New Economics Papers
on Efficiency and Productivity
Issue of 2013‒01‒26
fourteen papers chosen by

  1. On the inconsistency of the Malmquist-Luenberger index By Aparicio, Juan; Pastor, Jesús; Zofío, José Luis
  2. A dynamic approach to measuring ecological-economic performance with directional distance functions: greenhouse gas emissions in the European Union By Andrés J. Picazo-Tadeo; Juana Castillo; Mercedes Beltrán-Esteve
  3. Output Quality and Sources of Profit Change in the English and Welsh Water and Sewerage Companies By Alexandros Maziotis; David S. Saal; Emmanuel Thanassoulis
  4. Productivity dispersion and misallocation of resources: evidence from Polish industries By Monika Lewandowska – Kalina
  5. Profit, Productivity and Price Performance Changes in The English and Welsh Water and Sewerage Companies By Alexandros Maziotis; David S. Saal; Emmanuel Thanassoulis
  6. Assesing the Impact of Competition on the Efficiency of Italian Airports By Tiziana D’Alfonso; Cinzia Daraio; Alberto Nastasi
  7. Patterns and causes of growth of European agricultural production, 1950-2005 By Miguel Martín-Retortillo; Vicente Pinilla
  8. Decomposition of Supply and Demand Shocks in the Production Function using the Current Survey of Production By KONISHI Yoko; NISHIYAMA Yoshihiko
  9. Kaldor-Verdoorn's Law and Increasing Returns to Scale: A Comparison Across Developed Countries By Emanuele Millemaci; Ferdinando Ofria
  10. Misallocation and the recovery of manufacturing TFP after a financial crisis By Kaiji Chen; Alfonso Irarrazabal
  11. R&D and productivity: In search of complementarity between research and development activities By Barge-Gil, Andrés; López, Alberto
  12. Unobserved heterogeneous effects in the cost efficiency analysis of electricity distribution systems By Per J. Agrell; Mehdi Farsi; Massimo Filippini; Martin Koller
  13. The Economic Meaning of Data Envelopment: a "Behavioral" Perspective By Laurens Cherchye; Bram De Rock
  14. Corporate Social Responsibility and Firms’ Performance: A Stratigraphical Analysis By Nicola Comincioli; Laura Poddi; Sergio Vergalli

  1. By: Aparicio, Juan (Center of Operations Research, Universidad Miguel Hernández, Elche, Spain); Pastor, Jesús (Center of Operations Research, Universidad Miguel Hernández, Elche, Spain); Zofío, José Luis (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist-Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity measurement associated with the production of bad outputs. In particular, we show that the usual interpretation of the technical change component in terms of production frontier shifts can be inconsistent with its numerical value, thereby resulting in an erroneous interpretation of this component that passes on to the index itself. We illustrate this issue with a simple numerical example. Finally, we propose a solution for this inconsistency issue based on incorporating a new postulate for the technology related to the production of bad outputs.
    Keywords: Data Envelopment Analysis; Malmquist-Luenberger productivity index;Technological change; Efficiency change; Directional distance function
    JEL: C43 C61 D24 Q55
    Date: 2013–01
  2. By: Andrés J. Picazo-Tadeo (Departamento de Economía Aplicada II. Universidad de Valencia); Juana Castillo (Departamento de Economía Aplicada II. Universidad de Valencia); Mercedes Beltrán-Esteve (Departamento de Economía Aplicada II. Universidad de Valencia)
    Abstract: The impact of economic activity on the environment is a matter of growing concern for firm managers, policymakers, researchers and society as a whole. Building on previous work by Kortelainen [Kortelainen, M., 2008. Dynamic environmental performance analysis: A Malmquist index approach. Ecological Economics 64, 701-715], we contribute an approach to assessing dynamic ecological- economic performance, or simply dynamic eco-performance, and its two determinants, ecologicaleconomic efficiency change and technical change, at specific-environmental-pressure level. In doing so, we use Data Envelopment Analysis techniques, directional distance functions and Luenberger indices. Our approach is employed to assess dynamic eco-performance in the emission of greenhouse gases in the European Union-27 over the period 1990-2010. The main result is that eco-performance has been boosted by technical change rather than by increases in eco-efficiency. Accordingly, policy measures aimed at enhancing eco-efficiency are recommended to improve eco-performance in European countries regarding greenhouse gas emissions.
    Keywords: Dynamic eco-performance; directional distance functions; Data Envelopment Analysis; greenhouse gases emissions; European Union
    JEL: C61 O44 Q01 Q54
    Date: 2013–01
  3. By: Alexandros Maziotis (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Centre on Climate); David S. Saal (Aston University); Emmanuel Thanassoulis (Aston University)
    Abstract: This paper investigates the determinants of profit change over the period 1991-2008 for the Water and Sewerage Companies (WaSCs) in the English and Welsh water and sewerage industry. We firstly apply an input oriented profit decomposition approach following the approach of De Witte & Saal (2010). Then, we make allowances for differences in the quality of output, by decomposing the output effect into high quality and low quality output effect. We decompose profit changes into various factors such as quantity and price effect, technical change, efficiency change, resource mix, product mix and scale effect, without and after controlling for quality. In both cases, the positive impact on profit changes came from substantial improvements in technical change, the cost efficient allocation of resources by substituting labour with capital and small improvements in efficiency gains. The input price and scale effect had a significant negative impact on profit changes. This technique is of great interest for regulators to evaluate the effectiveness of regulation and companies to identify the determinants of profit change and improve future performance, even if sample sizes are limited.
    Keywords: Profit Decomposition, Productivity, Index Numbers, DEA, Regulation, Water and Sewerage Industry
    JEL: Q5
    Date: 2012–11
  4. By: Monika Lewandowska – Kalina (Warsaw School of Economics)
    Abstract: Differences in GDP per capita across countries are large and to a large extent accounted by differences in total factor productivity. We analyze role the misallocation of resources plays in helping us understand productivity differences. In theory, the extent of misallocation is worse when there is a greater productivity dispersion between firms in the same industry. We find significant differences in productivity dispersions within Polish industries but also compared to the same two-digit German industries. It provides evidence that misallocation of resources is important source of low level of total factor productivity.
    JEL: O47 O52
    Date: 2013–01–13
  5. By: Alexandros Maziotis (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Centre on Climate Change (CMCC)); David S. Saal (Aston University); Emmanuel Thanassoulis (Aston University)
    Abstract: The purpose of this paper is to assess the impact of regulation in the financial performance of the Water and Sewerage companies (WaSCs) in England and Wales. We apply a panel index approach across WaSCs over time to decompose unit-specific (temporal) index number based profitability growth as a function of the profitability, productivity and price performance growth achieved by benchmark firms, and the catch-up to the benchmark firm achieved by less productive firms. The results indicated that the steady decline in average price performance, gains in productivity and relatively stable economic profitability after 2000, suggest that Ofwat is now more focused on passing productivity benefits to consumers, and maintaining stable profitability than it was in earlier regulatory periods. This technique is of great interest for regulators to evaluate the effectiveness of regulation and companies to identify the determinants of profit change and improve future performance, even if sample sizes are limited.
    Keywords: Profit Decomposition, Productivity, Price Performance, Panel Index Numbers, Regulation, Water and Sewerage Industry
    JEL: Q5
    Date: 2012–11
  6. By: Tiziana D’Alfonso (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Cinzia Daraio (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Alberto Nastasi (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")
    Abstract: This paper provides new empirical evidence on the efficiency of Italian airports. Analysing data on 2010 trough conditional e?ciency measures, we find that competition affects mostly the frontier of best performers, whilst airports that are lagging behind are less influenced by it. By applying a novel two stage approach, we show that competition has an inverse U-shape impact. Finally, the bi-modal shape of the distribution of pure efficiency indicates the existence of two differently managed groups of airports.
    Keywords: Italian airports; competition; DEA; conditional efficiency; two stage analysis
    Date: 2013–01
  7. By: Miguel Martín-Retortillo (Universidad de Zaragoza, Spain); Vicente Pinilla (Universidad de Zaragoza, Spain)
    Abstract: The aim of this work is to analyze the evolution of agricultural production in Europe after World War Two. To study the evolution of production, we want to find the causes of its growth. We will start with the role played by the factors of production. We will also want to estimate the contribution to output growth from improvements in efficiency, for which we will calculate the total factor productivity growth. Preliminary results show three possible patterns to explain the evolution of agricultural production. The first one which included Western countries and Germany based their growth in the raised efficiency and a higher use of capital. The opposing model is that of the countries with centrally planned economies. In this group of countries the use of capital was crucial. The efficiency of the system improved, but by considerably less than in the rest of Europe. The intermediate situation is that of the lesser developed countries in the southern European periphery and the Nordic countries, but in distinction to those of the Soviet bloc, they tended to converge much earlier with the model of the Western countries.
    Keywords: Agricultural productivity, European agriculture, European economic history
    JEL: N50 N54 Q10 Q11
    Date: 2013–01
  8. By: KONISHI Yoko; NISHIYAMA Yoshihiko
    Abstract: The purpose of this paper is to decompose total factor productivity (TFP)-type quantity into supply/productivity, demand, and other shocks. We propose a method of decomposing these three kinds of shocks in the production function using the gap between the actual amount of production and the production capacity of each plant. We construct a model to describe the capacity and realized production under Cobb-Douglas technology and attempt to compute the demand and supply/productivity shocks separately using the Current Survey of Production by METI. This dataset provides product-based data for production, sales, inventory, labor, and the production capacity of each plant at the present input levels. The main idea is that production capacity does not, or cannot, change against a short-term change in demand, but realized production should reflect such demand shocks observed by firms. We found no negative productivity shocks but found severe demand shocks during the financial crisis of 2007-2008 in our empirical results.
    Date: 2013–01
  9. By: Emanuele Millemaci (Dipartimento DESMaS “V. Pareto”, Università degli Studi di Messina, Italy); Ferdinando Ofria (Dipartimento DESMaS “V. Pareto”, Università degli Studi di Messina, Italy)
    Abstract: The objective of this study is to investigate the validity of the Kaldor-Verdoorn’s Law in explaining the long run determinants of the labor productivity growth for the manufacturing sector of some developed economies (Western European Countries, Australia, Canada, Japan and United States). We consider the period 1973-2006 using data provided by the European Commission - Economics and Financial Affairs. Our findings suggest that the law is valid for the manufacturing as countries show increasing returns to scale. Capital growth and labor cost growth do not appear important in explaining productivity growth. The estimated Verdoorn coefficients are found to be substantially stable throughout the period.
    Keywords: Increasing Returns, Kaldor-Verdoorn Law, Productivity Growth, Manufacturing Sector
    JEL: C32 O47 O57
    Date: 2012–12
  10. By: Kaiji Chen (Emory University, Department of Economics); Alfonso Irarrazabal (Norges Bank (Central Bank of Norway))
    Abstract: The Chilean economy experienced a decade of sustained growth in aggregate out-put and productivity after the 1982 .nancial crisis. This paper analyzes the effects of resource misallocation on total factor productivity (TFP) of the manufacturing sector by applying the methodology of Hsieh and Klenow (2009) to the establishment data from the Chilean manufacturing census. We find that a reduction in resource misallocation accounts for about 46 percent of the growth in manufacturing TFP between 1983 and 1996. The improvement in allocative effciency, moreover, is essentially driven by a reduction in the cross-sectional dispersion of output distortion. In particular, a reduction in the least productive plants.output subsidies is the most important reason for the reduction in resource misallocation during this period.
    Keywords: Misallocation, TFP, Chile
    JEL: O1 O47
    Date: 2013–01–07
  11. By: Barge-Gil, Andrés; López, Alberto
    Abstract: The link between R&D and productivity has been widely analyzed. However, these innovation activities have been considered as a whole. This paper analyzes the differentiated effect of research and development on productivity and tests the existence of complementarity between these activities. We find evidence supporting the existence of a direct effect of both innovation activities. Most interesting, our results suggest that there is complementarity between research and development in determining productivity.
    Keywords: R&D; Productivity; Complementarity
    JEL: O33
    Date: 2013–01
  12. By: Per J. Agrell (Université Catholique de Louvain and Louvain School of Management); Mehdi Farsi (University of Neuchâtel); Massimo Filippini (ETH Zurich, Switzerland); Martin Koller (ETH Zurich, Switzerland)
    Abstract: The purpose of this study is to analyze the cost efficiency of electricity distribution systems in order to enable regulatory authorities to establish price- or revenue cap regulation regimes. The increasing use of efficiency analysis in the last decades has raised serious concerns among regulators and companies regarding the reliability of efficiency estimates. One important dimension affecting the reliability is the presence of unobserved factors. Since these factors are treated differently in various models, the resulting estimates can vary across methods. Therefore, we decompose the benchmarking process into two steps. In the first step, we identify classes of similar companies with comparable network and structural characteristics using a latent class cost model. We obtain cost best practice within each class in the second step, based on deterministic and stochastic cost frontier models. The results of this analysis show that the decomposition of the benchmarking process into two steps has reduced unobserved heterogeneity within classes and, hence, reduced the unexplained variance previously claimed as inefficiency.
    Keywords: Efficiency analysis; cost function; electricity sector; incentive regulation
    JEL: L92 L50 L25
    Date: 2013–01
  13. By: Laurens Cherchye; Bram De Rock
    Abstract: We reconsider the motivation of Data Envelopment Analysis (DEA), the non-parametrictechnique that is widely employed for analyzing productive efficiency in academia, the privatesector and the public sector. We first argue that the conventional engineering motivationof DEA can be problematic since it often builds on unverifiable production axioms. Wethen provide a dual viewpoint and highlight the `behavioral' interpretation of DEA models.We start from a specification of the production objectives while imposing minimal structureon the production possibilities, and construct tools to meaningfully quantify deviations ofobserved producer behavior from optimizing behavior. This brings to light the economicmeaning of DEA, provides guidelines for selecting the appropriate model in practical researchsettings, and prepares the ground for instituting new DEA models. We hope that our insightswill contribute to the further dissemination of DEA, and stimulate public sector applicationsof DEA that build on its behavioral interpretation.
    Keywords: non-parametric production analysis; economic efficiency; DEA
    JEL: C14 C61 D21 D24
    Date: 2013–01
  14. By: Nicola Comincioli (University of Brescia); Laura Poddi (University of Ferrara); Sergio Vergalli (University of Brescia and FEEM)
    Abstract: Over the last two decades in OECD countries an increasing number of firms are obtaining certification as Socially Responsible (CSR is the acronym for Corporate Social Responsibility). Several studies (including Preston and O’Bannon, 1997; Waddock and Graves, 1997; McWilliams and Sieger, 2001; Ullman, 1985) have sought to test whether there is a relation between Social Responsibility certification and the firms’ performance. Our work builds a CSR index that intersects two of the three main international indices (Domini 400 Social Index, Dow Jones Sustainability World Index, FTSE4Good Index), in order to overcome some problems related to the multiplicity of CSR definitions and certifications. By using this database, our work carries out a stratigraphical analysis in order to verify whether some variables are statistically different in the CSR group with respect to the benchmark case (non-CSR). The main results show that there are several interesting differences in some economic indicators between CSR and non-CSR firms and between USA and EU, and among different industrial sectors.
    Keywords: Corporate Social Responsibility, Growth
    JEL: M14 C23 O10
    Date: 2012–10

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