New Economics Papers
on Efficiency and Productivity
Issue of 2012‒07‒01
seventeen papers chosen by

  1. Export Activity and Productivity: New Evidence from the Egyptian Manufacturing Industry By Youssouf KIENDREBEOGO
  2. Total Factor Productivity Growth in Local Economic Partnership Regions in Britain, 1997-2008 By Richard Harris; John Moffat
  3. Knowledge assets and regional performance By Raffaele Paci; Emanuela Marrocu
  4. Monitoring bank performance in the presence of risk By Mircea Epure; Esteban Lafuente
  5. Productivity and the welfare of nations By Susanto Basu; Luigi Pascali; Fabio Schiantarelli; Luis Serven
  6. Overdraft facility policy and firm performance : an empirical analysis in eastern European Union industrial firms By Castillo, Leopoldo Laborda; Guasch, Jose Luis
  7. Is Technical Progress Sectorally Concentrated?: An Empirical Analysis for Western European Countries By Alexander Schiersch; Heike Belitz; Martin Gornig
  8. Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit By Marc J. Melitz; Sašo Polanec
  9. Materials Prices and Productivity By Enghin Atalay
  10. Trade, Technology Diffusion and Misallocation: Trade Partner Matters (Replaces CentER DP 2011-125) By Curuk, M.
  11. Compositional effects on productivity, labour cost and export adjustments By Zsolt Darvas
  12. High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias By Andrews, Martyn J.; Gill, Leonard; Schank, Thorsten; Upward, Richard
  13. Scaling Laws in Labor Productivity By FUJIWARA Yoshi; AOYAMA Hideaki; Mauro GALLEGATI
  14. Determinants of Equity-based and Co-operative Foreign R&D and Impact on the Parent Firm’s Performance By Martin Berger; Heinz Hollenstein
  15. The effect of intra- and inter-regional labour mobility on plant performance in Denmark: the significance of related labour inflows By Bram Timmermans; Ron Boschma
  16. Female parlamentarians and economic growth: Evidence from a large panel By Dinuk Jayasuriya; Paul J. Burke
  17. Using performance incentives to improve health outcomes By Gertler, Paul; Vermeersch, Christel

  1. By: Youssouf KIENDREBEOGO
    Abstract: This study addresses on the relationship between export participation and firm-level productivity. Using comprehensive data for Egypt, we find that total factor productivity and labor productivity are significantly higher in exporters than in non-exporters. When we differentiate between pre-entry and post-entry differences in productivity performance and after controlling for potential endogeneity problem, we find that this exporter premia is driven by the learning-by-exporting hypothesis. We find no evidence that more productive firms self-select into export markets. Exporting makes firms more productive but more productive firms do not necessarily self-select into exporting.
    Keywords: Productivity Performance, Exports
    JEL: L60 F10 D21
    Date: 2012
  2. By: Richard Harris; John Moffat
    Abstract: This paper decomposes aggregate TFP growth in Britain for 1997-2008 to show the contribution of different LEPs and the role played by manufacturing and services and UK- and foreign-owned plants within these LEPs. These contributions are further decomposed to show the role of productivity growth in continuing plants vis-à-vis reallocations in output shares. The results show that the largest LEPs, in population terms, with higher levels of job density, greater reliance on manufacturing and skilled worker occupations, higher proportions of workers with NVQ4+ qualifications, and lower turnover of businesses, achieved the highest TFP growth. This strong performance is mostly the result of reallocations of output shares towards high productivity continuing plants and the opening of high productivity plants.
    Keywords: Productivity decomposition, regional productivity growth
    JEL: C23 D24 R12
    Date: 2012–06
  3. By: Raffaele Paci; Emanuela Marrocu
    Abstract: Regional competitiveness, especially in the industrialised countries, is increasingly reliant on the availability of an adequate endowment of knowledge assets at the local level, like technological and human capital. These intangible factors enhance regional efficiency directly as inputs of the production function, but they also play a crucial role in allowing the territory to absorb the potential knowledge spillovers from the neighbouring regions. The aim of this paper is to analyse the role of the internal and external factors in determining the productivity level for a large set of regions belonging to the EU27 plus Norway and Switzerland. We estimate a Cobb-Douglas production function over the period 2000-2008 where, in addition to the traditional inputs of physical capital and units of labour, we consider innovation activities and human capital endowments as relevant knowledge assets. We also control for other geographical and industrial features of the regions. In order to take into account the commonly found geographic association across regions, our analysis is carried out within the spatial panel econometric framework. Main results, robust to a wide array of sensitivity checks, show that knowledge assets exhibit positive and significant coefficients and the impact of human capital on GDP is higher than the one found for technological capital in most of the estimated empirical models. Moreover, we find evidence of spatial spillovers directly associated with the two immaterial assets, which turn out to be much more effective in the regions of the 12 new accession countries with respect to all other European regions. The significant presence of such spillovers emphasizes the important role played by highly educated labour forces in increasing the regions’ absorptive capacity of new external knowledge and in ensuring its effective use in the production process.
    Keywords: knowledge; innovation; human capital; production function; spatial spillovers; European regions
    JEL: C23 O33 R11
    Date: 2012
  4. By: Mircea Epure; Esteban Lafuente
    Abstract: This paper devises management and accounting tools for monitoring bank performance. We first propose a multidimensional efficiency measure that integrates credit risk and is adapted to the real banking technology. Second, traditional accounting ratios complement the analysis. Third, the impact of different risk measures over efficiency and accounting ratios is shown. Fourth, we examine the effect of CEO turnover on future performance. An empirical application considers a unique dataset of Costa Rican banks during 1998-2007. Results reveal that performance improvements follow regulatory changes and that risk explains differences in performance. Non-performing loans negatively affect efficiency and return on assets, whereas the capital adequacy ratio positively affects the net interest margin. This supports that incurring monitoring costs and having higher levels of capitalisation may enhance performance. Finally, results confirm that appointing CEOs from outside the bank significantly improves performance, thus suggesting the potential benefits of new organisational practices.
    Keywords: efficiency; accounting; performance; risk; CEO turnover.
    JEL: G21 G28 G3 M1 M2
    Date: 2012–03
  5. By: Susanto Basu; Luigi Pascali; Fabio Schiantarelli; Luis Serven
    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
  6. By: Castillo, Leopoldo Laborda; Guasch, Jose Luis
    Abstract: This article evaluates the effect of the overdraft facility (or line of credit) policy by comparing a large sample of overdraft facilitated firms and matched non-overdraft facilitated firms from Eastern Europe at the sector level. The sample firms are compared with respect to rates of different performance indicators including: technical efficiency (a Data Envelopment Analysis approach is applied to estimate the technical efficiency level for individual sectors), production workers trained, expenditures on research and development, and export activity. In order to avoid the selectivity problem, propensity score matching methodologies are adopted. The results suggest that a certain level of overdraft facility provided to firms would be needed to stimulate investment in research and development, which will eventually result in increased growth in productivity.
    Keywords: Access to Finance,Environmental Economics&Policies,Debt Markets,Economic Theory&Research,Labor Policies
    Date: 2012–06–01
  7. By: Alexander Schiersch; Heike Belitz; Martin Gornig
    Abstract: Previous research shows that technical progress at the industry level, measured by sectoral TFP growth, is more localized in continental European countries than in Anglo-Saxon countries. We use EU KLEMS data sets to decompose sectoral TFP for nine European countries by means of a Malmquist approach, in order to separate technical change. Applying Harberger diagrams, we describe the sectoral patterns of technical progress. The analysis reveals that in most European countries technological progress is much more evenly distributed across sectors than TFP.
    Keywords: TFP, Generalized Malmquist Productivity Index, sectoral technical change
    JEL: O14 O47 E23
    Date: 2012
  8. By: Marc J. Melitz; Sašo Polanec
    Abstract: In this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms -- following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases in Slovenian manufacturing during the 1995-2000 period -- and contrast our results with those other decompositions. We find that, over a 5 year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes.
    JEL: C10 O47
    Date: 2012–06
  9. By: Enghin Atalay
    Abstract: There is substantial within-industry variation, even within industries that use and produce homogeneous inputs and outputs, in the prices that plants pay for their material inputs. I explore, using plant-level data from the U.S. Census Bureau, the consequences and sources of this variation in materials prices. For a sample of industries with relatively homogeneous products, the standard deviation of plant-level productivities would be 7% lower if all plants faced the same materials prices. Moreover, plant-level materials prices are both persistent across time and predictive of exit. The contribution of net entry to aggregate productivity growth is smaller for productivity measures that strip out di¤erences in materials prices. After documenting these patterns, I discuss three potential sources of materials price variation: geography, di¤erences in suppliers. marginal costs, and suppliers. price discriminatory behavior. Together, these variables account for 13% of the dispersion of materials prices. Finally, I demonstrate that plants.marginal costs are correlated with the marginal costs of their intermediate input suppliers.
    Keywords: CES,economic,research,micro,data,microdata
    Date: 2012–06
  10. By: Curuk, M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper suggests that contingent on the productivity level of the trade partner; international trade may create resource misallocation in less productive countries. It theoretically shows how the interaction between technology diffusion induced by trade and cross sectoral heterogeneity in productivity distributions, and technology adoption rates leads to asymmetric pro-competitive effects, which in turn result in misallocation. In this framework trade increases welfare in the long-run due to technology diffusion, even though there is steadystate resource misallocation across industries. Using firm level data from 32 European countries for the period of 1992-2007, it also presents robust empirical evidence supporting the model predictions by showing that trade with more productive regions as a share of purchasing power parity (PPP) GDP (1) increases economy wide markup variation, (2) raises mean sectoral productivity, and (3) decreases productivity dispersion within 4-digit sectors, only in less productive countries.
    Keywords: International trade;Technology diffusion;Firm size distribution;Misallocation.
    JEL: F10 F15 L11 O33
    Date: 2012
  11. By: Zsolt Darvas
    Abstract: Sectoral shifts, such as shrinkage of low labour productivity and the low-wage construction sector, can lead to apparent increased aggregate average labour productivity and average wages, especially when capital intensity differs across sectors. For 11 main sectors and 13 manufacturing sub-sectors, we quantify the compositional effects on productivity, wages and unit labour costs (ULCs) based and real effective exchange rates (REER), for 24 EU countries. Compositional effects are greatest in Ireland, where the pharmaceutical sector drives the growth of output and productivity, but other sectors have suffered greatly and have not yet recovered. Our new ULC-REER measurements, which are free from compositional effects, correlate well with export performance. Among the countries facing the most severe external adjustment challenges, Lithuania, Portugal and Ireland have been the most successful based on five indicators, and Latvia, Estonia and Greece the least successful. There is evidence of downward wage flexibility in some countries, but wage cuts have corrected just a small fraction of pre-crisis wage rises and came with massive reductions in employment even in the business sector excluding construction and real estate, highlighting the difficulty of adjusting wages downward.
    Date: 2012–06
  12. By: Andrews, Martyn J. (University of Manchester); Gill, Leonard (University of Manchester); Schank, Thorsten (University of Mainz); Upward, Richard (University of Nottingham)
    Abstract: Positive assortative matching implies that high productivity workers and firms match together. However, there is almost no evidence of a positive correlation between the worker and firm contributions in two-way fixed-effects wage equations. This could be the result of a bias caused by standard estimation error. Using German social security records we show that the effect of this bias is substantial in samples with limited inter-firm movement. The correlation between worker and firm contributions to wage equations is unambiguously positive.
    Keywords: linked employer-employee panel data, fixed effects, limited mobility bias
    JEL: J20 J30 C23
    Date: 2012–06
  13. By: FUJIWARA Yoshi; AOYAMA Hideaki; Mauro GALLEGATI
    Abstract: Empirical study of firms' growth and fluctuation requires the understanding of the dynamics of labor and productivity among firms by using large-scale data including that of small and medium-sized enterprises (SMEs). Specifically, the key to such understanding is the findings in statistical properties in equilibrium distributions of output, labor, and productivity.<br />We uncover a set of scaling laws of conditional probability distributions, which are sufficient for characterizing joint distributions by employing an updated database covering one million firms including domestic SMEs. These scaling laws show the existence of lognormal joint distributions for sales and labor, and the existence of a scaling law for labor productivity, both of which are confirmed empirically. This framework offers characterization of equilibrium distributions with a small number of scaling indices, which determine macroscopic quantities, thus opening a new perspective of bridging microeconomics and macroeconomics.
    Date: 2012–06
  14. By: Martin Berger; Heinz Hollenstein
    Abstract: The paper complements entry mode research by dealing with the choice of alternative modes of governance in the specific case of foreign R&D and its impact on a parent firm’s performance. Firstly, we identify the factors that determine whether a firm locates abroad any R&D activities, and, if it does so, whether it chooses an equity-based rather than a non-equity co-operative mode of governance. The OLI paradigm is used as theoretical background of this analysis. Secondly, we determine the impact of foreign R&D on a parent firm’s performance in terms of innovation output and labour productivity, and investigate whether this effect differs among firms using the one or the other governance mode. The study is based on separate estimations for Switzerland and Austria using comparable firm data and model specifications. The two countries are interesting cases as they strongly differ in terms of level and pattern of internationalisation.
    Keywords: Internationalisation of R&D, Governance of foreign R&D, International R&D co-operation, Foreign R&D and performance, OLI paradigm and R&D
    JEL: F23 L22 L24 O31
    Date: 2012–06
  15. By: Bram Timmermans; Ron Boschma
    Abstract: This paper investigates the impact of labour mobility on plant performance in Denmark. Our study shows that the effect of labour mobility can only be assessed when one accounts for the type of skills that flow into the plant, and the degree to which these match the existing skills at the plant level. As expected, we found that the inflow of skills that are related to skills in the plant impacts positively on plant productivity growth, while inflows of skills that are similar to the plant skills have a negative effect. We used a sophisticated indicator of revealed relatedness that measures the degree of skill relatedness between sectors on the basis of the intensity of labour flows between sectors. Intra-regional mobility of skilled labour had a negative effect on plant performance, but the impacts of intra- and inter-regional mobility depended on the type of skills that flow into the plant.
    Keywords: labour mobility, revealed relatedness, plant performance, geographical proximity, related labour flows, Denmark
    JEL: J61 R11
    Date: 2012–06
  16. By: Dinuk Jayasuriya (Development Policy Centre, Crawford School of Public Policy, The Australian National University); Paul J. Burke (Arndt-Corden Department of Economics, Australian National University, Canberra, ACT Australia 0200)
    Abstract: This article investigates whether female political representation affects economic growth. Panel estimates for 119 democracies using fixed effects specifications and a system generalized method of moments approach suggest that, over recent decades, countries with higher shares of women in parliament have had faster growing economies.
    JEL: D72 J16 O11 O43
    Date: 2012–05
  17. By: Gertler, Paul; Vermeersch, Christel
    Abstract: This study examines the effect of performance incentives for health care providers to provide more and higher quality care in Rwanda on child health outcomes. The authors find that the incentives had a large and significant effect on the weight-for-age of children 0-11 months and on the height-for-age of children 24-49 months. They attribute this improvement to increases in the use and quality of prenatal and postnatal care. Consistent with theory, They find larger effects of incentives on services where monetary rewards and the marginal return to effort are higher. The also find that incentives reduced the gap between provider knowledge and practice of appropriate clinical procedures by 20 percent, implying a large gain in efficiency. Finally, they find evidence of a strong complementarity between performance incentives and provider skill.
    Keywords: Health Monitoring&Evaluation,Population Policies,Health Systems Development&Reform,Disease Control&Prevention,Adolescent Health
    Date: 2012–06–01

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