New Economics Papers
on Efficiency and Productivity
Issue of 2012‒12‒22
eighteen papers chosen by

  1. Why did high productivity growth of banks precede the financial crisis? By Alfredo Martín-Oliver; Sonia Ruano; Vicente Salas-Fumás
  2. Estimation of the CES Production Function with Biased Technical Change: A Control Function Approach. By Xi CHEN
  3. Productivity As If Space Mattered: An Application to Factor Markets Across China By Wenya Cheng; John Morrow; Kitjawat Tacharoen
  4. Worker Productivity and Wages: Evidence from Linked Employer-Employee Data By Lopes, Ana Sofia; Teixeira, Paulino
  5. Productivity and structural heterogeneity in the Brazilian manufacturing sector: trends and determinants By Eva Yamila Catela; Mario Cimoli; Gabriel Porcile
  6. Impacts of Agricultural Extension on Crop Productivity, Poverty and Vulnerability: Evidence from Uganda By Md. Faruq Hasan; Katsushi S. Imai; Takahiro Sato
  7. ICT spillovers, absorptive capacity and productivity performance By Ana Rincon; Michela VECCHI; Francesco VENTURINI
  8. Productivity in Electricity, Gas and Water: Measurement and Interpretation By Topp, Vernon; Kulys, Tony
  9. Productivity and the Product Scope of Multi-product Firms: A Test of Feenstra-Ma By Horst Raff; Joachim Wagner
  10. Does sharecropping affect productivity and long-term investment ? evidence from West Bengal’s tenancy reforms By Deininger, Klaus; Jin, Songqing; Yadav, Vandana
  11. Análisis y determinantes de la productividad legislativa en México (2009-2012) By Bárbara Briones Martínez
  12. Trade liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters By Khandelwal, Amit; Schott, Peter K.; Wei, Shang-Jin
  13. Is Innovative Firm Behavior Correlated with Age and Gender Composition of the Workforce? Evidence from a New Type of Data for German Enterprises By Pfeifer, Christian; Wagner, Joachim
  14. Assessment of a spatial panel model for the efficiency analysis of the heterogonous healthcare systems in the world By Vahidin Jeleskovic; Benjamin Schwanebeck
  15. CO2 Emission and Firm Heterogeneity: A Study of Metals & Metal based Industries in India By K., Narayanan; Sahu, Santosh Kumar
  16. Financial Constraints, Innovation Performance, and Sectoral Disaggregation By Georgios Efthyvoulou; Priit Vahter
  17. The Costs of Agglomeration: Land Prices in French Cities By Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent
  18. A Supply-Response Model Under Invariant Risk Preferences By Robert Chambers; Margarita Genius; Vangelis Tzouvelekas

  1. By: Alfredo Martín-Oliver (Universitat de les Illes Balears); Sonia Ruano (Banco de España); Vicente Salas-Fumás (Universidad de Zaragoza)
    Abstract: The observed high levels of banks’ operating effi ciency, profi ts and market values in the years before the fi nancial crisis raise reasonable doubts about the information content of conventional performance measures for the accurate assessment of the efficiency of banking intermediation. In this paper we estimate the productivity of individual Spanish banks and the industry’s productivity growth over time using the methodology of Olley and Pakes (1996) and Levinsohn and Petrin (2003), which controls for simultaneity bias. We then examine the contributions of two sets of factors to productivity growth: banking practices that have been signalled as the proximate causes of the crisis, and technical progress in the industry. We obtain that more than two thirds of the estimated productivity growth in the years 2000-2007 is attributable to practices such as the expansion of the housing market, the high recourse to securitization and short-term fi nance, and the leveraging of banks’ balance sheets. The remaining 2.8% cumulative annual growth rate is our estimate for the technical progress in the industry, similar to the estimated rate in the period 1993-2000.
    Keywords: productivity of banks, financial stability production function, IT capital, simultaneity bias
    JEL: D24 G21
    Date: 2012–12
  2. By: Xi CHEN
    Abstract: In this paper, I extend the Olley-Pakes (1996) estimation method to the CES production function with biased technical change. The new semi-parametric approach allows consistent estimation of the degree of returns to scale, the elasticity of substitution, and the bias in technical change. Identification of these parameters is achieved under the assumption that the data generating process reflects not only technologies but also optimizing behavior of producers. Using data from U.S. manufacturing industries over the period 1958-2005, I find strong evidence that industries are characterized by a production technology with the elasticity of substitution below one and with significant biased technical progress.
    Keywords: Semi-parametric estimation, Panel data analysis, Returns to scale, Elasticity of substitution, Factor-augmenting technical change, Industry-level studies.
    JEL: C14 C23 O30 D24
    Date: 2012
  3. By: Wenya Cheng; John Morrow; Kitjawat Tacharoen
    Abstract: Optimal production decisions depend on local market characteristics. This paper develops a model to explain firm labor demand and firm density across regions. Firms vary in their technology to combine imperfectly substitutable worker types, and locate across regions with distinct distributions of workers and wages. Firm technologies which best match regional labor markets explain both productivity differences and firm density. Estimating structural model parameters is simple and relies on a two stage OLS procedure. The first stage estimates local market conditions using firm employment and regional data, while the second incorporates regional costs into production function estimation. The method is applied to Chinese manufacturing, population census and geographic data to estimate local market costs and production technologies. In line with the model, we find that labor markets which provide cost advantages explain substantial differences in firm productivity. Furthermore, regions which have lower optimal hiring costs attract more firms per capita.
    Keywords: Structural estimation, productivity, firm location, China
    JEL: D22 D24 J24 J30 O15 R11
    Date: 2012–12
  4. By: Lopes, Ana Sofia (Polytechnic Institute of Leiria); Teixeira, Paulino (University of Coimbra)
    Abstract: This study compares the determinants of productivity and wages at both firm and worker level. In the firm-level analysis, we follow Hellerstein, Neumark and Troske (1999) and provide improved estimates based on an extended set of covariates including the intensity of firm-provided training. In the worker-level analysis we take a new turn and generate a proxy for unobserved worker productivity. Our results point to the presence of sizeable spillover effects from schooling and training as their impact is bigger on firm-level productivity equations than on the corresponding worker-level equations. In turn, our fully disaggregated model at worker level shows that, by using all possible combinations of worker attributes, we obtain that the wage differences across different worker groups are mostly productivity based and that the gap can be as high as 33%.
    Keywords: worker productivity, wages, human capital, LEED
    JEL: C23 D24 J31
    Date: 2012–11
  5. By: Eva Yamila Catela; Mario Cimoli; Gabriel Porcile
    Abstract: This paper discusses the evolution of firmsù productivity and structural heterogeneity (SH) in the Brazilian manufacturing industry in the 2000s. SH is defined (following the Latin American structuralist tradition) as a situation in which a large share of total firms is in the lowest productivity groups of the production structure, and there are very large differences in labour productivity between groups and firms. The paper combines and makes compatible several databases on manufacturing production, innovation and micro-social data for Brazil, in order to measure productivity and SH, to analyze its evolution between 2000 and 2008, and to discuss its determinants. Econometric analyses (k-means cluster methodology to identify productivity groups, and ordered probit models to analyse the determinants of SH) show that increasing returns in innovation and learning prevailed in the 2000s, while policies failed to encourage the catching up process by laggard firms. As a result, SH did not fall in the Brazilian manufacturing sector.
    Keywords: Structural heterogeneity; technological change; productivity growth; technological asymmetries
    Date: 2012–11–29
  6. By: Md. Faruq Hasan (Department of Agricultural Extension, Hajee Mohammad Danesh Science and Technology University, Bangladesh); Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan)); Takahiro Sato (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: The present study examines whether agricultural extension improves household crop productivity, reduces poverty as well as vulnerability in rural Uganda drawing upon Uganda National Panel Survey data in 2009-10. We first estimate household crop productivity using stochastic frontier analysis that can allow for stochastic shocks in the production function. Then, the effect of different types of agricultural extension programmes on the crop productivity is estimated by treatment effects model which controls for the sample selection associated with household participation in agricultural extension. In this model, the distance to agricultural extension service centre is used as an instrument for participation in agricultural extension. It is found that household crop productivity was significantly raised by household participation in all types of agricultural extension programs except NGO programs, while household expenditure per capita was also significantly increased by participation in most cases. This is consistent with the central objectives of agricultural extension to improve productivity and reduce poverty. Further evidence is provided on the role of extension in reducing vulnerability as expected poverty associated with extension programs of NAADS, large farmers and other types of extension service providers.
    Keywords: Agricultural Extension, Poverty, Vulnerability, Treatment Effects Model, Uganda
    JEL: C31 I32 N57 O13
    Date: 2012–12
  7. By: Ana Rincon; Michela VECCHI; Francesco VENTURINI
    Abstract: We analyse the impact of ICT spillovers on productivity in the uptake of the new technology using company data for the U.S. We account for inter- and intra-industry spillovers and assess the role played by firm’s absorptive capacity. Our results show that intra-industry ICT spillovers have a contemporaneous negative effect that turns positive 5 years after the initial investment. By contrast, inter-industry spillovers are important both in the short and in the long run. In the short run, companies’ innovative effort is complementary to ICT spillovers, but such complementarity disappears with the more pervasive adoption and diffusion of the technology.
    JEL: D22 D24 D62 O33
    Date: 2012–08–01
  8. By: Topp, Vernon (Productivity Commission); Kulys, Tony (Productivity Commission)
    Abstract: This staff working paper examines productivity trends in the Australian utilities industry and highlights some significant issues relating to the measurement and interpretation of changes in measured productivity over time. Multifactor productivity (MFP) growth in Australia's market sector has been considerably below average since 2003-04. Utilities (Electricity, Gas, Water and Waste services), have played a significant role in this, with MFP growth being strongly negative between 1997-98 and 2009-10 (MFP falling, on average, by 3.2 per cent per year). To better understand why, this study examined MFP at the subdivision level, with a particular focus on the two largest subdivisions - Electricity supply (ES), and Water supply, sewerage and drainage services (WSSD). MFP growth between 1997-98 and 2009-10 was negative for both ES (on average, -2.7 per cent per year) and WSSD (-4.3 per cent per year). This study highlights some of the challenges involved in measuring and interpreting estimates of MFP growth in utilities. A particular concern is the influence of changes in capacity utilisation arising from either cyclical investment patterns, or changes in the structure of electricity demand. Also, government policies, regulatory settings and external shocks (especially the weather) can impact on the quantity or quality of measured output, and on the choice of production technology, thereby influencing estimates of MFP. The views expressed in this paper are those of the authors and are not necessarily those of the Productivity Commission, or of the organisations or people who provided assistance.
    Keywords: productivity trends; measured productivity; utilities industry; electricity; gas; water; multifactor productivity (MFP)
    JEL: Q40 Q50
    Date: 2012
  9. By: Horst Raff (University of Kiel, Germany); Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: Feenstra and Ma (2008) develop a monopolistic competition model where firms choose their optimal product scope by balancing the profits from a new variety against the costs of “cannibalizing” sales of existing varieties. While more productive firms always have a higher market share, there is no monotonic relationship between firms’ productivity level and their choices of product scope. In the model having a higher market share means that firms are hurt more by the “cannibalization effect”. Therefore, the incentive to add more products weakens as productivity rises. This leads to Lemma 3 in Feenstra and Ma (2008): There is an inverted U-shaped relationship between firms’ productivities and the range of varieties they choose to produce. This empirical note takes this Lemma to the data for firms from German manufacturing industries. Empirical evidence is in line with the results from the theoretical model.
    Keywords: Multi-product firms, productivity, optimal product scope, Germany
    JEL: L1 L6
    Date: 2012–12
  10. By: Deininger, Klaus; Jin, Songqing; Yadav, Vandana
    Abstract: Although transfer of agricultural land ownership through land reform had positive impacts on productivity, investment, and political empowerment in many cases, institutional arrangements in West Bengal -- which made tenancy heritable and imposed a prohibition on subleasing -- imply that early land reform benefits may not be sustained and gains from this policy remain well below potential. Data from a listing of 96,000 households in 200 villages, complemented by a detailed survey of 1,800 owner-cum tenants, point toward binding policy constraints and large contemporaneous inefficiency of share tenancy that is exacerbated by strong disincentives to investment. A conservative estimate puts the efficiency losses from such arrangements in any period at 25 percent.
    Keywords: Political Economy,Labor Policies,Economic Theory&Research,Debt Markets,Municipal Housing and Land
    Date: 2012–12–01
  11. By: Bárbara Briones Martínez (Universidad Autónoma de Ciudad Juárez)
    Abstract: In Mexico the study of legislative performance has been relegated to political science since the lack of information and Congress transparency are persistent, and because of its complexity to make use of it in matter of public policy implementation. Given the previous reasons this document has as main objectives to identify those characteristics which determine legislative productivity, as well as to analyze which of those characteristics determine the type of bill that deputies subscribe, is worth mentioning that the present study takes part of the first applied studies that have been developed in this area. In this study we use data from the 61° legislature (2009-2012), and we performed two different estimations. To identify the determinants of productivity we estimate a binomial negative regression, which we use to evaluate cross-section and panel data. Results show that the variables that explain legislative productivity are such as belonging to the majority party in Congress, age, and to participate in a greater number of commissions. Equally the educational level and the State which legislators represent have a positive effect, latter being new findings for this type of studies. To identify the determinants of the type of subscribed bills, we estimate a Multinomial Probit Model. Results show that gender, age and political ideology contribute to explain the type of bill that legislators subscribe.
    Keywords: Legislative productivity, binomial negative regression, multinomial probit models
    JEL: C25 C35
    Date: 2012–09–01
  12. By: Khandelwal, Amit; Schott, Peter K.; Wei, Shang-Jin
    Abstract: If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.
    Keywords: China; misallocation; Multifibre Agreement; productivity
    JEL: F1 O1
    Date: 2012–12
  13. By: Pfeifer, Christian (Leuphana University Lüneburg); Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: This empirical research note documents the relationship between composition of a firm's workforce (with a special focus on age and gender) and its performance with respect to innovative activities (outlays and employment in research and development (R&D)) for a large representative sample of enterprises from manufacturing industries in Germany using unique newly available data. We find that firms with a higher share of older workers have significantly lower proportions of R&D outlays in total revenues and of R&D employment in total employment, whereas firms with a higher share of female employment seem to be more active in R&D.
    Keywords: ageing, firm performance, gender, Germany, innovation, R&D
    JEL: D22 D24 J21 J24 L25
    Date: 2012–11
  14. By: Vahidin Jeleskovic (University of Kassel); Benjamin Schwanebeck (University of Kassel)
    Abstract: Various panel models were presented to resolve the ranking of global health care systems according to efficiency. However, in terms of the spatial distribution of statistical units, spatial dependence as a result of various forms of spatial interactions caused biased estimators in classical regression. To our knowledge, this is the first paper which analyzes the healthcare systems of WHO members with regard to spatial dependencies while distinguishing between heterogeneity and inefficiency. It was possible to determine a significant spatial autocorrelation. Therefore one have to consider these spatial spillovers when assessing the performance of healthcare systems. The most meaningful way of implementing these effects appears to be by regressing the health output on various explanatory variables through a combination of the fixed effects spatial lag and the fixed effects cross regressive model. This allows spatial spillovers due to level of education, healthcare expenditure, and the quality of the healthcare system itself, to be diagnosed. Modeling these spatial effects allows previous results to be given more precision with regard to the quality of the healthcare systems of WHO members.
    Keywords: panel data, fixed effects, production of health, efficiency measurement, heterogeneity, spatial effects, spatial autocorrelation
    JEL: C12 C21 I12
    Date: 2012
  15. By: K., Narayanan; Sahu, Santosh Kumar
    Abstract: Industrial energy efficiency has emerged as one of the key issues in India. The increasing demand for energy that leads to growing challenge of climate change has resulted major issues. It is obvious that high-energy intensity leads to high carbon intensity of the economy. This paper is an attempt to estimate the firm level CO2 emissions for the metals and metal based industries in Indian manufacturing. Calculation of firm level emissions is carried out following IPCC reference approach methodology of Carbon Dioxide emission from fuel combustion. We tried to find out the inter-firm differences of CO2 emission in the metals and metal based industries. In finding out the determinants of CO2 emission at firm level we have examined whether the firm heterogeneity matters for the differences in emission at firm level. Data for this study is collated from the CMIE PROWESS online database from 2000-2008, IEA energy statistics and IPCC conversion factors for each of the fuel types.
    Keywords: CO2 emission; Firm heterogeneity; Panel data econometrics; Metals and Metal based industries
    JEL: B23 Q4
    Date: 2012–02–22
  16. By: Georgios Efthyvoulou (Department of Economics, The University of Sheffield); Priit Vahter (Faculty of Economics and Business Administration, University of Tartu, Estonia)
    Abstract: How do the effects of financial constraints on innovation performance vary by sector and firm characteristics? This paper uses innovation survey data from eleven European countries to examine the heterogeneity of these effects. So far, there has been a lack of cross-country micro-level studies exploring the effects of financial constraints on innovation performance in Western Europe and only little research about the variability of such effects between the broad sectors of production and services. Our results suggest that the impact of direct measures of financial barriers differs in production and services sectors, and also by the firm’s export orientation. In particular, financial constraints appear to have more pronounced negative effects in the production sector than in the services sector. Among different types of firms, the response to financial constraints seems to be stronger for non-exporters.
    Keywords: financial constraints; innovation
    JEL: L1 L2 O1 O3
    Date: 2012
  17. By: Combes, Pierre-Philippe (GREQAM, University of Aix-Marseille); Duranton, Gilles (University of Toronto); Gobillon, Laurent (INED, France)
    Abstract: We develop a new methodology to estimate the elasticity of urban costs with respect to city population using French land price data. Our preferred estimate, which handles a number of estimation concerns, stands at 0.041. Our approach also yields a number of intermediate outputs of independent interest such as a distance gradient for land prices and the elasticity of unit land prices with respect to city population. For the latter, our preferred estimate is 0.72.
    Keywords: urban costs, land prices, land use, agglomeration
    JEL: R14 R21 R31
    Date: 2012–11
  18. By: Robert Chambers (University of Maryland); Margarita Genius (Department of Economics, University of Crete, Greece); Vangelis Tzouvelekas (Department of Economics, University of Crete, Greece)
    Abstract: In this article we first develop a theoretically consistent supply-response model for producers with invariant preferences facing price risk, and then we empirically apply the model for a group of Cretan olive-oil producers. For doing so, we estimate a Generalized Leontief cost function and we use the price distribution historically faced by individual farmers to induce three di erent representations of price risk corresponding to the second, third and fourth lp norms. These risk measures are combined with the estimated cost-structure to provide three separate representations of the ecient frontier for the representative producer. Empirical results suggest that, regardless of risk measure used, all farmers curtail production in managing price risk.
    Keywords: price risk; invariant risk preferences; producer responses; Cretan olive-oil producers
    JEL: C33 C22 D81 Q11
    Date: 2012–11–04

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