New Economics Papers
on Efficiency and Productivity
Issue of 2011‒11‒07
twenty-one papers chosen by

  1. Financial Reforms and Banking Efficiency: Case of Pakistan By Ahmad, Usman
  2. Local Government Efficiency in Western Australia By Fogarty, James J.; Mugera, Amin W.
  3. Cost and profit efficiency of french commercial banks By Béjaoui Rouissi, Raoudha
  4. Agricultural efficiency of rice farmers in Myanmar : a case study in selected areas By Nay Myo Aung
  5. Service deregulation, competition and the performance of French and Italian firms By Daveri, F.; Lecat, R.; Parisi , M L.
  6. Does accounting for inefficiency affect the time-varying short and long-run returns to scale? By Shaik, Saleem
  7. Technical efficiency in the Chilean agribusiness sector By Rivera Aedo, Edinson; Lakner, Sebastian; Brümmer, Bernhard
  8. Agglomeration or Selection? The Case of the Japanese Silk-Reeling Clusters, 1908-1915 By Arimoto, Yutaka; Nakajima, Kentaro; Okazaki, Tetsuji
  9. The Size Distribution of Farms and International Productivity Differences By Tasso Adamopoulos; Diego Restuccia
  10. Innovation, Metropolitan and Productivity By Lööf , Hans; Johansson, Börje
  11. Foreign Direct Investment, Black Economic Empowerment and Labour Productivity in South Africa By Mebratie, Anagaw Derseh; Bedi, Arjun S.
  12. The Costs of Financial Crises: Resource Misallocation, Productivity and Welfare in the 2001 Argentine Crisis By Guido Sandleris; Mark L.J. Wright
  13. Efficiency Analysis of Micro-finance Institutions in Pakistan By Ahmad, Usman
  14. Unconditional Convergence By Rodrik, Dani
  17. How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis By Tomáš Havránek; Zuzana Iršová
  18. A microfoundation for normalized CES production functions with factor-augmenting technical change By Jakub Growiec
  19. Beyond ConventionalWisdom and Anecdotal Evidence: Measuring Efficiency of Brazilian Courts By Luciana Luk-Tai Yeung; Paulo Furquim de Azevedo
  20. The world energy production, consumption and productivity in the energy sector, population and the per capita growth: Regression analysis By Josheski, Dushko; Lazarov , Darko; Koteski, Cane; Sovreski V. , Zlatko
  21. Economic development and growth in Colombia: An empirical analysis with super-efficiency DEA and panel data models By Alexander Cotte Poveda

  1. By: Ahmad, Usman
    Abstract: This paper attempts to analyze the performance of the banking sector of Pakistan in the light of second generation reforms on the domestic scheduled banks by using data from 1990 to 2008. For this purpose I used Non Parametric Data Envelopment Analysis (DEA). The analysis revealed an overall improvement in the efficiency of commercial banks. It implies that financial sector reforms, particularly the second phase of reforms, improved the efficiency of the commercial bank in Pakistan. After the reforms, pure technical efficiency increased as compared to scale efficiency and it was found that the overall efficiency of the industry has increased due to pure technical efficiency. The study concludes that the reforms were successful in improving the efficiency of the domestic commercial banks in Pakistan.
    Keywords: Efficiency; Banks; DEA; Pakistan
    JEL: E58 G21
    Date: 2011–03–06
  2. By: Fogarty, James J.; Mugera, Amin W.
    Abstract: The State government of Western Australia is currently working through a significant program of local government reform that has as a core objective a reduction in the number of local councils. The perception that there are economies of scale in service delivery is a key reason behind the State governmentâs desire to see a reduction in the number of councils in Western Australia. The following article uses the technique of Data Envelopment Analysis to measure the technical and scale efficiency of councils in Western Australia. The average pure technical efficiency score for Western Australian councils was found to be 83 per cent, and the average scale efficiency score was found to be 94 per cent. This suggests that pure scale effects are not a major source of inefficiency. Detailed returns to scale analysis for the 73 councils where complete data was available revealed that 17 councils were operating at the optimal scale, 26 were operating below the optimal scale, and 30 were operating above the optimal scale.
    Keywords: Data Envelope Analysis, Local Government, Efficiency, Productivity Analysis,
    Date: 2011–10–26
  3. By: Béjaoui Rouissi, Raoudha
    Abstract: The purpose is to investigate the efficiency levels of commercial domestic versus foreign banks in France by comparing the use of basic accounting ratios and the stochastic cost and profit frontier analysis (SFA). We analyze the profit and cost efficiency of domestic and foreign banks operating in France using unbalanced sample, including 62 domestic and 40 foreign banks over the period 2000-2007. We show that foreign banks exhibit higher cost and profit efficiency than domestic banks. This finding goes against previous empirical literature, concluding on advantage of cost efficiency for domestic banks in developed countries such as France (Berger et al. (2000)). However, the comparison between the cost efficiency and the profit efficiency scores, suggests that foreign banks are better managed in terms of profit efficiency mainly due to higher cost efficiency. On the other side, profit efficiency of domestic banks, was due to higher revenue efficiency. This suggests that French domestic banks operate with excessive margins.
    Keywords: efficiency; domestic banks; foreign banks
    JEL: C23 D24 G21
    Date: 2011–10–27
  4. By: Nay Myo Aung
    Abstract: This paper try to analyze unique data set for rice producing agricultural households in some selected areas of Bago and Yangon divisions to examine the households' profit efficiency and the relationship between farm and household attributes and profit inefficiency using a Cobb-Douglas production frontier function. The frequency distribution reveals that the mean technical inefficiency is 0.1627 with a minimum of 3 percent and maximum of 73 percent which indicates that, on average, about 16% of potential maximum output is lost owing to technical inefficiency in both studied areas. While 85% of the sample farms exhibit profit inefficiency of 20% or less, about 40% of the sample farms is found to exhibit technical inefficiency of 20% or less, indicating that among the sample farms technical inefficiency is much lower than profit inefficiency.
    Keywords: Myanmar, Rice, Farmers, Agricultural economies, Household, Efficiency, Production frontier function
    JEL: Q12
    Date: 2011–09
  5. By: Daveri, F.; Lecat, R.; Parisi , M L.
    Abstract: We use firm-level data for France and Italy to explore the impact of service regulation reform implemented in the two countries on the mark-up and eventually on the performance of firms between the second half of the 1990s and 2007. In line with some previous studies, we find that the relation between entry barriers and productivity is negative. This relation is intermediated through the firm’s mark up and is stronger in the long than in the short run.
    Keywords: regulation, services, performance, TFP.
    JEL: D24 K20 L51 O40 O57
    Date: 2011
  6. By: Shaik, Saleem
    Abstract: The returns to scale for nineteen South Asian countries are estimated using window and cumulative rolling stochastic frontier regression analysis. The stochastic frontier analysis accounts for technical inefficiency of Hicks non-neutral technology production function in the estimation of the returns to scale. The window rolling regression and cumulative rolling regression allows the estimation of short and long run time-varying returns to scale, respectively. Empirical application to Asian agriculture sector using Food and Agricultural Organization data from 1961-2008 indicates returns to scale are under (over) estimated by the traditional panel models in the short (long) run time-varying estimation. The time-varying estimates of returns to scale indicate decreasing trend in the short run compared to long run analysis. --
    Keywords: Asian agriculture sector,stochastic frontier analysis,window and cumulative time-varying input elasticities and returns to scale,one-way fixed effect,1961-2008
    Date: 2011
  7. By: Rivera Aedo, Edinson; Lakner, Sebastian; Brümmer, Bernhard
    Abstract: The reform-process towards a higher world-market orientation has a long tradition in Chile, with all its strengths and weaknesses. The food processing industry is highly competitive on the worldmarket. The following paper investigates the technical efficiency of the Chilean food processing industry between 2001 and 2007. We used a data-set from the 5,941 of firms in food processing industry. The observations are taken of the 'Annual National Industrial Survey'. The method of stochastic frontier analysis is applied; the heteroscedasticity-model is used in order to analyze the determinants of technical efficiency. We included variables capturing different effects before and after the introduction of a liberalization policy in 2004. Raw materials and labor have to largest impact on the output. We could show that technical efficiency is different in the periods before and after 2004. The region with the highest level of efficiency is the metropolitan region around Santiago de Chile. --
    Keywords: Technical Efficiency,Food Processing Industry,Chile
    Date: 2011
  8. By: Arimoto, Yutaka; Nakajima, Kentaro; Okazaki, Tetsuji
    Abstract: We examine two sources of productivity improvement in the specialized industrial clusters of the early twentieth century Japanese silk-reeling industry. Agglomeration improves the productivity of each plant through positive externalities, shifting plant-level productivity distribution to the right. Selection expels less productive plants through competition, truncating distribution on the left. We find no evidence confirming a right shift in the distribution in clusters or that agglomeration promotes faster productivity growth. Rather, the distribution in clusters was severely left truncated, even for younger plants. These findings imply that the plant-selection effect was the source of higher productivity in the Japanese silk-reeling clusters.
    Keywords: Economic geography, Heterogenous firms, Industrial clusters, Productivity
    JEL: R12 O18 L10
    Date: 2011–02
  9. By: Tasso Adamopoulos; Diego Restuccia
    Abstract: There is a 34-fold difference in average farm size (land per farm) between rich and poor countries and striking differences in their size distributions. Since labor productivity is much higher in large relative to small farms, we study the determinants of farm-size differences across countries and their impact on agricultural and aggregate productivity. We develop a quantitative model of agriculture and non-agriculture that features a non-degenerate size distribution of farms. We find that measured aggregate factors such as capital, land, and economy-wide productivity cannot account for more than 1/4 of the observed differences in farm size and productivity. We argue that, among the possible explanations, farm-level policies that misallocate resources from large to small farms have the most potential to account for the remaining differences. Such farm-size distortions are prevalent in poor countries. We quantify the effects of two specific policies in developing countries: (a) a land reform that imposes a ceiling on farm size and (b) a progressive land tax. We find that each individual policy generates a reduction of 3 to 7% in average size and productivity.
    Keywords: aggregate productivity, agriculture, farm-size distortions, misallocation
    JEL: O11 O13 O4 E0
    Date: 2011–10–27
  10. By: Lööf , Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper assesses the contribution to productivity of firms’ internal innovation efforts and spatially-specific factors. A dynamic GMM-estimator is applied to a panel of close to 3,000 firms located in 81 Swedish regions and observed over a 10-year period. The magnitude of benefits from the knowledge milieu of an agglomeration is sizeable, but varies between firms depending on their particular R&D-strategy and location within a metropolitan region.
    Keywords: R&D; innovation-strategy; productivity; metropolitan; externalities
    JEL: C23 O31 O32
    Date: 2011–10–27
  11. By: Mebratie, Anagaw Derseh (ISS, Erasmus University Rotterdam); Bedi, Arjun S. (ISS, Erasmus University Rotterdam)
    Abstract: The impact of foreign direct investment (FDI) on domestically owned firms in developing countries has been widely debated in the literature. It has been argued that FDI provides access to advanced technologies and other intangible assets which may spill over to the host country and allow domestic firms to improve their performance. While there is a substantial literature on this issue, for obvious reasons, little is known about the effect of FDI on domestic firms in the African context. Noting this gap, this paper uses two-period (2003 and 2007) firm level panel data from South Africa to examine the impact of foreign direct investment on the labour productivity of domestic firms. A key policy change during this time period was the passage of the broad-based black economic empowerment act (BB-BEE) and we also examine the effect of the interaction between foreign firm ownership and BEE on labour productivity. Regardless of the empirical specification we find no spill over effects and no evidence that a greater degree of BEE compliance by foreign firms influences labour productivity.
    Keywords: FDI, spillover, labour productivity, black economic empowerment, firm, South Africa
    JEL: J24
    Date: 2011–10
  12. By: Guido Sandleris; Mark L.J. Wright
    Abstract: Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective -- factor usage does not decline as much as output, resulting in large falls in measured productivity -- and from a theoretical perspective. Towards a resolution of this puzzle, we present a framework that allows us to (i) account for changes in a country's measured productivity during a financial crises as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors driven both by reallocation amongst existing plants and by entry and exit; and (ii) measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level data-set and find that more than half of the roughly 10% decline in measured total factor productivity can be accounted for by deterioration in the allocation of resources both across and within sectors. We measure the decline in welfare to be on the order of one-quarter of one years GDP.
    JEL: E01 F32 F34
    Date: 2011–10
  13. By: Ahmad, Usman
    Abstract: Microfinance collectively refers to the supply of loans, savings accounts, and other basic financial services like insurance, to the poor. About one billion people globally live in households with per capita incomes of one dollar per day (Morduch J. 1999). Microfinance Institutions (MFIs) are special financial institutions. They have both a social nature and a for-profit nature. Their performance has been traditionally measured by means of financial ratios. The objective of the study has been to estimate the efficiency of microfinance institutions in Pakistan. Non parametric Data Envelopment analysis has been used to analyze the efficiency of these institutions by using data for the year 2003 and 2007 respectively. Both input oriented and output oriented methods have been considered under the assumption of constant return to scale technologies and microfinance should provide services on sustainable basis. A microfinance institution is said to be financially sustainable if it without the use of subsidies, grants, or other concessional resources, it can profitably provide finance to micro enterprises on an acceptable scale.
    Keywords: DEA; Efficiency; Microfinance; Pakistan
    JEL: D53 E58
    Date: 2011–10–20
  14. By: Rodrik, Dani
    Abstract: Unlike economies as a whole, manufacturing industries exhibit unconditional convergence in labor productivity. The paper documents this finding for 4-digit manufacturing sectors for a large group of developed and developing countries over the period since 1990. The coefficient of unconditional convergence is estimated quite precisely and is large, at 3.0-5.6 percent per year depending on the estimation horizon. The result is robust to a large number of specification tests, and statistically highly significant. Because of data coverage, these findings should be as viewed as applying to the organized, formal parts of manufacturing.
    Keywords: convergence; growth
    JEL: O4
    Date: 2011–11
  15. By: Shreekant Gupta (Department of Economics, Delhi School of Economics, Delhi, India); Surender Kumar (Department of Business Economics, University of Delhi); Gopal K. Sarangi (TERI University, New Delhi)
    Abstract: We assess the efficiency of urban water supply in 27 Indian cities using data envelopment analysis (DEA). We also group cities by the management structure of their water utilities. Utilities with greater degree of functional autonomy perform better, supporting the hypothesis that more autonomy in management leads to better performance among water utilities. Our results also have implications for urban domestic water pricing--most of the utilities operate under decreasing returns to scale (DRS) implying water should be priced at marginal cost of supply.
    JEL: L95 L38 C14 H70
    Date: 2011–10
    Date: 2011
  17. By: Tomáš Havránek (Czech National Bank; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Zuzana Iršová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The voluminous empirical research on horizontal productivity spillovers from foreign investors to domestic firms has yielded mixed results. In this paper, we collect 1,205 estimates of horizontal spillovers from the literature and examine which factors influence spillover magnitude. To identify the most important determinants of spillovers among 43 collected variables, we employ Bayesian model averaging. Our results suggest that horizontal spillovers are on average zero, but that their sign and magnitude depend systematically on the characteristics of the domestic economy and foreign investors. The most important determinants are the technology gap between domestic and foreign firms and the ownership structure in investment projects. Foreign investors who form joint ventures with domestic firms and who come from countries with a modest technology edge create the largest benefits for the domestic economy.
    Keywords: Bayesian model averaging; Foreign direct investment; Productivity spillovers; Determinants; Meta-analysis
    JEL: F23 O12
    Date: 2011–10
  18. By: Jakub Growiec (National Bank of Poland, Economic Institute)
    Abstract: We derive the aggregate normalized CES production function from idea-based microfoundations where firms are allowed to choose their capital- and labor-augmenting technology optimally from a menu of available technologies. This menu is in turn augmented through factor-specific R&D. The considered model yields a number of interesting results. First, normalization of the production function can be maintained simultaneously at the local and at the aggregate level, greatly facilitating interpretation of the aggregate production function’s parameters in terms of the underlying idea distributions. Second, in line with earlier findings, if capital- and labor-augmenting ideas are independently Weibull-distributed then the aggregate production function is CES; if they are independently Pareto-distributed, then it is Cobb–Douglas. Third, by disentangling technology choice by firms from R&D output, one can draw a clearcut distinction between the direction of R&D and the direction of technical change actually observed in the economy, which are distinct concepts. Fourth, it is argued that the Weibull distribution should be a good approximation of the true unit factor productivity distribution (and thus the CES should be a good approximation of the true aggregate production function) if a “technology” is in fact an assembly of a large number of complementary components. This argument is illustrated with a novel, tractable model of directed (factor-specific) R&D. Finally, it is shown that all our results carry forward to the general case of n-input production functions.
    Keywords: CES production function, normalization, Weibull distribution, direction of technical change, directed R&D, optimal technology choice
    JEL: E23 E25 O47
    Date: 2011
  19. By: Luciana Luk-Tai Yeung; Paulo Furquim de Azevedo
    Date: 2011
  20. By: Josheski, Dushko; Lazarov , Darko; Koteski, Cane; Sovreski V. , Zlatko
    Abstract: In this paper was investigated the relationship between GDP per capita growth and Log of energy production, energy consumption per capita, the log of productivity in energy sector and population. Data covered sample for 220 countries and world regions, years covered from 1980 to 2002.The results showed that if energy consumption increases by 1% GDP per capita growth will decline by 0,57%, if energy production will rise by 1% growth will rise by 1,51%, if population rise by 1% growth will decline by 0,098%, although this coefficient is statistically here below significance. If productivity in energy sector rise by 1% growth will rise by 1,32%.
    Keywords: Energy; economic growth; population; sustainable growth
    JEL: Q43
    Date: 2011–10–27
  21. By: Alexander Cotte Poveda
    Abstract: In this paper, we analyse economic development and growth through traditional measures (gross domestic product and human development index) and Data Envelopment Analysis (DEA) in Colombian departments over the period 1993–2007. We use a DEA model to measure and rank economic development and growth from different approaches such as poverty, equality and security. The results show considerable variation in efficiency scores across departments. A second-stage panel data analysis with fixed effects reveals that higher levels of economic activity, quality life, employment and security are associated with a higher efficiency score based on the standards of living, poverty, equality and security. All findings of this analysis should demonstrate that economic development and growth could be achieved most effectively through a decrease in poverty, an increase in equality, a reduction in violence, and improved security. This indicates the need to generate effective policies that guarantee the achievement of these elements in the interest of all members of society.
    Date: 2011–10–27

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