with lagged investments, farm size and age of the farmer. We allow for interaction effects between these variables and derive the formula for calculating the marginal effects on technical efficiency. The results show that investments have a negative effect on farm efficiency in the year of the investment and the year after accruing from adjustment costs. There is a large positive effect on efficiency two and three years after the investment. The farmer’s age and the farm size significantly influence technical efficiency, as well as the effect of investments on adjustment costs and investment utilisation. These results are robust to different ways of measuring capital.
    Keywords: investment utilisation, adjustment costs, stochastic frontier analysis, technical efficiency, pig production, Denmark
    JEL: Q12 D24 D92
    Date: 2011–10
  3. By: Pavlyuk, Dmitry
    Abstract: This paper is devoted to econometric analysis of broadband adoption efficiency in EU member states. Stochastic frontier models are widely used for efficiency estimation. We enhanced the stochastic frontier model by adding a spatial component into the model specification to reflect possible dependencies between neighbour countries. A maximum likelihood estimator for the model was developed. The proposed spatial autoregressive stochastic frontier model is used for estimation of broadband adoption efficiency. We confirmed a negative impact of average prices of broadband services on broadband adoption in a country and also discovered a significant negative influence of a level of population income inequality. Significant positive spatial effects also have been revealed, so higher broadband penetration rates in neighbour countries have a positive impact on broadband adoption in a given country.
    Keywords: spatial stochastic frontier; broadband adoption; efficiency
    JEL: C51 C13 C21 L86
    Date: 2011–06–30
  4. By: Alon Brav; Wei Jiang; Hyunseob Kim
    Abstract: This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency within two years after activism, and this improvement is concentrated in industries with a high degree of product market competition. By following plants that were sold post-intervention we also find that efficient capital redeployment is an important channel via which activists create value. Furthermore, our analyses demonstrate that measuring performance using the Compustat data is likely to lead to a downward bias because target firms experiencing greater improvement post-intervention are also more likely to disappear from the Compustat database. Finally, consistent with recent work in asset-pricing linking firm investment decisions and expected returns, we show how changes to target firms’ productivity are associated with a decline in systemic risk, particularly in competitive industries.
    JEL: G23 G3 G34
    Date: 2011–10
  5. By: Nara F. Monkam (Department of Economics, University of Pretoria)
    Abstract: The paper assesses the technical efficiency of 231 local municipalities in South Africa for 2007 and investigates the potential determinants of efficiency gaps among local municipalities in the country using the nonparametric Data Envelopment Analysis (DEA) and the parametric Stochastic Frontier Analysis (SFA) techniques. In relation to the DEA technique, efficiency scores are subsequently explained in a second stage regression model with potential explanatory factors using a Tobit regression model. The results show that on average, B1 and B3 municipalities could have theoretically achieved the same level of basic services with about 16% and 80% fewer resources respectively; the difference between the most efficient and the least efficient municipalities being quite substantial. The results also show that B4 municipalities could have theoretically achieved the same level of basic services with about 62% fewer operating expenditures. Furthermore, fiscal autonomy and the number and skill levels of the top management of a municipality’s administration were found to influence the productive efficiency of municipalities in South Africa. The paper findings raise concerns over the future of local municipalities in South Africa, especially B3 and B4 municipalities, about their capability to efficiently deliver on expected outcomes on a sustainable basis.
    Keywords: Municipalities, spending efficiency, sub-national government finance, fiscal decentralization; DEA analysis, Tobit, SFA
    JEL: H11 H71 H72 H77
    Date: 2011–10
  6. By: Adriana Di Liberto; M. Sideri
    Abstract: In this paper we study the connection between economic performance and the quality of government institutions for the sample of 103 Italian NUTS3 regions. We include new measures of institutional quality calculated using data on the provision of four areas of public services - health, education, environment and energy. We depart from the vast literature that examines the role of different formal institutions on economic development and investigate if the quality of the same governing institutions matters for productivity. To get through likely endogeneity problems we focus on history to find good instruments. We firstly concentrate on the Spanish period that has been often portrayed by historians as having negatively affected the dominated areas through its legacy of inefficient bureaucracy. Secondly, unlike previous studies that are usually based on specific historical events, we collect data for all different dominations that governed each Italian province over seven centuries before the creation of the unified Italian State. Our results suggest a significant role of past historical institutions on the current public administration efficiency and, most of all, confirm that the latter matters for explaining region’s economic performance, with institutional quality differences explaining more than 20% of the observed differences in productivity levels. Our results are robust to the inclusion of different sets of controls, instruments and the use of different measures of regional economic performance.
    Keywords: economic development; quality of institutions; history
    JEL: O43 O11
    Date: 2011
  7. By: Delis, Manthos D; Hasan, Iftekhar; Mylonidis, Nikolaos
    Abstract: There is a growing consensus that a prolonged period of low interest rates can exert a negative impact on financial stability through the risk-taking incentives of banks. Using micro-level datasets from the US banking sector, this paper finds evidence of a highly significant negative relationship between monetary policy rates and bank-risk taking. This finding remains robust across various specifications, sub-periods and subsamples, thereby confirming the presence of an active risk-taking channel of monetary policy since the 1990s. The results, therefore, support the new responsibilities of the Fed on macro-prudential supervision to monitor systemic risks.
    Keywords: Bank risk; monetary policy; US commercial banks; Total loans; New loans
    JEL: E43 E52 G21
    Date: 2011–10–01
  8. By: Nakanishi, Yasuo
    Abstract: This article presents an empirical investigation of the role of IT(Information Technology)capital in the Japanese macroeconomy, with a particular focus on the adjustment of IT capital stock. We use the Translog model in this study and treat IT capital as the only quasi-fixed factor. We found that the shadow price of IT capital was largely decreased, and that there was a significant difference in the shadow prices between the beginning of the measurement periods and in recent years. There was also a high investment incentive in most periods. We found evidence for the contribution of IT capital to labor productivity, and our findings are consistent with the proposition that IT capital contributes to output growth.
    Keywords: IT capital; Translog model; productivity
    JEL: D21 O33 D24
    Date: 2011–10–10
  9. By: JG. Brida; N. Garrido; Francesco Mureddu
    Abstract: This paper compares the long run prediction of convergence clubs introduced by Quah (1996 and 1997) with the actual observed dynamics of the Italian regions during the period 1970-2004. Economic dynamics is described by the evolution per capita GDP and different notions of distance are introduced to compare the trajectories of the regions. In addition, by means of hierarchical clustering methodologies the set of economies are segmented. By using the average distance, the study identifies two main performance clubs resembling the long run prediction of two converge clubs. On the other hand, the distance correlation shows different co-movements between members of the same cluster, indicating a variety of responses to external shocks. In particular the average distance identifies a clear division between a high performance club consisting of regions from the Center North, and a low performance club composed by regions from the South and islands. The presence of a cluster composed by center north regions is substantially confirmed by the distance correlation analysis, suggesting an homogeneous response to external shock. By contrast Southern regions display the same dynamical evolution but difference in co-movements. Our analysis provides hints about the fundamentals that link the regions in their process of divergence. In fact the performance clubs pattern we discovered reflects the distribution of economic activities as well as the structural attributes of the regional economies.
    Keywords: economic convergence; economic dualism; hierarchical clustering
    JEL: L83 C24 C14
    Date: 2011
  10. By: Chen, Shenjie; Van Biesebroeck, Johannes; Yu, Emily
    Abstract: We evaluate the impact of the export promotion program delivered by the Canadian Trade Commissioner Service on various dimensions of export performance. Over the 1999-2006 time period we study, Canadian firms successfully diversified their exports to destinations beyond the United States and smaller firms increased their share of total exports. Both of these achievements are explicit aims of the program, but in order to make causal inferences we rely on various identifying assumptions from the treatment effects literature. The results indicate very robustly that the program had an effect at the intensive margin, boosting the average level of exports to given product-destination markets. Effects at the extensive margins of trade, increasing the number of export destinations or number of products exported, are smaller and more sensitive to the identification assumption. This finding differs from previous studies for several Latin American countries where extensive margin effects were most robust. One reason is that the Canadian program was most effective for larger firms and for firms already active on several export markets.
    Keywords: Export Promotion; heterogeneous firms; treatment effect
    JEL: F13 F14 L15
    Date: 2011–10

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