New Economics Papers
on Efficiency and Productivity
Issue of 2012‒06‒13
thirteen papers chosen by

  1. Technical and Structural Efficiency in Mexican Manufacturing: A Regional Approach By Juan Carlos Chávez; Felipe J. Fonseca
  2. Dealing with small samples and dimensionality issues in data envelopment analysis By Zervopoulos, Panagiotis
  3. Ageing and Employability. Evidence from Belgian Firm-Level Data By Mariann RIGO; Vincent VANDENBERGHE; Fabio WALTENBERG
  4. US Residential Energy Demand and Energy Efficiency: A Stochastic Demand Frontier Approach By Massimo Filippini; Lester Hunt
  5. Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade By Smeets, Valérie; Warzynski, Frédèric
  6. Municipal Wastewater Treatment in Poland – Efficiency, Costs and Returns to Scale By Krzysztof Berbeka; Mikołaj Czajkowski; Agnieszka Markowska
  7. "Productivity Change and Mine Dynamics: The Coal Industry in Japan during and after World War II" By Tetsuji Okazaki
  8. A note on schooling in development accounting By Francesco Caselli; Antonio Ciccone
  9. Measurement of Intangible Investments by Industry and Its Role in Productivity Improvement Utilizing Comparative Studies between Japan and Korea By Hyunbae CHUN; FUKAO Kyoji; HISA Shoichi; MIYAGAWA Tsutomu
  10. Estimation of losses due to the existence of monopolies in urban bus transport in Poland By Wolański, Michał
  11. Assessing the contribution of donor agencies to aid effectiveness: The impact of World Bank preparation on project outcomes By Kilby, Christopher
  12. "Congestion, Technical Returns, and the Minimum Efficient Scales of Local Public Expenditures: An Empirical Analysis for Japanese Cities" By Masayoshi Hayashi
  13. Intangible Capital and Productivity Growth in Canada By Baldwin, John R.<br/> Gu, Wulong<br/> Macdonald, Ryan

  1. By: Juan Carlos Chávez; Felipe J. Fonseca
    Abstract: This paper applies a stochastic frontier approach to analyze the evolution of technical efficiency in manufacturing as a source of regional growth, taking as a unit of analysis the Mexican states in the period 1988-2008. The main findings of our analysis are threefold. First, technical efficiency was increasing over the analyzed period and acted as a mechanism to reduce the labor productivity gap across states. Second, Mexican regions can increase manufacturing production about one third, on average, using the same amount of inputs which implies ample potential for regional growth. Third, there exists a considerable difference in the level of technological development, measured in terms of structural efficiency, of the north and the central regions with respect to the south that partially explains the labor productivity gap among regions.
    Keywords: Manufacturing, mexican regions, stochastic frontier, structural efficiency, technical efficiency.
    JEL: D24 L60 O18
    Date: 2012–05
  2. By: Zervopoulos, Panagiotis
    Abstract: Data Envelopment Analysis (DEA) is a widely applied nonparametric method for comparative evaluation of firms’ efficiency. A deficiency of DEA is that the efficiency scores assigned to each firm are sensitive to sampling variations, particularly when small samples are used. In addition, an upward bias is present due to dimensionality issues when the sample size is limited compared to the number of inputs and output. As a result, in case of small samples, DEA efficiency scores cannot be considered as reliable measures. The DEA Bootstrap addresses this limitation of the DEA method as it provides the efficiency scores with stochastic properties. However, the DEA Bootstrap is still inappropriate in the presence of small samples. In this context, we introduce a new method that draws on random data generation procedures, unlike Bootstrap which is based on resampling, and Monte Carlo simulations.
    Keywords: Data envelopment analysis; Data generation process; Random data; Bootstrap; Bias correction; Efficiency
    JEL: C14 C15 C1
    Date: 2012–02–05
  3. By: Mariann RIGO (Department of Economics, Central European University, Budapest and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Fabio WALTENBERG (Departamento de Economia and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)
    Abstract: The Belgian population is ageing due to demographic changes; so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firms’ age-mix choices in the short run) using i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional system-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10%-points of their share causes a 1.3-2.8% contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.
    Keywords: Ageing, Old Labour Productivity and Employability, Panel Data Analysis
    JEL: J24 C33 D24
    Date: 2012–06–04
  4. By: Massimo Filippini (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich and Department of Economics, University of Lugano, Switzerland); Lester Hunt (Department of Economics, University of Surrey, UK)
    Abstract: This paper estimates a US frontier residential aggregate energy demand function using panel data for 48 ‘states’ over the period 1995 to 2007 using stochastic frontier analysis (SFA). Utilizing an econometric energy demand model, the (in)efficiency of each state is modelled and it is argued that this represents a measure of the inefficient use of residential energy in each state (i.e. ‘waste energy’). This underlying efficiency for the US is therefore observed for each state as well as the relative efficiency across the states. Moreover, the analysis suggests that energy intensity is not necessarily a good indicator of energy efficiency, whereas by controlling for a range of economic and other factors, the measure of energy efficiency obtained via this approach is. This is a novel approach to model residential energy demand and efficiency and it is arguably particularly relevant given current US energy policy discussions related to energy efficiency.
    Keywords: US residential energy demand, efficiency and frontier analysis, state energy efficiency
    JEL: D2 Q4
    Date: 2012–04
  5. By: Smeets, Valérie (Department of Economics, Aarhus School of Business); Warzynski, Frédèric (Department of Economics, Aarhus School of Business)
    Abstract: In this paper, we analyze the relationship between exports, imports and firm productivity. We use a rich product-firm-level dataset providing both revenue and quantities of all products for a large panel of Danish manufacturing firms over the period 1998-2008 and link it to firms’ international trade transactions by product. We use our detailed product level information to compute a firm level deflator and avoid the criticism of biased estimates due to the use of industry level deflator. We find that both importing and exporting behaviours are strongly associated with productivity, but firms involved in both importing and exporting are the most productive. We also find evidence of a self-selection into importing and exporting but no learning effect. Finally, we try to distinguish between cost effect and product quality effect by analyzing the importance of the origin of imports and the destination of exports. We find that both imports from countries with abundant and cheap labor like China and from countries with similar level of development matter, although the mechanism through which productivity is affected is likely to be different. In addition, exporting to more distant OECD economies is more strongly associated to productivity than exporting to neighboring or other EU countries, especially when controlling for the price specific effect.
    Keywords: No; keywords
    JEL: A10
    Date: 2011–06–01
  6. By: Krzysztof Berbeka (Cracow University of Economics); Mikołaj Czajkowski (University of Warsaw, Faculty of Economic Sciences); Agnieszka Markowska (University of Warsaw, Faculty of Economic Sciences)
    Abstract: The paper reports the costs of municipal wastewater collection and treatment in Poland based on an empirical sample of 1400 operators. Treatment cost functions are investigated econometrically using the Box-Cox regression model, indicating high non-linearity and significant scale effects. Wastewater treatment costs are increasing with technology efficiency (moving from the primary, through the secondary, to the tertiary treatment), and decreasing with higher wastewater treatment plant capacity. Combining treatment and collection costs with treatment efficiency allows estimation of costs and potentials for reducing the nitrogen and phosphorus loadings to rivers by improving the efficiency of wastewater treatments plants, or building new ones, on an aggregated country-wide scale. Therefore, our results provide valuable input into any cost-benefit analyses of nutrient loadings reduction through extending or upgrading municipal wastewater treatment systems.
    Keywords: municipal wastewater treatment costs, scale effects, nutrient loadings reductions, nitrogen, phosphorus
    JEL: Q53 Q28 D61
    Date: 2012
  7. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: In the 1930s and 1940s, the Japanese coal industry experienced huge ups and downs of labor productivity as well as production. In this paper, I explored the micro-aspects of productivity change in the coal industry using mine-level data compiled from official statistics and the original documents of the Coal Control Association. The coal industry in this period was characterized by dynamic changes in market structure. While a number of mines entered and exited the industry, shares of incumbent mines also changed substantially. These mine dynamics had substantial productivity implications. In the early stage of the war, many low productivity mines entered the industry, which reduced average productivity considerably. On the other hand, the government and the Coal Control Association implemented a policy to concentrate productive resources and production on efficient mines during the war, which helped raise average productivity. In a deteriorating environment, coal production in Japan was maintained fairly well during the war. One of the conditions that made it possible was the policy of resource reallocation.
    Date: 2012–05
  8. By: Francesco Caselli; Antonio Ciccone
    Abstract: How much would output increase if underdeveloped economies were to increase their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on the increase in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number of schooling levels with arbitrary patterns of substitution/complementarity. We also quantify the upper bound for all economies with the necessary data, compare our results with the standard development accounting approach, and provide an update on the results using the standard approach for a large sample of countries.
    Keywords: schooling, productivity effects, upper bound
    JEL: I25 O11
    Date: 2011–11
  9. By: Hyunbae CHUN; FUKAO Kyoji; HISA Shoichi; MIYAGAWA Tsutomu
    Abstract: Using the Japan Industrial Productivity (JIP) database and other primary statistics, we estimate intangible investments in Japan at the industry level. Comparing our estimates with Korean ones measured by Professor Chun, intangible investment/gross value added (GVA) ratios in Japan are higher than those in Korea in many industries. However, in some service industries, Korean intangible investments are larger than their Japanese counterparts. Although intangible capital stock in 2008 was 136 trillion yen, the growth rate in intangibles became negative in some industries in Japan in the 2000s due to harsh restructuring. When we examine the impacts of intangible investments on total factor productivity (TFP) growth, we find a significant and positive effect on it in the market economy after the IT revolution. However, in the service sector, we do not find any clear evidence of the effect of intangibles. The estimation results show that the government should improve its management skills to utilize intangible assets effectively through deregulation in the service sector.
    Date: 2012–06
  10. By: Wolański, Michał
    Abstract: The aim of this paper is to present the different approaches to demonopolisation used in Polish and European urban public transport, compare the efficiency of these models which have proven popular in Poland as well as to estimate the total losses incurred due to the high monopolisation of Polish public transport. The methodology of the research is based on econometric modelling (Stochastic Frontier Analysis) and on a survey conducted by the author among Public Transport Authorities. The author proves that the modern London model (competition for the market) is more efficient in Polish conditions than the classic German one (communal monopoly). The very popular in Poland combination of the two above formulas – the co-existence of a Public Transport Authority with a monopolistic publicly owned operator – is surprisingly the least efficient. Total losses due to the existence of monopolies in Polish urban bus transport are estimated for the year 2007 at the level of 10-14% of its total budget (ca. 117-149 m EURO/year). In some cities, the losses can be as high as 20-25% of the total remuneration to the public bus operator. In others, public monopolists can be as efficient as private operators in the competitive model.
    Keywords: public transport; demonopolisation; Stochastic Frontier Analysis
    JEL: K21
    Date: 2011
  11. By: Kilby, Christopher (Department of Economics and Statistics, Villanova School of Business, Villanova University)
    Abstract: This paper assesses the impact of World Bank project preparation on project outcomes. Using a stochastic frontier model, I generate a measure of World Bank project preparation duration based on variation in political economy factors that are otherwise exogenous to project outcomes. Panel analysis of project data finds that projects with longer preparation periods are significantly more likely to have satisfactory outcome ratings. This result is robust across a range of specifications but the effects are conditional on the degree of economic vulnerability. The impact of World Bank preparation is greater in countries experiencing debt problems. The impact of donor preparation identifies a positive contribution of development aid that is not subject to the usual fungibility critique.
    Keywords: Aid Effectiveness; Fungibility; Project Preparation; Stochastic Frontier Analysis; World Bank.
    JEL: F35 F53 F55 O19
    Date: 2012–06
  12. By: Masayoshi Hayashi (Faculty of Economics, University of Tokyo)
    Abstract: On the basis of the standard model of local public production, we delineate the factors that account for the "U-shaped" per capita local public expenditures and relate them to construct an efficiency indicator for local populations. We articulate that population-induced changes in the per capita cost are related to the relative magnitude between the (i) technical elasticity of scale, which characterizes technology for the direct outputs produced by a government, and (ii) congestion elasticity, which characterizes consumption technology for the public services consumed by citizens. Those two elasticities allow us to construct an indicator that quantifies the distance of a local population from its minimum efficient scale (MES) for local public expenditures. We then estimate the urban public production structure in Japan and apply the analysis to the Japanese case. With the estimates obtained, we rank the Japanese cities according to the calculated values of the indicator.
    Date: 2012–05
  13. By: Baldwin, John R.<br/> Gu, Wulong<br/> Macdonald, Ryan
    Abstract: Intangible capital consists of investments that do not take on the solid, physical characteristics of machinery and equipment or buildings. Nevertheless, such investments have some of the properties of other types of investments in that they yield long-lasting benefits as a result of expenditures that are made today. In the National Accounts, these expenditures need to be capitalized rather than expensed as intermediate materials for purposes of estimating gross domestic product (GDP). Recent papers have considered issues surrounding the measurement of intangibles. Baldwin et al. (2005) discussed issues surrounding research and development (R&D). They noted that R&D is only one of the components of innovation expenditures. Baldwin et al. (2009) extended the measurement of intangible investments beyond that of just R&D. At the heart of intangible investments, of course, are software and R&D. However, intangible investments also consist of purchased science services, own-account scientific services, exploration expenses in the resource sector, and advertising expenditures, because these create an intangible asset and yield long-term benefits. This paper extends the authors' previous work in three ways. First, it expands it into several new areas--what are referred to as economic competencies. These involve primarily investments in human capital--via management and training investments as well as management consulting services. This not only provides broader coverage; it also allows cross-country comparisons of Canada to the United States. Second, this paper moves from just measuring investment to also developing capital stock estimates. This requires assumptions about depreciation rates. In both instances, the paper adopts assumptions similar to those used elsewhere in developing estimates for the United States, in order to ensure comparability. Third, the paper incorporates the estimates of intangible capital into th
    Keywords: Economic accounts, Gross domestic product, Productivity accounts
    Date: 2012–06–01

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