New Economics Papers
on Efficiency and Productivity
Issue of 2011‒11‒28
nineteen papers chosen by

  1. Determinants of regional productivity growth in Europe: an empirical analysis By Gert-Jan Linders; Tatyana Bulavskaya; Henri De Groot; Ferdinand Paraguas
  2. Productivity and Credit Constraints Firm-Level Evidence from Propensity Score Matching By Ciaian, Pavel; Falkowski, Jan; Kancs, d'Artis; Pokrivcak, Jan
  3. And Yet they Co-Move! Public Capital and Productivity in OECD: A Panel Cointegration Analysis with Cross-Section Dependence By Anna Bottaso; Carolina Castagnetti; Maurizio Conti
  4. Municipality Size and Efficiency of Local Public Services: Does Size Matter? By P. Bönisch; Peter Haug; A. Illy; L. Schreier
  5. A Monte Carlo simulation comparing DEA, SFA and two simple approaches to combine efficiency estimates By Andor, Mark; Hesse, Frederik
  6. Industry-science connections in agriculture: Do public science collaborations and knowledge flows contribute to firm-level agricultural research productivity? By Toole, Andrew A.; King, John L.
  7. Size-class and returns to cultivation in India: A Cold case reopened By Sarthak Gaurav; Srijit Mishra
  8. Education or just Creativity: what matters most for economic performance? By Emanuela Marrocu; Raffaele Paci
  9. Productivity, Relationship-Specific Inputs and the Sourcing Modes of Multinationals By Defever, Fabrice; Toubal, Farid
  10. Does Skilled Migration Foster Innovative Performance? Evidence from British Local Areas By Luisa Gagliardi
  11. Decomposing the predictive performance of the moving average trading rule of technical analysis: the contribution of linear and non linear dependencies in stock returns By Alexandros E. Milionis; Evangelia Papanagiotou
  12. Low Cost Carriers and Airports Performance: Empirical Evidence from a Panel of UK Airports By Anna Bottasso; Maurizio Conti; Claudio A. Piga
  13. Empirical evidence on the impact of privatization of fixed-line operators on telecommunications performance - Comparing OECD, Latin American, and African countries By Gasmi, Farid; Maingard, Alexis; Noumba Um, Paul; Recuero Virto, Laura
  14. Land Markets in the EU Candidate Countries of Croatia, Former Yugoslav Republic of Macedonia and Turkey By Bojnec, Stefan
  15. Small and as Productive : Female Headed Households and the Inverse Relationship between Land Size and Output in Kenya By Mwangi wa Githinji; Charalampos Konstantinidis; Andrew Barenberg
  16. Human Capital and Spatial Heterogeneity in the Iberian Countries’ Regional Growth and Convergence By Catarina Cardoso; Eric J. Pentecost
  17. Can Governments Do It Better? Merger Mania and Hospital Outcomes in the English NHS By Martin Gaynor; Mauro Laudicella; Carol Propper
  18. Beauty and Productivity:The Case of the Ladies Professional Golf Association By Seung Chan Ahn; Young Hoon Lee
  19. Entry of Wal-Mart Supercenters and Supermarkets' Profit Margins By Rigoberto A. Lopez; Xiaoou Liu

  1. By: Gert-Jan Linders; Tatyana Bulavskaya; Henri De Groot; Ferdinand Paraguas
    Abstract: Discussion on the possibilities for and barriers to income convergence and catch-up growth is at the heart of the debate on European regional economic policy. This study presents an empirical analysis of the determinants of regional productivity growth in Europe, using the most recent Cambridge Econometrics regional database, EU KLEMS growth and productivity accounts and EuroStat R&D data. We apply a reduced-form empirical specification for semi-endogenous productivity growth that allows for differences in steady state income levels and long-run growth rates. Productivity growth in a region depends on its level of human capital, the investments in R&D, and the productivity gap with the technology frontier. Empirical findings show that these factors are interrelated. Apart from a technology gap, absorptive capacity is important to realize catch-up. Both convergence and divergence of productivity across regions are possible. Results show that all considered factors have significant effect on disparity in regional productivity growth, although effects across manufacturing and service sectors are different. The estimated model also features stable dynamic properties in response to an exogenous shock. Keywords: Semi-endogenous Growth, Regional Convergence, International Transfer of Technology, human capital, R&D.
    Date: 2011–09
  2. By: Ciaian, Pavel; Falkowski, Jan; Kancs, d'Artis; Pokrivcak, Jan
    Abstract: Drawing on a unique, farm-level panel dataset with 37,409 observations and employing a matching estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the Central and Eastern European transition countries. We find that farms are asymmetrically credit constrained with respect to inputs. Farm use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per â¬1,000 of additional credit. Our estimates also suggest that farm access to credit increases total factor productivity up to 1.9% per â¬1,000 of additional credit, indicating that an improvement in access to credit results in an adjustment in the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land.
    Keywords: Agricultural and Food Policy, Agricultural Finance, Political Economy,
    Date: 2011–09
  3. By: Anna Bottaso (Department of Economics and Quantitative Methods, University of Genova); Carolina Castagnetti (Department of Economics and Quantitative Methods, University of Pavia); Maurizio Conti (Department of Economics and Quantitative Methods, University of Genova)
    Abstract: In this paper we add to the debate on the public capital - productivity link by exploiting very recent developments in the panel time series literature that take into account cross sectional correlation in non-stationary panels. In particular we evaluate the productive effect of public capital by estimating various production functions for a panel of 21 OECD countries over the period 1975-2002. We find strong evidence of common factors that drive the cointegration relationship among variables; moreover, our results suggest a public capital elasticity of GDP in the range 0.05-0.15, depending on model specification. Results are robust to the evidence of spillovers from public capital investments in other countries and to controlling for other productivity determinants like human capital, the stock of patents and R&D capital.
    Keywords: Public capital; Productivity; Panel Cointegration; Cross-section Dependence.
    JEL: C33 C15 H54 O47
    Date: 2011–11
  4. By: P. Bönisch; Peter Haug; A. Illy; L. Schreier
    Abstract: Similarly to western Germany in the 1960s and 1970s, the eastern part of Germany has experienced a still ongoing process of numerous amalgamations among counties, towns and municipalities since the mid-1990s. The evidence in the economic literature is mixed with regard to the claimed expenditure reductions and efficiency gains from municipal mergers. We therefore analyze the global efficiency of the municipalities in Saxony-Anhalt, for the first time in this context, using a double-bootstrap procedure combining DEA and truncated regression. This allows including environmental variables to control for exogenous determinants of municipal efficiency. Our focus thereby is on institutional and fiscal variables. Moreover, the scale efficiency is estimated to find out whether large units are necessary to benefit from scale economies. In contrast to previous studies, we chose the aggregate budget of municipal associations (“Verwaltungsgemeinschaften”) as the object of our analysis since important competences of the member municipalities are settled on a joint administrative level. Furthermore, we use a data set that has been carefully adjusted for bookkeeping items and transfers within the communal level. On the “eve” of a mayor municipal reform the majority of the municipalities were found to have an approximately scale-efficient size and centralized organizational forms (“Einheitsgemeinden”) showed no efficiency advantage over municipal associations.
    Keywords: efficiency, local government, DEA, bootstrap, demographic change, local institutions
    JEL: H11 H72
    Date: 2011–11
  5. By: Andor, Mark; Hesse, Frederik
    Abstract: In certain circumstances, both researchers and policy makers are faced with the challenge of determining individual efficiency scores for each decision making unit (DMU) under consideration. In this study, we use a Monte Carlo experimentation to analyze the optimal approach to determining individual efficiency scores. Our first research objective is a systematic comparison of the two most popular estimation methods, data envelopment (DEA) and stochastic frontier analysis (SFA). Accordingly we extend the existing comparisons in several ways. We are thus able to identify the factors which influence the performance of the methods and give additional information about the reasons for performance variation. Furthermore, we indicate specific situations in which an estimation technique proves superior. As none of the methods is in all respects superior, in real word applications, such as energy incentive regulation systems, it is regarded as best-practice to combine the estimates obtained from DEA and SFA. Hence in a second step, we compare the approaches to transforming the estimates into efficiency scores, with the elementary estimates of the two methods. Our results demonstrate that combination approaches can actually constitute best-practice for estimating precise efficiency scores. --
    Keywords: efficiency,data envelopment analysis,stochastic frontier analysis,simulation,regulation
    JEL: C1 C5 D2 L5 Q4
    Date: 2011
  6. By: Toole, Andrew A.; King, John L.
    Abstract: Prior research shows long-run productivity growth in agriculture is associated with increases in the stock of public scientific knowledge and private patented inventions. However, private inventions may be a function of the stock of public knowledge. In this paper, we examine the possibility that public knowledge contributes to productivity through its relationship with private sector invention. Our analysis identifies connections between the stock of public knowledge and private firm R&D and examines whether the degree of 'connectedness' to public science is associated with greater firm-level research productivity in agriculture. Bibliographic information identifies the nature and degree to which firms use public agricultural science through citations and collaborations on scientific papers. Fixed effects models show that greater citations and collaborations with university researchers are associated with greater private agricultural research productivity. --
    Keywords: Public science,research productivity,patents,citations,collaboration,R&D,bibliometrics
    JEL: Q16 O31
    Date: 2011
  7. By: Sarthak Gaurav (Indira Gandhi Institute of Development Research); Srijit Mishra (Indira Gandhi Institute of Development Research)
    Abstract: This paper investigates the relationship between returns to cultivation per hectare and size-class of land cultivated in India, using unit level data from the 59th round National Sample Survey, 2003. The analysis is done separately for `kharif' and `rabi' - for total value of cultivation from all crops at the all India level. The empirical evidence rejects the null hypothesis of no relationship and points to the existence of an inverse association. We argue that the efficiency of the small-holders has to be taken with a pinch of salt because their low absolute returns brings into focus the question of their livelihood sustainability which is further aggravated on account of higher unit costs. Being the first exercise in a series of proposed explorations into disaggregated analyses across states, and for specific crops, it opens up the classic debate on farm size and productivity in the 21st century.
    Keywords: agrarian crisis, agriculture, efficiency, livelihood sustainability, NSS, productivity, size-class
    JEL: O13 Q12
    Date: 2011–10
  8. By: Emanuela Marrocu; Raffaele Paci
    Abstract: There is a large consensus among social researchers on the positive role played by human capital on economic performances. The standard way to measure the human capital endowment is to consider the educational attainments by the resident population, usually the share of people with a university degree. Recently, Florida (2002) suggested a different measure of human capital - the “creative class†- based on the actual occupations of individuals in specific jobs like science, engineering, arts, culture, entertainment. However, the empirical analyses carried out so far overlooked a serious measurement problem concerning the clear identification of the education and creativity components of human capital. The main purpose of this paper is to try to disentangle this issue by proposing a disaggregation of human capital into three non-overlapping categories of creative graduates, bohemians and non creative graduates. By using a spatial econometric framework to account for spatial dependence, we assess the concurrent effect of the human capital indicators on total factor productivity for 257 regions of EU27. Our main results indicate that the highly educated creative group is the most relevant one in explaining production efficiency, while the other two categories - non creative graduates and bohemians - exhibit negligible effects. Moreover, a relevant influence is exerted by technological capital and by the level of tolerance providing robust evidence that an innovative, open, inclusive and culturally diverse environment is becoming more and more crucial for productivity enhancements.
    Date: 2011–09
  9. By: Defever, Fabrice; Toubal, Farid
    Abstract: We investigate the roles of productivity and the specificity of inputs for the international sourcing strategy of firms which are part of a multinational network. We present a framework in which firms decide to import from a foreign independent supplier or from their related party abroad according to these two dimensions. We use a detailed survey that provides a detailed geographical breakdown of French firms' imports at the product level as well as the sourcing mode used for each transaction. The dataset also provides information to estimate the firms' productivity and their intensity in relationship-specific inputs. After controlling for countries of origin, products and sectors specific effects, the empirical results provide evidence that for the most productive multinationals the likelihood of trading through an independent supplier is higher especially if they use relationship-specific inputs intensively.
    Keywords: incomplete contracts; intra-group trade; outsourcing; productivity
    JEL: F14 F23 L22 L23
    Date: 2011–11
  10. By: Luisa Gagliardi
    Abstract: What is the effect of an increase in the stock of human capital on the innovative performance of a local economy? This paper tests the hypothesis of a causal link between an increase in the average stock of human capital, due to skilled migration inflows, and the innovative performance of local areas using British data. The paper examines the role of human capital externalities as crucial determinant of local productivity and innovative performance, suggesting that the geographically bound nature of these valuable knowledge externalities can be challenged by the mobility of skilled individuals. Skilled migration becomes a crucial channel of knowledge diffusion broadening the geographical scope of human capital externalities and fostering local innovative performance.
    Keywords: Innovation, migration, education, externalities
    JEL: O15 O31 I2 H22
    Date: 2011–11
  11. By: Alexandros E. Milionis (Bank of Greece and University of Aegean); Evangelia Papanagiotou (University of the Aegean)
    Abstract: On several occasions technical analysis rules have been shown to have predictive power. The main purpose of this work is to decompose the predictive power of the moving average trading rule and isolate the portion that could be attributed to the possible exploitation of linear and non linear dependencies in stock returns. Data for the General Index of the Athens Stock Exchange are filtered using linear filters so that the resulting simulated “returns” exhibit no serial correlation. Applying moving average trading rules to both the original and the simulated indices and using a statistical testing procedure that takes into account the sensitivity of the performance of the trading rule as a function of moving average length, it is found that the predictive power of the trading rule is clearly weakened when applied to the simulated index indicating that a substantial part of the rule’s predictive power is due to the exploitation of linear dependencies in stock returns. It is also found that the contribution of linear dependencies in stock returns to the performance of the trading rule is increased for shorter moving average lengths.
    Keywords: Market Efficiency; Technical Analysis; Moving Average Trading Rules; Athens Stock Exchange.
    JEL: G14 G15 C2
    Date: 2011–07
  12. By: Anna Bottasso (University of Genoa); Maurizio Conti (University of Genoa); Claudio A. Piga (Loughborough University; RCEA)
    Abstract: During the last decade, the proliferation of Low Cost Carriers and the related huge increase in traffic has been the most visible effect of the deregulation of the airline market in Europe. Little attention has been paid to how airports were affected by the changes in the new institutional environment. In this study we model the total factor productivity (TFP) for a panel of the UK largest airports over the 2002-2005 period and investigate whether the presence of LCCs has some impact on airports' TFP. Empirical results are consistent with the hypothesis that conspicuous entry of LCCs on European markets has impacted positively on the vertical chain by facilitating airports' productivity improvements. This result is robust to reverse causality issues associated with the possibility that most efficient airports are those that are more likely to attract LCCs. Different possible arguments may explain our results: traffic increases brought about by LCCs for a given installed capacity might have generated higher TFP; more efficient organizational models might have been adopted to meet LCCs operational requirements (short turnaround times); cost reductions might have been realized in order to lower charges and attract LCCs; competition from a larger number of airports induced by LCCs' wider catchment areas (with respect to full service airlines) might have exerted further pressure toward TFP improvements.
    Keywords: Total Factor Productivity, Airports, LCCs
    Date: 2011–11
  13. By: Gasmi, Farid (Toulouse School of Economics (ARQADE & IDEI), Université Toulouse 1 Capitole); Maingard, Alexis (Télécom ParisTech); Noumba Um, Paul (The World Bank); Recuero Virto, Laura (OECD Development Centre)
    Abstract: The aim of this paper is to highlight empirically some important worldwide differences in the impact of privatization of the fixed-line telecommunications operator on network expansion, tariffs, and efficiency during the 1985-2007 period for a large panel of countries. Our work suggests that the divergent results in the empirical literature on the performance of the privatization reform can be explained to a large extent by cross-regional heterogeneity. We find that the impact of privatization on outcomes is significantly positive in OECD and African resource scarce coastal countries, weakly positive in Latin American and the Caribbean countries, and strongly negative in African resource rich and African resource scarce landlocked countries. The results presented in this paper thus challenge the idea that there is a unique model of reform for infrastructure sectors that is equally applicable across regions and countries.
    Keywords: Privatization, Telecommunications
    JEL: L51 L96 L98 C23
    Date: 2011–02
  14. By: Bojnec, Stefan
    Abstract: The paper provides an overview and a comparison of land markets covering the three candidate countries for European Union membership: Croatia, the Former Yugoslav Republic (FYR) of Macedonia and Turkey. We analyse and compare agricultural land structures and factors driving land markets. The analyses are based on the available cross-section and time-series evidence on agricultural land structures and land productivity (yields). The land productivity measured by production per hectare of agricultural land varies between the three countries. Agricultural land structures are the result of historical evolution in land markets and land-leasing developments with additional different institutional environments and agrarian and land reforms.
    Keywords: Land markets, land structures, land productivity, candidate countries, European Union, Agricultural and Food Policy, Land Economics/Use, Political Economy,
    Date: 2011–09
  15. By: Mwangi wa Githinji (University of Massachusetts Amherst); Charalampos Konstantinidis (University of Massachusetts Amherst); Andrew Barenberg (University of Massachusetts-Amherst)
    Abstract: Access to land and particularly its distribution has reemerged as an important part of both academic and policy discussions in the last decade, leading to the resuscitation of the debate on the relationship between size of holdings and output per land unit. Across the world, studies have suggested the existence of a decreasing relationship between land size and output per unit of land. The most-widely accepted explanation for this relationship is that households with smaller holdings tend to be labor rich relative to land, and therefore can achieve higher output through the increased application of labor. Despite the rich literature on this topic there has been little work on whether this relationship is valid for female-headed households, particularly in the case of African countries. Past African studies have found female-headed households to be smaller by close to one adult in comparison to male-headed households. Given this difference one would expect there to be a difference in the outcome of land redistribution for different types of households, ceteris paribus. Additionally, the aggregate impact in African countries could be substantial, as female-headed households comprise in several cases up to 30 percent of the rural households. In this paper we will examine empirically whether the inverse size and output relationship is different between female and male headed households in the case of Kenya, using the Kenya Integrated Household Budget and Expenditure Survey of 2006, which includes modules on agricultural holdings and agricultural output in addition to the standard demographic characteristics. By controlling for the endogeneity of crop choice and fertilizer use we are able to find that cash crop production and human capital, and not differences in household size, determines the differences in male and female headed land productivity. Hence, our study goes beyond the simple discussion of the inverse relationship between land size and output per unit and the potential impact of redistribution. Specifically we will be able to address the kind of broad rural development policies in addition to land redistribution that would allow female headed households to do at least as well as (if not better than) male headed households. JEL Categories: J16, O13, Q15
    Keywords: Agriculture, Gender, Kenya, Africa, Crop Choice, Land Productivity
    Date: 2011–11
  16. By: Catarina Cardoso (School of Business and Economics, Loughborough University, UK); Eric J. Pentecost (School of Business and Economics, Loughborough University, UK)
    Abstract: Human capital is believed to be an important conditioning factor in explaining the convergence and the speed of convergence of regional economies, although it is usually excluded from the estimated models due to a lack of consistent data. In contrast this paper, using a newly constructed series on human capital at the NUTS III level for Portugal, evaluates the role of human capital on the speed of convergence using a spatial econometric methodology, for a sample of Iberian NUTS III regions over the period 1991-2006. This is the first study to consider human capital effects at the NUTS III level and the results show convergence, both absolute and conditional, occurs mainly in the peripheral group of regions, while human capital plays a positive role only in the club of the richest regions, in contrast with an insignificant effect in the periphery. There is also evidence of important regional spillovers between the regions and evidence of the importance of EU regional policy in enhancing the convergence of the NUTS III regions.
    Keywords: Regional growth, beta-convergence, Human Capital, Spatial Effects
    JEL: C23 I21 O18 R11
    Date: 2011–11
  17. By: Martin Gaynor; Mauro Laudicella; Carol Propper
    Abstract: The literature on mergers between private hospitals suggests that such mergers often produce little benefit. Despite this, the UK government has pursued an active policy of hospital merger. These mergers are initiated by a regulator, acting on behalf of the public, and justified on the grounds that merger will improve outcomes. We examine whether this promise is met. We exploit the fact that between 1997 and 2006 in England around half the short term general hospitals were involved in a merger, but that politics means that selection for a merger may be random with respect to future performance. We examine the impact of mergers on a large set of outcomes including financial performance, productivity, waiting times and clinical quality and find little evidence that mergers achieved gains other than a reduction in activity. In addition, mergers reduce the scope for competition between hospitals.
    JEL: I11 I18 L13 L32
    Date: 2011–11
  18. By: Seung Chan Ahn (Department of Economics, Arizona State University, Tempe, AZ 85287-9801, U.S.A & Department of Economics, Sogang University, Seoul); Young Hoon Lee (Department of Economics, Sogang University, Seoul)
    Abstract: There is much evidence that attractive looking workers earn more than average-looking workers, even after controlling for a variety of individual characteristics. The presence of such beauty premiums may influence the labor supply decisions of attractive workers. For example, if one unit of a product by an attractive worker is more rewarded than that by her less attractive coworker, the attractive worker may put more effort into improving her productivity. We examine this possibility by analyzing panel data for individual female golfers participating in the Ladies Professional Golf Association (LPGA) tour. We find that attractive golfers record lower average scores and earn more prize money than average-looking players, even when controlling for player experience and other variables related to their natural talents. This finding is consistent with the notion that physical appearance is associated with individual workers' accumulation of human capital or skills. If the human capital of attractive workers is at least partly an outcome of favoritism toward beauty, then the premium estimates obtained by many previous studies may have been downwardly biased.
    JEL: J3 J7 L8
    Date: 2011
  19. By: Rigoberto A. Lopez (Department of Agriculture and Resource Economics, University of Connecticut); Xiaoou Liu
    Abstract: This article quantifies the impact of Wal-Mart Supercenters on supermarkets’ profitability via a two-stage dynamic entry game, using method of simulated moments and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings show that the entry of Wal-Mart Supercenters accounts for about an average 50% decrease in milk profit margins for incumbent supermarkets. Effects of scale are found to be more significant for Wal-Mart Supercenters than for incumbent supermarkets, granting Wal-Mart a competitive edge.
    Keywords: Wal-Mart, entry, profit margins, milk, dynamic games
    Date: 2011–06

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