nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2012‒05‒02
thirteen papers chosen by
Angelo Zago
University of Verona

  1. Cost-containment policies and hospital efficiency: evidence from a panel of Italian hospitals By Vincenzo Atella; Federico Belotti; Giuseppe Ilardi; Silvio Daidone; Giorgia Marini
  2. Salesperson Efficiency Benchmarking Using Sales Response Data: Who is Working Hard and Working Smart? By Bielecki, Andre; Albers, Sönke; Mantrala, Murali
  3. The Two Faces of R&D and Human Capital: Evidence from Western European Regions By Johanna Vogel
  4. Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy By Lucifora, Claudio; Origo, Federica
  5. Do Subsidies Enhance or Erode the Cost Efficiency of Microfinance? Evidence from MFI Worldwide Micro Data By Mieno, Fumiharu; Kai, Hisako
  6. Globalization, structural change, and productivity growth: By McMillan, Margaret; Rodrik, Dani
  7. A metafrontier directional distance function approach to assessing eco-efficiency By Mercedes Beltr‡n-Esteve; JosŽ A. G—mez-Lim—n; AndrŽs J. Picazo-Tadeo; Ernest Reig-Mart’nez
  8. Socially responsible mutual funds: An efficiency comparison among the European countries By Antonella Basso; Stefania Funari
  9. Do corporate boards affect firm performance? New evidence from the financial crisis By Francis, Bill; Hasan , Iftekhar; Wu , Qiang
  10. Consistent Estimation of the “True” Fixed-effects Stochastic Frontier Model By Federico Belotti; Giuseppe Ilardi
  11. Do those who stay work less? On the impact of emigration on the measured TFP in Poland By Katarzyna Budnik
  12. Performance-related pay in the public sector : a review of theory and evidence By Hasnain, Zahid; Manning, Nick; Pierskalla Henryk
  13. The Effects of a Megabank Merger on Firm-Bank Relationships and Borrowing Costs By UCHINO Taisuke; UESUGI Iichiro

  1. By: Vincenzo Atella (Faculty of Economics, University of Rome "Tor Vergata"); Federico Belotti (Faculty of Economics, University of Rome "Tor Vergata"); Giuseppe Ilardi (Bank of Italy, Economic and Financial Statistics Department); Silvio Daidone (University of York); Giorgia Marini (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: The main objective of this article is to evaluate to which extent the set of national and regional cost control policies implemented in recent years in Italy have affected hospital activity. Our contribution is mainly empirical as we focus our attention on the impact that policies like hospital mergers and regional bailout plans had on inefficiency. We use a rich longitudinal sample of Italian hospitals over the period 1999-2007 and perform a Bayesian analysis of the random-effects stochastic frontier model proposed by Greene (2005), allowing for a one-step estimation of both production frontier parameters and inefficiency effects. Results show that hospital inefficiency has changed over time and that part of this change could be ascribed to the mentioned policies.
    Keywords: Hospital efficiency, Stochastic frontiers, Bayesian inference, Policy evaluation
    JEL: C23 I11 L23
    Date: 2012–04–13
    URL: http://d.repec.org/n?u=RePEc:rtv:ceisrp:228&r=eff
  2. By: Bielecki, Andre; Albers, Sönke; Mantrala, Murali
    Abstract: A key to enhancing sales force productivity is finding ways to help existing reps sell more. In this paper, we focus on the process of internal efficiency benchmarking of a firm’s sales representatives aimed at identifying strong and weak performers and providing meaningful and actionable directions for improving productivity of relatively inefficient performers. We propose to do this by utilizing measures of two fundamental attributes of a salesperson’s controllable work activity as inputs in a DEA (data envelopment analysis) – based procedure: how hard and how smart s/he works. The suggested metrics are derived in an empirical application using archival sales response data from a pharmaceutical company sales force. The application shows that, on average, working smart has larger effects on sales than working hard. In comparison to a conventional DEA benchmarking that simply uses raw sales calls as input measures, the proposed model that uses more ‘processing’ of the sales response data to derive working smart and hard input measures shows much larger potential for efficiency improvement and offers more meaningful and actionable guidance for improving sales force productivity. --
    Keywords: Working Smart,Working Hard,Salesperson Benchmarking,Data Envelopment Analysis,Efficiency Analysis
    JEL: M30 M10
    Date: 2012–04–23
    URL: http://d.repec.org/n?u=RePEc:zbw:esprep:57427&r=eff
  3. By: Johanna Vogel
    Abstract: This paper investigates two channels through which research and development (R&D) and human capital may affect regional total factor productivity growth in the manufacturing sector, using panel data on 159 EU-15 regions from 1992 to 2005. Based on the endogenous growth model of Griffith, Redding and Van Reenen (2003), we allow R&D and human capital to influence productivity growth both directly, reflecting own innovation, and indirectly, reflecting imitation of frontier technology. Further, the model allows for conditional convergence to a long-run level of TFP relative to the frontier. We also develop an extension that captures geographically localised technology spillovers. Our preferred system-GMM estimates provide evidence of a positive and significant direct effect of human capital, and a positive and significant indirect effect of R&D on productivity growth. This may be interpreted as lending support to the recent focus of EU regional policy on raising educational attainment and R&D expenditures, although their channels of influence appear to differ. Our results also suggest that TFP convergence has taken place over our sample period and that geographic distance to the technology frontier matters.
    Keywords: Total factor productivity, Convergence, Human capital, Research and development, European regions
    JEL: O30 O47 I25 C23
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:oxf:wpaper:599&r=eff
  4. By: Lucifora, Claudio (Università Cattolica del Sacro Cuore); Origo, Federica (University of Bergamo)
    Abstract: This paper investigates the causal effect of a switch from fixed wages to collective performance-related pay on firm productivity, exploiting an exogenous variation in the institutional environment regulating collective bargaining. We find that the introduction of collective performance related pay significantly increases productivity by around 3-5 per cent, but such effect varies greatly by firm size, industry and union density. We show that the design of the PRP scheme – in terms of number and type of parameters used – is also relevant for firm productivity.
    Keywords: performance related pay, productivity, unions
    JEL: J31 J33 J52 L61
    Date: 2012–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp6483&r=eff
  5. By: Mieno, Fumiharu; Kai, Hisako
    Abstract: A recent issue in the microfinance literature is whether microfinance institutions (MFIs) are financially sustainable without a subsidy as a prerequisite for competition policy or commercialization processes. Although some recent studies have proposed relevant theoretical frameworks, empirical analyses are scarce. Using financial data for MFIs across a panel of 1791 observations for 2003-2006, we estimate a cost function for the MFIs and a measure of inefficiency using the stochastic frontier cost approach, and then examine the effects of subsidies, operating age and other possible factors as determinants of efficiency. We find that subsidies are generally not an impediment to cost efficiency; instead, they are generally utilized to improve cost efficiency. We also find that the effect of a subsidy on efficiency is larger for younger MFIs, suggesting that subsidies for these institutions are effectively utilized for intensifying initial technology investment or hu man resource development. The findings are consistent with the arguments that stress the importance of subsidies for the initial stage of development of MFIs, and partially contradictory to the claims that the subsidies generally erode MFIs’ financial sustainability.
    Keywords: microfinance, financial institutions, frontier cost function approach
    JEL: G21 O16 R51
    Date: 2012–03
    URL: http://d.repec.org/n?u=RePEc:hit:primdp:26&r=eff
  6. By: McMillan, Margaret; Rodrik, Dani
    Abstract: Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, we document these gaps and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. Our results show that since 1990 structural change has been growth-reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries' productivity performance and that of Asia is accounted for by differences in the pattern of structural change—with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. In our empirical work, we identify three factors that help determine whether—and, if so, the extent to which—structural change contributes to overall productivity growth. In countries with a relatively large share of natural resources in exports, structural change has typically been growth-reducing. Even though these enclave sectors usually operate at very high productivity, they cannot absorb the surplus labor from agriculture. By contrast, competitive or undervalued exchange rates and labor market flexibility have contributed to growth-enhancing structural change.
    Keywords: economic growth, exchange rates, Labor, productivity, structural change,
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:fpr:ifprid:1160&r=eff
  7. By: Mercedes Beltr‡n-Esteve (Universidad de Valencia); JosŽ A. G—mez-Lim—n (Universidad de C—rdoba); AndrŽs J. Picazo-Tadeo (Universidad de Valencia); Ernest Reig-Mart’nez (Universidad de Valencia)
    Abstract: This paper uses directional distance functions to extend the non-parametric metafrontier approach to efficiency measurement proposed by OÕDonnell et al. (2008) to the assessment of technological differences in eco-efficiency between groups of producers. Furthermore, eco-efficiency is assessed at the level of specific environmental pressures management. This methodology is applied to a sample of Spanish olive producers that belong to both traditional mountain and traditional plain growing systems. We find great potential for both olive growing systems to reduce environmental pressures. In terms of pressures on natural resources, the most eco-efficient technology corresponds to the traditional plain system, while the traditional mountain system is the most eco-efficient when considering pressures on biodiversity. These results might help policymakers design strategies aimed at improving the performance of olive growing and meeting the demands of society regarding the economic and ecological functions of this farming activity.
    Keywords: Economic-ecological efficiency; metafrontier; directional distance functions; Data Envelopment Analysis; agro environmental policy; Spain
    JEL: C61 Q12 Q57 Q58
    Date: 2012–04
    URL: http://d.repec.org/n?u=RePEc:eec:wpaper:1206&r=eff
  8. By: Antonella Basso (Department of Economics, Università Ca' Foscari Venezia); Stefania Funari (Department of Management, Università Ca' Foscari Venezia)
    Abstract: The first objective of this contribution is to evaluate the performance of SRI equity mutual funds in the main European countries with three different DEA models. Secondly, with a series of statistical tests we compare the performance of SRI and non SRI mutual funds in the various countries, to determine if SRI mutual funds have to sacrifice something in terms of financial performance. Thirdly, we compare the performance obtained by SRI mutual funds among the different European countries.
    Keywords: SRI mutual funds; Performance evaluation; Data envelopment analysis
    JEL: C65 G1 G23
    Date: 2012–04
    URL: http://d.repec.org/n?u=RePEc:vnm:wpdman:16&r=eff
  9. By: Francis, Bill (Lally School of Management and Technology, Rensselaer Polytechnic Institute); Hasan , Iftekhar (Schools of Business, Fordham University, Bank of Finland); Wu , Qiang (Lally School of Management and Technology, Rensselaer Polytechnic Institute)
    Abstract: This study uses the current financial crisis as a quasi-experiment to examine whether and to what extent corporate boards affect the performance of firms. Using cumulative stock returns over the crisis to measure of firm performance, we find that board independence, as traditionally defined, does not significantly affect firm performance. However, when we re-define independent directors as outside directors who are less connected with current CEOs, a measure we call true independence, there is a positive and significant relationship between this measure and firm performance. Second, outside financial experts are important for firm performance. Third, board meeting frequencies, director attendance behaviors, and director age also affect firm performance during the crisis. Overall, our results suggest that firm performance during a crisis is a function of firm-level differences in corporate boards.
    Keywords: financial crisis; boards of directors; firm performance; true independence
    JEL: G01 G30 G34
    Date: 2012–04–12
    URL: http://d.repec.org/n?u=RePEc:hhs:bofrdp:2012_011&r=eff
  10. By: Federico Belotti (Faculty of Economics, University of Rome "Tor Vergata"); Giuseppe Ilardi (Economic and Financial Statistics Department, Bank of Italy.)
    Abstract: The classic stochastic frontier panel data models provide no mechanism to disentangle individual time invariant unobserved heterogeneity from inefficiency. Greene (2005a,b) proposed a fixed-effects model specification that distinguishes these two latent components and allows a time varying inefficiency distribution. However, the maximum likelihood estimator proposed by Greene leads to biased inefficiency estimates due to the incidental parameters problem. In this paper, we propose two alternative estimation procedures that, by relying on a first difference data transformation, achieve consistency for n goes to infinity with fixed T. Evidence from Monte Carlo simulations shows good finite sample performances of both approaches even in presence of small samples.
    Keywords: Stochastic frontiers, Fixed-effects, Panel data, Marginal simulated likelihood, Pairwise differencing
    JEL: C13 C16 C23
    Date: 2012–04–18
    URL: http://d.repec.org/n?u=RePEc:rtv:ceisrp:231&r=eff
  11. By: Katarzyna Budnik (National Bank of Poland)
    Abstract: The measured TFP growth in Poland slowed from around 4% in the second half of the 90s to 2% a decade later. This reduction in the growth rate of the Solow residual is argued to reflect the evolution of worker effort and, indirectly, of the labour market within the period. The unobserved worker effort is identified within a structural efficiency wage model with shirking. The model estimates suggest that a reduction in the generosity of the unemployment benefit system and the stabilization of the job destruction rate before 2000 reinforced worker motivation. In turn, the economic revival and the intensification of emigration around the date of the Polish accession to the European Union undermined it. Consequently, a steep increase in worker effort before 2000 temporarily boosted the measured TFP growth. A levelling off and the eventual correction of effort after 2000 depressed the observed TFP growth rates. Around 15% of the estimated decline in GDP tied to an increase in emigration after 2004 can be attributed to negative changes in worker discipline.
    Keywords: emigration, TFP, labour productivity, efficiency wages, shirking, potential product, gross worker flows, EU enlargement
    JEL: C11 J30 J61 J64 F22
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:nbp:nbpmis:113&r=eff
  12. By: Hasnain, Zahid; Manning, Nick; Pierskalla Henryk
    Abstract: The objective of this paper is to provide a review of the theoretical and, in particular, empirical literature on performance-related pay in the public sector spanning the fields of public administration, psychology, economics, education, and health with the aim of distilling useful lessons for policy-makers in developing countries. This study to our knowledge is the first that aims to disaggregate the available evidence by: (i) the quality of the empirical study; (ii) the different public sector contexts, in particular the different types of public sector jobs; and (iii) geographical context (developing country or OECD settings). The paper's main findings, based on a comprehensive review of 110 studies of public sector and relevant private sector jobs are as follows. First, we find that overall a majority (65 of 110) of studies find a positive effect of performance-related pay, with higher quality empirical studies (68 of the 110) generally more positive in their findings (46 of the 68). These show that explicit performance standards linked to some form of bonus pay can improve, at times dramatically, desired service outcomes. Second, however, these more rigorous studies are overwhelmingly for jobs where the outputs or outcomes are more readily observable, such as teaching, health care, and revenue collection (66 of the 68). There is insufficient evidence, positive or negative, of the effect of performance-related pay in organizational contexts that that are similar to that of the core civil service, characterized by task complexity and the difficulty of measuring outcomes, to reach a generalized conclusion concerning such reforms. Third, while some of these studies have shown that performance-related pay can work even in the most dysfunctional bureaucracies in developing countries, there are too few cases to draw firm conclusions. Fourth, several observational studies identify problems with unintended consequences and gaming of the incentive scheme, although it is unclear whether the gaming results in an overall decline in productivity compared to the counterfactual. Finally, few studies follow up performance-related pay effects over a long period of time, leaving the possibility that the positive findings may be due to Hawthorne Effects, and that gaming behavior may increase over time as employees become more familiar with the scheme and learn to manipulate it.
    Keywords: Labor Policies,Educational Sciences,E-Business,Tertiary Education,Economic Theory&Research
    Date: 2012–04–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6043&r=eff
  13. By: UCHINO Taisuke; UESUGI Iichiro
    Abstract: Using a unique dataset of non-listed firms that identifies the banks with which firms transact, we examine the effects of the largest-ever bank merger in Japan—that between Bank of Tokyo-Mitsubishi (BTM) and UFJ Bank (UFJ) in 2005. We focus on how the merger affected firms through their firm-bank relationships. Specifically, we examine whether there are any differences in how the availability of loans evolved over time for firms that, prior to the merger, either transacted with both of the merged banks, with one of them, or with none. We find the following: (1) Firms that had transacted with both BTM and UFJ saw their borrowing costs increase by 40bp relative to those that had transacted with neither. (2) Firms that transacted with one of the two banks saw their borrowing costs increase by a smaller but still significant margin of 20bp relative to those that had transacted with neither. And (3) we do not find a significant difference in the extent that borrowing costs increased between firms that transacted with the acquiring bank (BTM) and those that transacted with the acquired bank (UFJ). These results suggest that the bank merger increased firms' borrowing costs partly through an exogenous decrease in the number of firm-bank relationships and partly through changes in the organizational structure of the merged bank, including a consolidation of the branch network.
    Date: 2012–04
    URL: http://d.repec.org/n?u=RePEc:eti:dpaper:12022&r=eff

This nep-eff issue is ©2012 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.