nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2012‒11‒03
seventeen papers chosen by
Angelo Zago
University of Verona

  2. The transatlantic productivity gap: Is R&D the main culprit? By Raquel Ortega-Argilés; Mariacristina Piva; Marco Vivarelli
  3. Philippine Productivity Dynamics in the Last Five Decades and Determinants of Total Factor Productivity By Llanto, Gilberto M.
  4. Demand or productivity: What determines firm growth? By A. Pozzi; Fabiano Schivardi
  5. The Impact of Infrastructure on Agricultural Productivity By Llanto, Gilberto M.
  6. Measuring Gross Output, Value Added, Employment and Labor Productivity of the Chinese Economy at Industry Level, 1987-2008 — An Introduction to the CIP Database (Round 1.0) By Harry WU
  7. Birthplace Diversity of the Workforce and Productivity Spill-overs in Firms By René Böheim; Thomas Horvath; Karin Mayr
  8. Impact of Climate Change on the Indian Economy-Evidence from Foodgrain Yields By SHREEKANT GUPTA; PARTHA SEN; SUCHITA SRINIVASAN
  9. Private Equity Portfolio Company Performance During The Global Recession By M. WRIGHT; D. S. SIEGEL; L. SCHOLES
  10. Private Equity Firm Experience and Buy-out Vendor Source: What is their Impact on Efficiency? By Y. ALPEROVYCH; K. AMESS; M. WRIGHT
  11. The Latin American Development Problem: An Interpretation By Diego Restuccia
  12. Measuring the Economic Output of the Education Sector in the National Accounts By Gu, Wulong<br /> Wong, Ambrose
  13. Do collaborations enhance the high-quality output of scientific institutions? Evidence from the Italian Research Assessment Exercise (2001-2003) By Maria Rosaria Carillo; Erasmo Papagni; Alessandro Sapio
  14. Prices, productivity and irregular cycles in a walrasian labour market. By Luciano Fanti
  15. The Brain Gain of Corporate Boards: A Natural Experiment from China By Giannetti, Mariassunta; Liao, Guanmin; Yu, Xiaoyun
  16. The Effect of Fair Trade Affiliation on Child Schooling: Evidence from a Sample of Chilean Honey Producers By Leonardo Becchetti; Stefano Castriota; Melania Michetti
  17. Performance Evaluation of Urban Local Governments: A Case for Indian Cities By Simanti Bandyopadhyay

  1. By: Salzwedel, Arvid; Huttel, Silke; Odening, Martin
    Keywords: efficiency, static and dynamic DEA, quasi-fixed inputs, dairy farms, Livestock Production/Industries, Productivity Analysis, Research Methods/ Statistical Methods,
    Date: 2012
  2. By: Raquel Ortega-Argilés (Instituto Superior Técnico, Lisboa, Portugal); Mariacristina Piva (DISCE, Università Cattolica); Marco Vivarelli (DISCE, Università Cattolica)
    Abstract: The literature has pointed to different causes to explain the productivity gap between Europe and United States in the last decades. This paper tests the hypothesis that the lower European productivity performance in comparison with the US can be explained not only by a lower level of corporate R&D investment, but also by a lower capacity to translate R&D investment into productivity gains. The proposed microeconometric estimates are based on a unique longitudinal database covering the period 1990-2008 and comprising 1,809 US and European companies for a total of 16,079 observations. Consistent with previous literature, we find robust evidence of a significant impact of R&D on productivity; however – using different estimation techniques - the R&D coefficients for the US firms always turn out to be significantly higher. To see to what extent these transatlantic differences may be related to the different sectoral structures in the US and the EU, we differentiated the analysis by sectors. The result is that both in manufacturing, services and high-tech sectors US firms are more efficient in translating their R&D investments into productivity increases.
    Keywords: R&D, productivity, embodied technological change, US, EU
    JEL: O33
    Date: 2012–09
  3. By: Llanto, Gilberto M.
    Abstract: Various studies showed that total factor productivity (TFP) has not been a source of growth in the Philippines. It seems that factor accumulation, which is not a sustainable source of growth, has underpinned Philippine economic growth. Studies have also shown that the sustained growth of developed countries has ridden on the back of technological advances rather than on increasing use of factor inputs. Total factor productivity improvement is the only route to sustain economic growth in the long run. After a brief review of economic growth and productivity dynamics of the Philippine economy in the past fifty years, the paper provides an estimation of the determinants of total factor productivity and labor productivity. In the light of the empirical findings reported in this paper, some policy levers present themselves as critical in improving productivity growth in the economy. Investments in education, more government expenditure for improving human capital, greater openness of the economy, and macroeconomic stability are indispensable.
    Keywords: total factor productivity, economic growth, Philippines, labor productivity growth, openness
    Date: 2012
  4. By: A. Pozzi; Fabiano Schivardi
    Abstract: We disentangle the contribution of unobserved heterogeneity in idiosyncratic demand and productivity to firm growth. We use a model of monopolistic competition with Cobb-Douglas production and a dataset of Italian manufacturing firms containing unique information on firm-level prices to reach three main conclusions. First, demand shocks are at least as important as productivity shocks for firm growth. Second, firms respond to shocks less than a frictionless model would predict, suggesting the existence of adjustment frictions. Finally, the degree of under-response is much larger for TFP shocks. This implies the existence of frictions with differential effects according to the nature of the shock, unlike the typical frictions studied by the literature on factor misallocation. We consider hurdles to firm reorganization as one such friction and show that they hamper firms’ responses to TFP shocks but not to demand shocks.
    Keywords: TFP; demand heterogeneity; firm growth; misallocation
    JEL: D24 L11
    Date: 2012
  5. By: Llanto, Gilberto M.
    Abstract: <p>Recent literature indicates the significant role played by rural infrastructure in improving agricultural productivity in developing economies. While the availability and quality of rural infrastructure are never substitutes to efficient macroeconomic and agriculture-specific policies and the effective implementation of such policies, inadequate infrastructure can be a significant constraint to growth and productivity. Rural infrastructure, like other public investments, raises agricultural productivity, which in turn induces growth in the rural areas, bringing about higher agricultural wages and improved opportunities for nonfarm labor. The rise in agricultural productivity, which reduces food prices, benefits both urban and rural inhabitants who are net food buyers. Thus, aside from its growth benefits, agricultural productivity has significant poverty-reduction effects.</p><p>The paper`s overall empirical results indicate a significant link between rural infrastructure and agricultural productivity. Electricity and roads are significant determinants of agricultural productivity. This is consistent with a related finding on the constraints imposed on growth by inadequate infrastructure. Rural roads provide the important connectivity with growing markets adjacent to rural areas; they also lessen input costs and transaction costs of rural producers and consumers. Access to electricity creates various income-earning opportunities for rural households.</p>
    Keywords: agricultural productivity, poverty reduction, rural infrastructure, transaction costs, connectivity, regional convergence
    Date: 2012
  6. By: Harry WU
    Abstract: This paper introduces the preliminary version of the China Industrial Productivity Database (CIP Round 1.0), a first of its kind covering the period 1987-2008, including data problems and the construction procedures to deal with the problems. It also discusses the outstanding methodological and data issues aiming to invite constructive comments and suggestions for further improvement of the database. Finally, using the CIP data, this paper provides a preliminary measure of China's labor productivity at industry level and individual industries' contributions to and labor reallocation effect on the aggregate labor productivity growth of the economy. Our preliminary findings show that there was nearly a fourfold growth (383%) in the labor productivity of the Chinese economy over the period 1987-2008, or an increase of 6.6% per annum. The top two performers were post-and-telecommunication service and transportation equipment manufacturing, experiencing an annual growth of labor productivity by 16.3% and 15.1%, respectively. However, that health care (11.0% p.a.) and government service (9.7% p.a.) also fell in the "super labor-productivity-growth club" raises a serious question about potential data problems because the labor productivity growth of these sectors is typically low or close to zero by international experiences. China gained from the labor reallocation effect alongside the state sector reform beginning in the early 1990s. But the effect turned into negative following the Asian financial crisis in 1997-98 and maintained that status in the aftermath deflationary macroeconomic environment (1998-2001). The labor reallocation effect became positive again after China's entry into the World Trade Organization (WTO) (2002-08).
    Date: 2012–10
  7. By: René Böheim (WIFO); Thomas Horvath (WIFO); Karin Mayr
    Abstract: We analyse the effect of workforce composition by birthplace in Austrian firms on workers' wages. In our model, each worker's productivity may depend on whether the co-workers are of the same or of a different birthplace and wages depend therefore both on the relative size of workers' groups as well as on the production structure of firms. We derive empirically testable hypotheses about the effect of co-worker birthplace on wages using a stylised model of intra-firm spill-overs across worker groups. We find evidence for complementarities between workers of different birthplace in line with our model that persist (but become smaller in size) after we control for observable productivity characteristics such as occupation and work experience.
    Keywords: Immigration, Labour force composition, Labour productivity
    Date: 2012–10–22
  8. By: SHREEKANT GUPTA (Department of Economics, Delhi School of Economics, Delhi, India & LKY School of Public Policy (NUS)); PARTHA SEN (South Asian University); SUCHITA SRINIVASAN (American Express)
    Abstract: This paper estimates the impact of climate change on foodgrain yields in India, namely riceand millets. We estimate a crop-specific agricultural production function with exogenous climate variables, namely, precipitation and temperature and control for key inputs such as irrigation, fertilizer and labour. Our analysis is at the district level using a panel dataset for physical yield (output per hectare – gross cropped area) for the period 1966-99. Thus, we eschew crop simulation approaches that rely on experimental data. We do not also estimate reduced form relationships between economic variables such as profits or the monetary value of yield and weather measures. Consistent with other studies at the district and state level we find significant impacts of climate change (temperature and precipitation) on Indian agriculture. The implication of our results for inter-state disparities and corrective measures is elaborated.
    Keywords: Climate Change; Agricultural Impacts; Developing Countries
    JEL: O13 Q54 R11
    Date: 2012–09
    Abstract: We assess the recent economic and financial performance of U.K. private equity (PE) backed buyouts. Our empirical evidence, which is based on thousands of transactions, reveals that PE-backed buyouts achieved superior economic and financial performance in the period before and during the recent global recession, relative to comparable firms that did not experience such transactions. Our regression results imply positive differentials of 5-15% in productivity and approximately 3-5% in profitability for buyout firms, relative to non-buyout firms. Another key finding is that revenue and employment growth for PE- backed firms were positive during the sample period.
    Keywords: management buyouts; private equity; total factor productivity; employment; financial performance
    JEL: G34 G32
    Date: 2012–06
    Abstract: Using a dataset comprising 102 private equity (PE) backed leveraged buyouts (LBOs) completed and exited during the period 1999-2008, this study sheds new light on the impact of buyout vendor source and PE investor experience on post-buyout efficiency during the first three years after the transaction. There are three main findings. First, we observe increases in post-buyout efficiency over time, although LBOs from different vendor source differ in terms of post-transaction efficiency levels and improvement trajectories. Private buyouts are about as efficient as the average. Divisional buyouts show highest efficiency levels overall. Secondary buyouts remain below the average. Second, multivariate analyses suggest a positive and significant effect of PE firm experience on post-buyout efficiency. Finally, the observed efficiency patterns seem to be convex, suggesting the major improvements happen in the first two years after the transaction.
    Keywords: private equity; management buyouts; efficiency; dynamic data envelopment analysis
    Date: 2012–06
  11. By: Diego Restuccia
    Abstract: By international standards, gross domestic product (GDP) per capita in Latin America is low: around one fourth of that of the United States. Moreover, in the last five decades, Latin America has failed to catch-up in wealth to the level of the United States while other countries at similar or even lower stages of development have been successful. The failure to attain higher levels of relative income represents what I call the development problem in Latin America. Using a development accounting framework, I find that the bulk of the difference in GDP per capita between Latin America and the United States is accounted for by low GDP per hour and, in particular, low total factor productivity (TFP) in Latin America. I estimate that to explain the difference in GDP per hour, TFP in Latin America must be around 60 percent of that in the United States. I then consider a model with heterogeneous production units where institutions and policy distortions lead to a 60 percent productivity ratio between Latin America and the United States. Removing the barriers to productivity can increase long-run GDP per hour in Latin America by a factor of 4 relative to that of the United States. This increase is equivalent to 70-years worth of post-world-war-II economic development in the United States.
    Keywords: productivity, capital, schooling, establishments, distortions
    JEL: O1
    Date: 2012–10–25
  12. By: Gu, Wulong<br /> Wong, Ambrose
    Abstract: This research paper constructs two experimental measures of the economic output of the education sector for Canada: an income-based measure and a cost-based measure. The measures differ from the existing measure currently used in the National Accounts, which is based on the volume of total input, and can be used to examine the productivity performance of the education sector. Both approaches are predicated on the notion that the output of the education sector represents investment in human capital. The income-based approach measures investment in education as increments in the future stream of earnings arising from education. The cost-based approach measures investment as total expenditures related to education.
    Keywords: Education, training and learning, Economic accounts, Education indicators, Outcomes of education, Productivity accounts
    Date: 2012–10–18
  13. By: Maria Rosaria Carillo; Erasmo Papagni; Alessandro Sapio (-)
    Abstract: In this paper, we analyse the effects of research collaborations on the scientific output of academic institutions, drawing on data from the first official Italian research assessment exercise. We measure the scientific performance of a research unit as the number of publications that received an excellent grade in the evaluation process. Different aspects of scientific collaboration are taken into account, such as the degree of openness of a research team towards other institutions and/or other countries, the frequency of co-authorships, and the average size of a collaborating team. Using econometric models for count data, we find that collaborations are more effective when they imply knowledge exchange resulting from collaboration with external or foreign colleagues, are very frequent, and the collaborating teams have a small size.
    Keywords: Academic departments; Productivity; Knowledge externalities
    JEL: I21 D2
    Date: 2012–06–15
  14. By: Luciano Fanti
    Abstract: A standard Cobb Douglas labour market model is used to examine the role of changes in prices and productivity on the stability. It is shown that in this walrasian labour market deterministic endogenous economic fluctuations, which are seemingly stochastic, emerge. Therefore it may be argued that the controversial - in empirical as well as theoretical recent literature – co-movement between variables does not necessarily ground on stochastic shocks on prices and technology as retained in the prevailing business cycle theory. In particular, we show that negative shocks on prices and productivity are always destabilising and trigger robust chaotic fluctuations.
    Date: 2012–09–01
  15. By: Giannetti, Mariassunta; Liao, Guanmin; Yu, Xiaoyun
    Abstract: We study the impact of directors with foreign experience on firms in emerging markets. To establish causality, we use a unique dataset from China and exploit that at different times, Chinese provinces introduced policies to attract highly talented emigrants. These policies led to an exogenous increase in the supply of Chinese individuals with foreign experience in the local labor market and ultimately increased the likelihood that firms in these provinces had directors with foreign experience in comparison to firms with a similarly high demand for these skills elsewhere. We document that hiring directors with foreign experience results in higher firm valuation, productivity, and profitability. Furthermore, corporate governance improves and firms are more likely to make international acquisitions, to export, and to raise funds internationally. These results indicate that the transfer of knowledge to emerging markets occurs not only through foreign investment, but also through labor flows and, in particular, return migration.
    Keywords: corporate boards; corporate governance; firm performance; firm productivity; human capital
    JEL: D22 D80 F21 F22 G30 J24
    Date: 2012–10
  16. By: Leonardo Becchetti (Università degli Studi di Roma Tor Vergata, Italy); Stefano Castriota (Università degli Studi di Roma Tor Vergata, Italy); Melania Michetti (Fondazione Eni Enrico Mattei and Centro-Euro Mediterraneo sui Cambiamenti Climatici, Italy)
    Abstract: We evaluate the impact of fair trade (FT) affiliation on child schooling within a sample of Chilean honey producers with a retrospective panel data approach. From a theoretical point of view we argue that FT should have a positive effect on child schooling since it generates a short run pure income effect together with a medium run productivity effect on both adult and child wages. On the other hand, because of the higher productivity generated by the medium run effect, the opportunity cost of child education increases if they work with their parents. The direction of the impact of FT affiliation on child schooling is therefore uncertain and requires empirical testing. Our econometric findings document a positive and significant impact of affiliation years on child schooling after controlling for endogeneity and heterogeneity between the treatment and control sample.
    Keywords: Fair Trade, Child Schooling, Impact Study
    JEL: O19 O22 D64 J22
    Date: 2012–09
  17. By: Simanti Bandyopadhyay (Indian Council For Research On International Economic Relations)
    Abstract: The paper assesses the performances of the urban local bodies in the state of Karnataka in India.We use non parametric Data Envelopment Analysis as a tool to measure technical efficiencies of the ULBs. If we compare the services in a particular size class of city with the norms we find that in the smallest size class it is water supply which has the minimum shortfall from norms, in the medium size cities it is road density which is closest to the norms and in the largest city size class it is the solid waste management which performs the best with zero shortfall from norms. On an average for all the services there is a shortage of 57 per cent of the ONM expenditure norms, the shortage being the highest (64 per cent) in the biggest size class of cities. If we compare across size classes we find that bigger cities have on an average higher proportions of ONM expenditures while both salary and establishment components show higher proportions in smaller cities. This is indicative to the fact that bigger cities are incurring more productive expenses than the smaller ones. We find that the overall average collection efficiency of property taxes is only 62 per cent which is the lowest in the smallest size class and the highest in the medium size class with little variation across cities. We find that only 27.5 per cent of the ONM expenditure requirements can be fulfilled by the own revenues once the potential for the latter is fully realised. This proportion is higher in bigger cities with moderately high variation across cities. As far as the ONM cost coverage is concerned we find that on an average the ULBs in Karnataka can finance 50 per cent of the ONM costs on basic services through their own revenues with a very high variation in the proportions across cites. We find that the ULBs on an average can reduce 27 per cent of their expenditures on ONM, labor and establishment to provide the same levels of services provided currently by them. We also find that there can be additional savings particularly on establishment and labor expenditures to operate at the maximum efficiency levels. We find that the extent of problem of unproductive spending and under-provision of services is more pronounced in smaller cities.
    Date: 2012–10–20

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