New Economics Papers
on Efficiency and Productivity
Issue of 2012‒04‒10
nine papers chosen by

  1. Measuring dynamic market selection by persistent scale inefficiencies - applied to EU business services By Kox, Henk L.M.; Leeuwen, George van
  2. Productivity, Structural Change, and Latin American Development By Carlos Gustavo Machicado; Felix Rioja; Antonio Saravia
  3. A comparative analysis of the technical efficiency of rain-fed and smallholder irrigation in Ethiopia By Godswill, M.; Namara, Regassa; Hagos, Fitsum; Awulachew, Seleshi Bekele; Ayana, M.; Awulachew, Bossio, Deborah
  4. Productivity of the English National Health Service 2003-4 to 2009-10 By Chris Bojke; Adriana Castelli; Rosalind Goudie; Andrew Street; Padraic Ward
  5. Spill-over effects of foreign direct investment: an econometric study of Indian firms By Bikash Ranjan Mishra, Dr.
  6. Productivity and the welfare of nations By Basu, Susanto; Pascali, Luigi; Schiantarelli, Fabio; Serven, Luis
  7. Impact of services liberalization on industry productivity, exports and development : six empirical studies in the transition countries By Tarr, David
  8. Quantifying the Impact of Financial Development on Economic Development By Jeremy Greenwood; Juan M. Sanchez; Cheng Wang
  9. Financing Constraints, Firm Dynamics, Export Decisions and Aggregate productivity By Andrea Caggese; Vincente Cunat

  1. By: Kox, Henk L.M.; Leeuwen, George van
    Abstract: The paper proposes a new way of analysing the efficiency of dynamic market selection, based on the persistence of scale economies. The persistence of scale-related inefficiencies is used as an indicator for the effectiveness of market selection. We use a DEA method to construct the productivity frontier by sub-sector and size class, for business services in 13 EU countries. From this we derive scale economies and their development over time. Our results indicate malfunctioning competitive selection. Between 1999 and 2005 we observe a persistence of scale diseconomies, with scale efficiency falling rather than growing over time. In panel regressions we find the distance to the productivity frontier (within and between size classes) to be significantly explained by regulatory policies that hamper entry and exit dynamics and labour adjustment, and by a lack of import penetration and domestic start-ups. The results suggest that policy reform and more market openness may have positive productivity effects. This holds for business services itself, but also wider, because of business services’ large role in intermediary production inputs.
    Keywords: dynamic market selection; scale economies; market contestability; regulation; EU economy; business services
    JEL: D40 D24 L80
    Date: 2012–03
  2. By: Carlos Gustavo Machicado (Institute for Advanced Development Studies); Felix Rioja (Department of Economics, Georgia State University); Antonio Saravia (Deloitte Tax LLP)
    Abstract: We calibrate a simple neoclassical model of structural transformation to a set of Latin American countries and show that slow growth in agricultural productivity can substantially delay the development process and result in signicant dierences in per capita incomes. Some of our results indicate that low agricultural productivity delayed the beginning of the industrialization process in Paraguay and Bolivia by about 100 years compared to the leader of the group, Chile. The development pro- cess can be accelerated, however, by increasing productivity in the non-agricultural sector. In fact, in the long run, it is non-agricultural productivity what determines the speed of convergence. Improvements in non-agricultural productivity between 20% to over 100% would be required for the other Latin American countries in our set to signicantly close the income gap with Chile by the end of the century.
    Keywords: Economic Development, Latin America, Agriculture Productivity, Manufacturing Productivity
    JEL: O47 O57 E13
    Date: 2012–03
  3. By: Godswill, M.; Namara, Regassa; Hagos, Fitsum; Awulachew, Seleshi Bekele; Ayana, M.; Awulachew, Bossio, Deborah
    Keywords: Rainfed farming / Irrigated farming / Efficiency / Irrigation schemes / Small scale systems / Cropping patterns / Crop production / Economic aspects / Statistical analysis / Ethiopia
    Date: 2011
  4. By: Chris Bojke (Centre for Health Economics, University of York, UK); Adriana Castelli (Centre for Health Economics, University of York, UK); Rosalind Goudie (Centre for Health Economics, University of York, UK); Andrew Street (Centre for Health Economics, University of York, UK); Padraic Ward (Centre for Health Economics, University of York, UK)
    Abstract: A new research study reveals that the productivity of the NHS in England has been broadly constant over the last seven years, increasing by an average of 0.1 per cent per year. The most detailed and comprehensive information available was used to compare growth in the total amount of resources (input) used to produce health care provided to NHS patients (output). The research shows that between 2003/4 to 2009/10 the number of staff has increased by 18 per cent, buildings and equipment by 24 per cent and all other inputs, such as clinical supplies and energy costs, by 76 per cent. There has also been a corresponding increase in both the quantity and quality of output. The number of patients treated in hospital increased from 12.1m to 15.6m; outpatient attendances from 50m to 77m; community care contacts from 76m to 92m; and primary care consultations from 262m to 300m. Over the same period, hospital survival rates improved from 99.4 per cent to 99.8 per cent for elective patients and from 95 per cent to 96 per cent for non-electives. Average inpatient waiting times fell from 78 to 57 days, reaching a low of 51 days in 2008/9. Outpatient waiting times fell from 58 days to 24 days. All in all, growth in activity and changes in quality have tracked the growth in inputs, implying that productivity has been flat over the seven year period.
    Date: 2012–03
  5. By: Bikash Ranjan Mishra, Dr.
    Abstract: The channel through which the inflows of foreign direct investment (FDI) contribute to economic progress of the host economy like India can both be direct as well as indirect. Such pecuniary benefits resulting in improved productivity of local firms which cannot be fully appropriated by foreign investors are better known in the literature as spill-over effects. The paper is based on the following research question: what are the firm-level direct impact and indirect effects of FDI in India? This question is analysed with reference to a micro-level investigation which tests particularly for inter- and intra-industrial spill-overs from FDI by applying a Panel framework with Levinsohn-Petrin approach. The study envelops a rich firm-level dataset from 22 sectors of Indian Manufacturing industries and over a time period from 2006 to 2010. After controlling for firm-wise and year-wise effects, the paper finds marginal and insignificant direct impact and mixed spill-over effects of FDI inflow on the productivity of local firms.
    Keywords: FDI; spill-over effects; panel data; Levinsohn-Petrin approach
    JEL: F23 F21 C33
    Date: 2011–11
  6. By: Basu, Susanto; Pascali, Luigi; Schiantarelli, Fabio; Serven, Luis
    Abstract: This paper shows that the welfare of a country's representative consumer can be measured using just two variables: current and future total factor productivity and the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare differences across countries. The result holds regardless of the type of production technology and the degree of market competition. It applies to open economies as well, if total factor productivity is constructed using domestic absorption, instead of gross domestic product, as the measure of output. It also requires that total factor productivity be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates and they will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of developed countries with high-quality total factor productivity and capital data. Under realistic scenarios, the U.K. and Spain had the highest growth ratesof welfare during the sample period 1985-2005, but the U.S. had the highest level of welfare.
    Keywords: Economic Theory&Research,Currencies and Exchange Rates,Environmental Economics&Policies,Debt Markets,Emerging Markets
    Date: 2012–04–01
  7. By: Tarr, David
    Abstract: Services as a share of gross domestic product and in foreign direct investment flows have increased in importance both globally and in the transition countries of Europe and Central Asia. So has the need for both academics and policymakers to understand the impacts of services liberalization in the transition countries. For this reason, the World Bank Institute, under a grant from the Government of Austria, commissioned seven studies under the auspices of the Economic Education Research Consortium (headquartered in Kiev, Ukraine) to investigate the impact of services liberalization on productivity, focusing on services reform in the transition countries of Europe and Central Asia. All of the studies have been produced by authors from the transition countries of Europe or Central Asia. This paper summarizes six of these studies that will appear in a volume in Russian edited by the author of this paper. The studies contribute to the growing empirical literature establishing that liberalization of barriers against service providers can make an important contribution to increase total factor productivity, exports and growth in the economy. They also show that the issue of services liberalization is important for the transition countries in particular. Links to the English language versions of the papers are provided.
    Keywords: Banks&Banking Reform,Economic Theory&Research,ICT Policy and Strategies,Emerging Markets,E-Business
    Date: 2012–04–01
  8. By: Jeremy Greenwood (University of Pennsylvania); Juan M. Sanchez (Federal Reserve Bank of St. Louis); Cheng Wang (Iowa State University)
    Abstract: How important is financial development for economic development? A costly state veriÂ…cation model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the firm-size distributions for 1974 and 2004. It is then used to study the international data using cross-country interest-rate spreads and per-capita GDPs. The analysis suggests a country like Uganda could increase its output by 116 percent if it could adopt the worldÂ’s best practice in the financial sector. Still, this amounts to only 29 percent of the gap between UgandaÂ’s potential and actual output.
    Keywords: costly state veriÂ…cation, economic development, Â…financial intermediation, fiÂ…rm-size distribution, interest-rate spreads, cross-country output differences, cross-country differences in Â…financial sector productivity, cross-country TFP differences
    JEL: E13 O11 O16
    Date: 2012–03
  9. By: Andrea Caggese; Vincente Cunat
    Abstract: We develop a dynamic industry model where financing frictions affect the entry decisions of new firms in the home market, as well as the riskiness of operating firms. These two factors in turn determine a joint endogenous distribution of firms across productivity, volatility and financial wealth. We show that this endogenous distribution is crucial to understand export and productivity dynamics after a trade liberalization. In particular, the calibrated model predicts that financing frictions have an ambiguous effect on the number of firms starting to export. They reduce the ability of firms to finance the fixed costs necessary to start exporting, but they also change the distribution of domestic firms so that most of them find more profitable to access foreign markets. More importantly, the model predicts that financing constraints, even when they have a negligible net effect on the number of exporting firms, reduce the aggregate productivity gains induced by trade liberalization by 30% to 50%, because they distort the selection into export of the most productive firms. In the second part of the paper we verify the main predictions of the model with a rich dataset of Italian manufacturing firms for the period 1995-2003.
    Date: 2011–06

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