New Economics Papers
on Efficiency and Productivity
Issue of 2012‒04‒03
eighteen papers chosen by

  1. Local Government Size and Efficiency in Capital Intensive Services: What Evidence is There of Economies of Scale, Density and Scope? By Germà Bel
  2. Effects of deregulation and vertical unbundling on the performance of China's electricity generation sector By Hang GAO; Jo VAN BIESEBROECK
  4. Productivity and the Welfare of Nations By Susanto Basu; Luigi Pascali; Fabio Schiantarelli; Luis Serven
  5. Gender Gaps in Performance: Evidence from Young Lawyers By Ghazala Azmat; Rosa Ferrer
  6. Effects of Privatization on Exporting Decisions: Firm-level evidence from Chinese state-owned enterprises By TODO Yasuyuki; INUI Tomohiko; YUAN Yuan
  7. (Not so) easy come, (still) easy go? Footloose multinationals revisited By Pierre Blanchard; Emmanuel Dhyne; Catherine Fuss; Claude Mathieu
  8. The Missing Food Problem By Trevor Tombe
  9. Why Are Migrants Paid More? By Alex Bryson; Giambattista Rossi; Rob Simmons
  10. Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises By Sangeeta Pratap; Carlos Urrutia
  11. A user cost approach to capital measurement in aggregate production functions By Knetsch, Thomas A.
  14. Dynamics and Convergence in Chief Executive Officer Pay By Hristos Doucouliagos; Michael Graham; Janto Haman
  15. The relationship between market structure and innovation in industry equilibrium: a case study of the global automobile industry By Aamir Rafique HASHMI; Johannes VAN BIESEBROECK
  16. Nonparametric analysis of multi-output production with joint inputs By Laurens CHERCHYE; Thomas DEMUYNCK; Bram DE ROCK; Kristof DE WITTE
  17. Implicit Netput Functions By Rulon D. Pope; Jeffrey T. LaFrance
  18. Aggregation without the aggravation? Nonparametric analysis of the representative consumer By Laurens CHERCHYE; Ian CRAWFORD; Bram DE ROCK; Frederic VERMEULEN

  1. By: Germà Bel (Universitat de Barcelona & GiM-IREA)
    Date: 2012–03–23
    Abstract: We study whether the 2002 deregulation and vertical unbundling of the Chinese electricity sector has boosted productivity in the generation segment of the industry. Controlling explicitly for sources of price-heterogeneity across firms and for firm-fixed effects, we find deregulation to be associated with a reduction in labor input and material use of 6 and 4 percent, respectively. This effect only appears two years after the reforms, is robust to alternative ways of identifying restructured firms, and to the nonrandom selection of restructured firms using a matching estimator. Input use of new state-owned firms that start operations two years into the reform period does not differ significantly anymore from input use of private sector entrants.
    Date: 2011–11
  3. By: James B. Ang; Jakob B. Madsen
    Abstract: This paper examines the importance of the domestic R&D stock and foreign knowledge spillovers on total factor productivity for six Asian miracle economies over the period from 1955 to 2006. The productivity effects of international knowledge spillovers through the following channels are considered: imports, exports, inward foreign direct investment, patents, geographical proximity and no specific channel. The estimates show that knowledge has been transmitted through all the channels considered but that the import channel and the no-weighting channel have probably been the most important ones for the Asian miracle economies.
    Keywords: Asian miracle; knowledge spillovers; R&D; TFP
    JEL: O10 O30 O40
    Date: 2012–03
  4. By: Susanto Basu (Boston College; NBER); Luigi Pascali (Boston College); Fabio Schiantarelli (Boston College; IZA); Luis Serven (World Bank)
    Abstract: We show that the welfare of a representative consumer can be related to observable aggregate data. To a first order, the change in welfare is summarized by (the present value of) the Solow productivity residual and by the growth rate of the capital stock per capita. We also show that productivity and the capital stock suffice to calculate differences in welfare across countries, with both variables computed as log level deviations from a reference country. These results hold for arbitrary production technology, regardless of the degree of product market competition, and apply to open economies as well if TFP is constructed using absorption rather than GDP as the measure of output. They require that TFP be constructed using prices and quantities as perceived by consumers. Thus, factor shares need to be calculated using after-tax wages and rental rates, and will typically sum to less than one. We apply these results to calculate welfare gaps and growth rates in a sample of developed countries for which high-quality TFP and capital data are available. We find that under realistic scenarios the United Kingdom and Spain had the highest growth rates of welfare over our sample period of 1985-2005, but the United States had the highest level of welfare.
    Keywords: Productivity, Welfare, TFP, Solow Residual
    JEL: D24 D90 E20 O47
    Date: 2012–03–28
  5. By: Ghazala Azmat; Rosa Ferrer
    Abstract: This paper documents and studies the gender gap in performance among associate lawyers in the United States. Unlike most high-skilled professions, the legal profession uses widely-accepted and objective methods to measure and reward lawyers' productivity: the number of hours billed to clients and the amount of new client revenue generated. We find clear evidence of a gender gap in annual performance. Male lawyers bill ten-percent more hours and bring in more than double the new client revenue. We show that the differential impact across genders in the presence of young children and the differences in aspirations to become a law-firm partner account for a large part of the difference in performance. These gaps in performance have important consequences for gender gaps in earnings. While individual and firm characteristics explain up to 50 percent of the gap in earnings, the inclusion of performance measures explains most of the remainder.
    Keywords: performance measures, gender gaps, lawyers
    JEL: M52 J16 K40 J44
    Date: 2012–03
  6. By: TODO Yasuyuki; INUI Tomohiko; YUAN Yuan
    Abstract: This paper examines whether or not privatization of Chinese state-owned enterprises (SOEs) increases the probability of exporting, and, if so, what channels generate such effect. Using firm-level data for the Chinese manufacturing sector for the period 2000-2007, we find that privatization has a positive effect on exporting decisions, productivity, and firm size and a negative effect on firms' long-term debt. We also find that Chinese firms are more likely to engage in export when the productivity level, firm size, or long-term debt is larger. These two sets of results suggest that privatization has positive effects on exporting decisions through improving productivity and firm size and a negative effect through lowering debt. However, quantitative analysis reveals that effects of privatization through these three channels are small. Therefore, we conclude that the positive effect of privatization on exporting decisions comes mostly from other unobservable factors, most probably changes in attitude toward profits and risks associated with privatization.
    Date: 2012–03
  7. By: Pierre Blanchard (University of Paris Est Créteil, ERUDITE); Emmanuel Dhyne (National Bank of Belgium, Research Department; Université de Mons); Catherine Fuss (National Bank of Belgium, Research Department; Université Libre de Bruxelles); Claude Mathieu (University of Paris Est Créteil, ERUDITE)
    Abstract: This paper revisits the "footloose" nature of multinational firms (MNFs) hypothesis. Using firm-level data for Belgium over the period 1997-2008, we rely on a Probit model and take into account the endogeneity of the determinants of firm exit. Our results may be summarised as follows. First, the unconditional exit probability of MNFs is lower than that of domestic firms. Second, controlling for firm and sector characteristics - firm age, Total Factor Productivity, sunk costs, size, competition on the product market, sector-level value added growth, and sector dummies - the difference between the exit probability of MNFs and domestic firms becomes positive. Third, our results show that MNFs have a lower sensitivity to sunk costs and size than do domestic firms, which may be interpreted as lower exit barriers due to greater possibilities of relocating tangible and intangible assets to foreign affiliates.
    Keywords: firm exit, multinationals, Total Factor Productivity, sunk costs, panel data, Probit model
    JEL: D22 F23
    Date: 2012–03
  8. By: Trevor Tombe (Wilfrid Laurier University)
    Abstract: Poor countries have low labour productivity in agriculture relative to other sectors, yet predominantly consume domestically produced food. The existing literature on cross-country agricultural and aggregate productivity differences abstracts from open economy considerations – leaving open the question of why poor countries import so little food. I propose an answer: high trade barriers and low relative input costs (wages) in developing-country agriculture. With a modified Eaton-Kortum trade model, I show these distortions reconcile the cross-country productivity data with observed trade flows. Through various counterfactual exercises, I find these distortions contribute to cross-country productivity differences and future work should ascertain their underlying causes.
    Keywords: Food Problem, Dual Economy Models, Trade, Agriculture, Productivity
    JEL: F1 F41 O11
    Date: 2012
  9. By: Alex Bryson; Giambattista Rossi; Rob Simmons
    Abstract: In efficient global labour markets for very high wage workers one might expect wage differentials between migrant and domestic workers to reflect differences in labour productivity. However, using panel data on worker-firm matches in a single industry over a seven year period we find a substantial wage penalty for domestic workers which persists within firms and is only partially accounted for by individual labour productivity. We show that the differential partly reflects the superstar status of migrant workers. This superstar effect is also apparent in migrant effects on firm performance. But the wage differential also reflects domestic workers' preferences for working in their home region, an amenity for which they are prepared to take a compensating wage differential, or else are forced to accept in the face of employer monopsony power which does not affect migrant workers.
    Keywords: wages, migration, superstars, productivity, compensating wage differentials, sports
    JEL: J24 J31 J61 J71 M52
    Date: 2012–03
  10. By: Sangeeta Pratap (Hunter College and Graduate Center City University of New York); Carlos Urrutia (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working capital constraint to the purchase of intermediate goods. The model is calibrated to Mexico before the 1995 crisis and subject to an unexpected shock to interest rates. The financial friction generates an endogenous fall in TFP and output and can explain more than half of the fall in TFP and 74 percent of the fall in GDP per worker.
    Keywords: Financial crises, total factor productivity, financial frictions
    JEL: E32 F41 G01
    Date: 2011
  11. By: Knetsch, Thomas A.
    Abstract: A method is proposed to measure capital services in production. This means that productive assets are weighted according to their user costs. The user costs of the individual asset classes are estimated based on data from the national accounts and other sources. The results show that, in the observation period between 1991 and 2010, enterprises' capital services expand faster than the offcially published capital stock. For the economy as a whole, this applies only to phases of cyclical expansion. As the capital stock is aggregated using asset prices, the differences can be explained by the dfferent weighting methods in conjunction with the varying speeds at which the individual asset types have accumulated over time. In growth accounting, different estimates of total factor productivity emerge. The methodological difference, however, does not significantly affect the estimates of parametric production function specifications. -- Es wird eine Methode zur Messung des Produktionsfaktors Kapital vorgeschlagen, in der Vermögensarten nach ihrem Nutzungswert im Produktionsprozess gewichtet werden. Dazu werden Nutzungskosten für die einzelnen Anlageklassen mit Hilfe von Daten der Volkswirtschaftlichen Gesamtrechnungen sowie anderer Quellen geschätzt. Im Beobachtungszeitraum von 1991 bis 2010 nahm der aggregierte Kapitaleinsatz der Unternehmen erkennbar stärker zu als der amtlich ausgewiesene Kapitalstock. In der Gesamtwirtschaft gilt dies nur für die zyklischen Expansionsphasen. Da das Statistische Bundesamt mit Bestandswerten gewichtet, sind die voneinander abweichenden Wägungsschemata in Verbindung mit den nach Vermögensarten variierenden Akkumulationsgeschwindigkeiten für die Unterschiede verantwortlich. Im Rahmen angebotsseitiger Zerlegungen des Wirtschaftswachstums ergeben sich daraus Differenzen in den Schätzungen der Totalen Faktorproduktivität. Parametrische Produktionsfunktionsschätzungen werden von diesem Methodenunterschied indessen nicht wesentlich beeinflusst.
    Keywords: Capital stock,aggregation,production function,TFP,Kapitalstock,Aggregation,Produktionsfunktion,TFP
    JEL: E01 O47 C43
    Date: 2012
  12. By: Michela Ponzo; Vincenzo Scoppa (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: Using data from an Italian University we relate student evaluations of teaching quality to physical attractiveness of instructors, controlling for a number of teachers’ and courses’ characteristics. We first show that the beauty of teachers strongly affects teaching evaluations. To investigate whether the impact is due to productivity or discrimination, that is, if the better evaluations obtained by good-looking instructors are determined by their possess of greater abilities or by Becker-type customer discrimination, we propose a simple theoretical framework and build a measure of teachers’ abilities that is used as control in the empirical model explaining teaching evaluations. We show that beauty affects teaching evaluations even controlling for ability, suggesting that customer discrimination is the key factor explaining the role of beauty.
    Keywords: Beauty, Discrimination, Teaching Quality, Subjective Evaluations
    JEL: I20 J24 J7
    Date: 2012–03
  13. By: Debarshi Ghosh Author_Email: (Meghnad Saha Institute of Technology, Kolkata, India); Sukanya Ghosh (Meghnad Saha Institute of Technology, Kolkata, India)
    Keywords: Non-performing assets, Performance indicators, Regulatory compliance, Capital adequacy norms.
    JEL: M0
    Date: 2011–06
  14. By: Hristos Doucouliagos; Michael Graham; Janto Haman
    Abstract: This study investigates dynamics and convergence in CEO pay in Australia’s largest corporations over an 18 year period. Utilizing dynamic panel estimators, we find that CEO pay is driven by dynamic adjustments, firm size, board size, CEO tenure and firm performance. The largest pay-performance effect emerges for long-term incentive pay. We also show that by ignoring dynamics, prior studies may have understated the size of payperformance effects. Analysis of convergence shows a clear pattern of catch up among firms making CEO pay more equitable over time. The analysis points to efficiency in CEO remuneration contracts rather than managerial entrenchment.
    Keywords: CEO Pay; Dynamic Panel Data Analysis; Pay for Performance; Convergence
    JEL: G30 J33 M52
    Date: 2012–03–21
  15. By: Aamir Rafique HASHMI; Johannes VAN BIESEBROECK
    Abstract: We first estimate a dynamic game for the global automobile industry and then compute a Markov Perfect equilibrium to study the equilibrium relationship between market structure and innovation. The key state variable in the model is the efficiency level of each firm and the market structure is characterized by the vector of efficiency levels across all firms. Efficiency is estimated to be stochastically increasing in the dynamic control-innovation-which is proxied by patenting behavior. Equilibrium innovation is a function of all state variables in the industry and the cost of R&D which includes a privately observed cost shock. We find that it exhibits the following patterns: 1) innovation by the industry leader is decreasing in the efficiency of other firms; 2) innovation is decreasing in the efficiency dispersion; 3) innovation is more concentrated that efficiency; 4) innovation is declining in the number of active firms; 5) the innovation gap between the leader and other firms increases with competition.
    Date: 2012–01
  16. By: Laurens CHERCHYE; Thomas DEMUYNCK; Bram DE ROCK; Kristof DE WITTE
    Abstract: We present a novel framework for analyzing cost minimizing production behavior in multi-output settings. Our specific focus is on dealing with joint inputs, i.e. inputs that are simultaneously used for the production of multiple outputs. Here, we distinguish between two possible approaches. The cooperative approach takes a centralized perspective and assumes cost minimization at the aggregate firm level. By contrast, the noncooperative approach adopts a decentralized view and assumes cost minimization at the level of the individual output departments, which implies the possibility of free riding behavior for the joint inputs. Our framework is non-parametric in nature, which means that it allows for analyzing production behavior while avoiding (nonverifiable) prior functional structure for the production technology. We show that it naturally extends the existing nonparametric framework for analyzing single output production. We establish rationalizability conditions for cooperative as well as noncooperative production behavior. In addition, we introduce goodness-of-fit measures for evaluating the degree of violation of these conditions. An empirical application to the English and Welsh drinking water and sewerage sector shows the practical usefulness of our framework. Specifically, we compare the empirical validity of the cooperative and noncooperative models for describing the observed production behavior.
    Date: 2011–12
  17. By: Rulon D. Pope; Jeffrey T. LaFrance
    Abstract: This paper proposes a new way to empirically model netput functions. It argues for the flexibility and rationality of specifying netputs as a function of competitive prices, fixed inputs, and restricted profit. We call these implicit netput functions because they depend on restricted profit. Doing so invites the adoption of recent developments in consumer theory to production theory. New aggregable forms are investigated and applied to U.S. agricultural production illustrating the benefits of this approach.
    Keywords: aggregation, production, implicit netputs
    JEL: D21 D22
    Date: 2012–03
  18. By: Laurens CHERCHYE; Ian CRAWFORD; Bram DE ROCK; Frederic VERMEULEN
    Abstract: In the tradition of Afriat (1967), Diewert (1973) and Varian (1982), we provide a revealed preference characterisation of the representative consumer. Our results are simple and complement those of Gorman (1953, 1961), Samuelson (1956) and others. They can also be applied to data very readily and without the need for auxilliary parametric or statistical assumptions. We investigate the application of our characterisation by means of a balanced microdata panel survey. Our findings provide robust evidence against the existence of a representative consumer for our data.
    Date: 2011–12

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