New Economics Papers
on Efficiency and Productivity
Issue of 2011‒11‒01
thirteen papers chosen by

  1. On the Identification of Production Functions: How Heterogeneous is Productivity? By Amit Gandhi; Salvador Navarro; David Rivers
  2. War and Individual Creativity: Tentative Evidence in Relation to Composers By Karol Jan BOROWIECKI; John W. O'HAGAN
  3. Exports, Foreign Direct Investments and Productivity: Are Services Firms Different? By Wagner, Joachim
  4. Using proxy variables to control for unobservables when estimating productivity: A sensitivity analysis By Carmine ORNAGHI; Ilke VAN BEVEREN
  5. Spatial Effects and Convergence Theory in the Portuguese Situation By Vitor Joao Pereira Domingues Martinho
  6. Spatial Effects and Verdoorn Law in the Portuguese Context By Vitor Joao Pereira Domingues Martinho
  7. Is foreign-bank efficiency in financial centers driven by homecountry characteristics? By Claudia Curi; Paolo Guarda; Ana Lozano-Vivas; Valentin Zelenyuk
  8. From Differences in Export Behavior of Services and Manufacturing Firms in Slovenia By Tanja Grublješič; Jože Damijan;
  9. Financial determinants of human development in developing countries By Simplice A., Asongu
  10. Sectoral Convergence in Output Per Worker Between Portuguese Regions By Vitor Joao Pereira Domingues Martinho
  11. Employment Concentration and Resource Allocation: One-Company Towns in Russia By Commander, Simon; Nikoloski, Zlatko; Plekhanov, Alexander
  12. Regulation, Privatization, and Airport Charges: Panel Data Evidence from European Airports By Bilotkach, Volodymyr; Clougherty, Joseph A.; Mueller, Juergen; Zhang, Anming
  13. The incidence of regional factors on "competitive performance” of universities By Fabio Pollice; Stefano De Rubertis; Enrico Ciavolino; Antonella Ricciardelli

  1. By: Amit Gandhi (University of Wisconsin-Madison); Salvador Navarro (University of Western Ontario); David Rivers (University of Western Ontario)
    Abstract: The estimation of production functions suffers from an unresolved identification problem caused by flexible inputs, such as intermediate inputs. We develop an identification strategy for production functions based on a transformation of the firm’s short-run first order condition that solves the problem for both gross output and value-added production functions. We apply our approach to plant-level data from Colombia and Chile, and find that a gross output production function implies fundamentally different patterns of productivity heterogeneity than a value-added specification. This finding is consistent with our analysis of the bias induced by the use of value-added.
    Date: 2011
  2. By: Karol Jan BOROWIECKI (Department of Economics, Trinity College Dublin); John W. O'HAGAN (Department of Economics, Trinity College Dublin)
    Abstract: The relationship between conflict and individual artistic output is ambiguous, both a priori and in terms of the evidence. To address this question in relation to composers, we employ a sample of 115 prominent classical composers born after 1800 and attempt to link their annual productivity with the incidence of wars. While the sample is small and the measure of creative productivity limited, we find evidence that the impact of wars on individual creative production is significant and negative, in keeping with the evidence on the impact of wars on overall societal creative output.
    Keywords: productivity, conflict, war, composer
    JEL: D24 D74 J24 F51 O31 N40 Z10
    Date: 2011–10
  3. By: Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: This paper contributes to the literature on international firm activities and firm performance by providing the first evidence on the link of productivity and both exports and foreign direct investment (fdi) in services firms from a highly developed country. It uses unique new data from Germany - one of the leading actors on the world market for services - that merge information from regular surveys and from a one-time special purpose survey performed by the Statistical Offices. Descriptive statistics, parametric and non-parametric statistical tests and regression analyses (with and without explicitly taking differences along the conditional productivity distribution and firms with extreme values, or outliers, into account) indicate that the productivity pecking order found in numerous studies using data for firms from manufacturing industries – where the firms with the highest productivity engage in fdi while the least productive firms serve the home market only and the productivity of exporting firms is in between – does not exist among firms from services industries. In line with the theoretical model and the empirical results for software firms from India provided by Bhattacharya, Patnaik and Shah (2010) there is evidence that firms with fdi are less productive than firms that export.
    Keywords: exports, foreign direct investments, productivity, services firms
    JEL: F14 F21
    Date: 2011–10
  4. By: Carmine ORNAGHI (University of Southampton, School of Social Science - Economics Division); Ilke VAN BEVEREN (Lessius, Department of Business Studies & IRES, Universite Catholique de Louvain & KU Leuven, CES & LICOS)
    Abstract: The use of proxy variables to control for unobservables when estimating a production function has become increasingly popular in empirical works in recent years. The present paper aims to contribute to this literature in three important ways. First, we provide a structured review of the different estimators and their underlying assumptions. Second, we compare the results obtained using different estimators for a sample of Spanish manufacturing firms, using definitions and data comparable to those used in most empirical works. In comparing the performance of the different estimators, we rely on various proxy variables, apply different definitions of capital, use alternative moment conditions and allow for different timing assumptions of the inputs. Third, in the empirical analysis we propose a simple (non-graphical) test of the monotonicity assumption between productivity and the proxy variable. Our results suggest that productivity measures are more sensitive to the estimator choice rather than to the choice of proxy variables. Moreover, we find that the monotonicity assumption does not hold for a non-negligible proportion of the observations in our data. Importantly, results of a simple evaluation exercise where we compare productivity distributions of exporters versus non-exporters shows that different estimators yield different results, pointing to the importance of making suitable timing assumptions and choosing the appropriate estimator for the data at hand.
    Keywords: Total factor productivity, Semiparametric estimator, Simultaneity, Timing assumptions, Generalized Method of Moments
    JEL: C13 C14 D24 D40
    Date: 2011–08–19
  5. By: Vitor Joao Pereira Domingues Martinho
    Abstract: This study analyses, through cross-section estimation methods, the influence of spatial effects and human capital in the conditional productivity convergence (product per worker) in the economic sectors of NUTs III of mainland Portugal between 1995 and 2002. To analyse the data, Moran's I statistics is considered, and it is stated that productivity is subject to positive spatial autocorrelation (productivity develops in a similar manner to productivity in neighbouring regions), above all, in agriculture and services. Industry and the total of all sectors present indications that they are subject to positive spatial autocorrelation in productivity. On the other hand, it is stated that the indications of convergence, specifically bearing in mind the concept of absolute convergence, are greater in industry. Taking into account the estimation results, it is stated once again that the indications of convergence are greater in industry, and it can be seen that spatial spillover effects, spatial lag (capturing spatial autocorrelation through a spatially redundant dependent variable) and spatial error (capturing spatial autocorrelation through a spatially redundant error term), as well as human capital, condition the convergence of productivity in the various economic sectors of Portuguese region in the period under consideration (Martinho, 2011).
    Date: 2011–10
  6. By: Vitor Joao Pereira Domingues Martinho
    Abstract: The consideration of spatial effects at a regional level is becoming increasingly frequent and the work of Anselin (1988), among others, has contributed to this. This study analyses, through cross-section estimation methods, the influence of spatial effects in productivity (product per worker) in the NUTs III economic sectors of mainland Portugal from 1995 to 1999 and from 2000 to 2005 (taking in count the availability of data), considering the Verdoorn relationship. To analyse the data, by using Moran I statistics, it is stated that productivity is subject to a positive spatial autocorrelation (productivity of each of the regions develops in a similar manner to each of the neighbouring regions), above all in services. The total of all sectors present, also, indicators of being subject to positive autocorrelation in productivity. Bearing in mind the results of estimations, it can been that the effects of spatial spillovers, spatial lags (measuring spatial autocorrelation through the spatially lagged dependent variable) and spatial error (measuring spatial autocorrelation through the spatially lagged error terms), influence the Verdoorn relationship when it is applied to the economic sectors of Portuguese regions (Martinho, 2011).
    Date: 2011–10
  7. By: Claudia Curi; Paolo Guarda; Ana Lozano-Vivas; Valentin Zelenyuk
    Abstract: This paper investigates the effects of home country banking regulations on the performance of foreign banks in Luxembourg?s financial center. We control for the main regulatory indicators, such as capital requirements, private monitoring, official disciplinary power and restrictions on bank activities, accounting for the regulatory regime applied to foreign banks. We also control for the level of GDP in the home country and its position in the business cycle. The two-stage bootstrap method proposed by Simar and Wilson (2007) is applied to bank panel data covering 1999-2009. The analysis carries policy implications for bank regulators in both home and host countries and provides insight into the choice between establishing a branch or a subsidiary, when developing cross-border activities through financial centers.
    Keywords: Foreign bank efficiency, Home-host country characteristics, Bank regulation, Data Envelopment Analysis, Bootstrap
    JEL: G15 G21 G28 C14
    Date: 2011–10
  8. By: Tanja Grublješič; Jože Damijan;
    Abstract: We provide new comprehensive evidence on similarities and differences in export Behavior of Slovenian manufacturing and services firms by using detailed firm-level panel data for Slovenia. Main findings show that export Behavior in these two types of firms is similar and in line with the big picture that is by now familiar from the literature. Slovenian exporting services firms are more productive than non-exporting firms when observed and unobserved heterogeneity are controlled for. Export premia of services firms is even larger than for exporting manufacturing firms. Similarly, pre-entry premia over non-exporters is even larger than for manufacturing firms. We find some evidence of significant learning-by-exporting effects for services firms, but only when using the Levinsohn and Petrin measure of total factor productivity.
    Keywords: Trade in Services, Firm heterogeneity, Self-selection, Learning by exporting
    Date: 2011
  9. By: Simplice A., Asongu
    Abstract: Hitherto financial drivers of human development have been unexplored by the UNDP. This paper assesses determinants of human development from financial dynamics of depth, efficiency, size and activity on data from 38 developing countries. While the importance of financial activity, size and depth (in decreasing order) is significant for inequality adjusted human development, financial allocation efficiency significantly undermines welfare. As a policy implication results do not support financial allocation efficiency as a driver of human development.
    Keywords: Banking; human development; developing countries; instrumental variables
    JEL: O10 I00 E00 G20
    Date: 2011–10–19
  10. By: Vitor Joao Pereira Domingues Martinho
    Abstract: The aim of this paper is to present a further contribution to the analysis of absolute convergence (and), associated with the neoclassical theory, and conditional, associated with endogenous growth theory, of the sectoral productivity at regional level. Presenting some empirical evidence of absolute convergence of productivity for each of the economic sectors and industries in each of the regions of mainland Portugal (NUTS II and NUTS III) in the period 1986 to 1994 and from 1995 to 1999. The finest spatial unit NUTS III is only considered for each of the economic sectors in the period 1995 to 1999. They are also presented empirical evidence of conditional convergence of productivity, but only for each of the economic sectors of the NUTS II of Portugal, from 1995 to 1999. The structural variables used in the analysis of conditional convergence is the ratio of capital/output, the flow of goods/output and location ratio. The main conclusions should be noted that the signs of convergence are stronger in the first period than in the second and that convergence is conditional, especially in industry and in all sectors (1)(Martinho, 2011).
    Date: 2011–10
  11. By: Commander, Simon (EBRD, London); Nikoloski, Zlatko (University College London); Plekhanov, Alexander (EBRD, London)
    Abstract: The paper looks at the effects of employment concentration on resource allocation with a particular focus on one-company towns in Russia defined as towns where a single company accounts for a significant share of total employment of the locality. Empirical analysis of firms' production functions indicates that companies located in one-company towns are characterised by lower marginal product of labour, higher marginal product of capital and lower overall productivity pointing towards significant labour hoarding. One-company town enterprises are also found to be financially more vulnerable. The paper argues that the dominance of natural resources in the Russian economy and employment concentration is closely linked.
    Keywords: employment concentration, one-company towns, labour productivity, Russia
    JEL: D24 J42 R23
    Date: 2011–10
  12. By: Bilotkach, Volodymyr; Clougherty, Joseph A.; Mueller, Juergen; Zhang, Anming
    Abstract: This paper examines the determinants of airport aeronautical charges by employing a unique panel dataset covering sixty-one European airports over an eighteen-year period. We are able to extend the literature on the role of airports as an essential element in transport infrastructure by offering the first analysis of the impact of different regulatory policies and privatization on airport charges in a panel data setting where fixed effects can be employed to mitigate endogeneity concerns. Our main empirical results indicate that aeronautical charges are lower at airports when single-till regulation is employed, when airports are privatized, and -- tentatively -- when ex-post price regulation is applied. Furthermore, hub airports generally set higher aeronautical charges, and it appears that price-cap regulation and the presence of nearby airports do not affect aeronautical charges.
    Keywords: airport charges; airports; hubs; privatization; regulation; single-till
    JEL: L33 L93 R40 R48
    Date: 2011–10
  13. By: Fabio Pollice (University of Salento); Stefano De Rubertis (University of Salento); Enrico Ciavolino (University of Salento); Antonella Ricciardelli (University of Salento)
    Abstract: The performance of single universities, beyond internal determinants, is influenced by the conditions of their own territorial context, that is by a number of factors related to their local geographical area, meant as a space of territorial interactions, measurable by its previous relational dynamics. This set of factors can, directly or indirectly, affect both the organizational structure and strategic orientations of the single university, as well as the results achieved by it in the field of education and research.Through a multi-dimensional statistical model, the evaluation criteria for university performance will be compared to some territorial variables which, in scientific literature, are considered to be indexes of territorial competitiveness. The statistical model aims at measuring the impact local context has on the competitive performance of universities, explaining the nature and intensity of this relationship. With reference to the objectives of the research, data we will use refer to two different sets of indicators: on the one hand, data used to evaluate university performance, on the other hand, the ones used to measure territorial competitiveness. In more detail, university performance is based on some of the indicators used by the CENSIS in the "University Ranking 2010" referring to the following databases: MIUR-Statistical Office; CINECA; CNVSU; National LLP Agency Italy; CRUI; CORDIS. Territorial data, instead, are extracted from the "Atlas of the Provinces and Regions competitiveness” elaborated by UNIONCAMERE. For both sets of indicators, the analysis will refer to the year 2008.If the indicators of university performance are correlated to territorial conditions, they don’t really measure university productivity/competitiveness, but rather the competitiveness of its territorial context. This can lead to some distortions in the financial resources allocation and, more generally, in national supporting policies to public universities.In their conclusions, authors also tend to reverse the perspective through which the role of government intervention has been traditionally interpreted. If universities are qualifying elements of territorial competitiveness – as it is shown by the fact that they are frequently used within the set of indicators to measure it – the strengthening of university system should be one of the priority objectives of regional development policies. Consequently, national government should invest in university education and research, even where university performance, due to some specific local conditions, is not satisfactory or even below fixed national or international standards.
    Date: 2011–09

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