nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2013‒02‒03
eleven papers chosen by
Angelo Zago
University of Verona

  1. The Impact of the Global Financial Crisis on Efficiency and Productivity of the Banking System in South Africa By Andrew Maredza and Sylvanus Ikhide
  2. The Impact of Liberalization on the Production of Electricity in Japan By Miyuki Taniguchi
  3. R&D and Non-Linear Productivity Growth of Heterogeneous Firms By d'Artis Kancs; Boriss Siliverstovs
  4. The Impact of Educational Mismatch on Firm Productivity: Evidence from Linked Panel Data By Kampelmann, Stephan; Rycx, Francois
  5. Efficiency analysis of commercial grape-producing family farms in the Republic of Macedonia By Manevska-Tasevska, Gordana
  6. Service sector reform and manufacturing productivity : evidence from Indonesia By Duggan, Victor; Rahardja, Sjamsu; Varela, Gonzalo
  7. Reallocation and Technology: Evidence from the U.S. Steel Industry By Allan Collard-Wexler; Jan De Loecker
  8. The fixed effects estimator of technical efficiency By Wikström, Daniel
  9. Internationalization choices: an ordered probit analysis at industry-level By Pietrovito, Filomena; Pozzolo, Alberto Franco; Salvatici, Luca
  10. The Influence of Voluntary and Mandatory Environmental Performance on Financial Performance: An Empirical Study of Indonesian Firms By Kimitaka Nishitani; Nurul Jannah; Hardinsyah Ridwan; Shinji Kaneko
  11. Drivers of Firm Growth: Micro-evidence from Indian Manufacturing By Nanditha Mathew

  1. By: Andrew Maredza and Sylvanus Ikhide
    Abstract: South Africa‘s financial sector is believed to have weathered the contagion and catastrophic effects of the 2008 world wide financial crisis partly on account of a sound regulatory framework and solid macroeconomic policies. In this paper, we seek to measure efficiency and productivity changes during the period of the crisis through an analysis of bank performance over the period 2000 — 2010 using a two stage methodology framework. The recently developed Hicks-Moorsteen total factor productivity (TFP) index approach developed by O‘Donnell (2010a) as opposed to the popular Malmquist TFP was utilised. Our first stage results showed that during the crisis period there was a noticeable but mild deviation of total factor productivity and efficiency measures. Second stage analysis using the censored Tobit model showed that the financial crisis was the main determinant of bank efficiency, indicating that total factor productivity efficiency was 16.96% lower during the crisis period compared to the pre-crisis period.
    Keywords: Bank efficiency, data envelopment analysis, global financial crisis, Hicks-Moorsteen, Malmquist, South African banking, total factor productivity efficiency, censored Tobit model
    JEL: G01 G21 C14 C24
    Date: 2013
  2. By: Miyuki Taniguchi (Graduate School of Economics, Keio University)
    Abstract: This study aims to measure the impact of liberalization on the efficiency of electricity production in Japan, and to examine whether or not economies of scope exist between electricity generation and transmission. Since 1995, liberalization of the electricity market in Japan has been phased in and regulations on entry have been relaxed three times. One motivation for these regulatory changes has been to improve the efficiency of electricity production by introducing competition. Using a panel data set on the nine main power companies in Japan over the period 1970-2010, fixed-effects and stochastic frontier estimates of the cost function are obtained and compared. Estimates of the cost function show that liberalization has improved cost efficiency. Economies of scope are found to exist for all firms.
    Date: 2013–01
  3. By: d'Artis Kancs (JRC-IPTS); Boriss Siliverstovs (ETH Zurich - KOF Swiss Economic Institute)
    Abstract: The present paper studies the relationship between R&D investment and firm productivity growth by explicitly accounting for non-linearities in the R&D-productivity relationship and inter-sectoral firm heterogeneity. In order to address these issues, we employ a two step estimation approach, and match two firm-level panel data sets for the OECD countries, which allows us to relax both the linearity and homogeneity assumptions of the canonical Griliches (1979) knowledge capital model. Our results suggest that: (i) R&D investment increases firm productivity with an average elasticity of 0.15; (ii) the impact of R&D investment on firm productivity is differential at different levels of R&D intensity – the productivity elasticity ranges from -0.02 for low levels of R&D intensity to 0.33 for high levels of R&D intensity; (iii) the relationship between R&D expenditures and productivity growth is non-linear, and only after a certain critical mass of R&D is reached, the productivity growth is significantly positive; (iv) there are important intersectoral differences with respect to R&D investment and firm productivity – high-tech sectors’ firms not only invest more in R&D, but also achieve more in terms of productivity gains connected with research activities.
    Keywords: R&D investment, firm productivity, generalised propensity score
    JEL: C14 C21 D24 F23 O32
    Date: 2012–12
  4. By: Kampelmann, Stephan (Free University of Brussels); Rycx, Francois (Free University of Brussels)
    Abstract: We provide first evidence regarding the direct impact of educational mismatch on firm productivity. To do so, we rely on representative linked employer-employee panel data for Belgium covering the period 1999-2006. Controlling for simultaneity issues, time-invariant unobserved workplace characteristics, cohort effects and dynamics in the adjustment process of productivity, we find that: i) a higher level of required education exerts a significantly positive influence on firm productivity, ii) additional years of over-education (both among young and older workers) are beneficial for firm productivity, and iii) additional years of under-education (among young workers) are detrimental for firm productivity.
    Keywords: linked panel data, productivity, educational mismatch, GMM
    JEL: I21 J24
    Date: 2012–12
  5. By: Manevska-Tasevska, Gordana
    Abstract: An empirical analysis was conducted on the efficiency of commercial grape-producing family farms in the Republic of Macedonia in order to examine how farm performance is influenced by selected aspects of the current Rural Development Programme (RDP) (2007-2013). The emphasis was on Macedonian grape production on family farms and on instruments for more efficient use of resources, production modernisation, vine revitalisation, and the knowledge and managerial capacity of Macedonian grape growers. A two-stage analysis was carried out on farm-level data for the period 2006-2008. The estimated efficiency scores indicated that substantial efficiency improvements are possible on Macedonian grape-producing farms, with potential for a cost decrease of 29% (20% and 36% with parametric and bootstrapping applied) if farmers manage inputs more efficiently. Farm revenue can be improved by 47% (61% when bootstrapping applied) if farmers manage to increase the value of outputs. More efficient farms used a smaller area, irrigated a smaller proportion of total area, used less hired labour, used and paid less for inputs, but produced a larger quantity, with higher value per hectare. The technically more efficient farmers were: younger farmers, farmers with profit maximisation objectives; farmers with lower expectations of a better future for farming; farmers making choices with other family members; farmers monitoring production on the farm and maintaining bookkeeping records; those attending seminars, and those interested in competence-based knowledge such as plant protection, credit/investments. Interventions in production assortment and quality have potential to influence farm performance. Rural development policies can help improve farm efficiency. RDP measures targeted at achieving stable yield, yield improvement and modernisation of equipment, improving farmers' managerial performance and strengthening the capacity of sources providing non-formal education should be a high priority.
    Date: 2011–12
  6. By: Duggan, Victor; Rahardja, Sjamsu; Varela, Gonzalo
    Abstract: This paper examines the extent to which policy restrictions on foreign direct investment in the Indonesian service sector affected the performance of manufacturers over the period 1997-2009. It uses firm-level data on manufacturers'total factor productivity and the OECD's foreign direct investment Regulatory Restrictiveness Index, combined with data from Indonesia’s input-output tables regarding the intensity with which manufacturing sectors use services inputs. Controlling for firm-level fixed effects and other relevant policy indicators, it finds, first, that relaxing policies toward foreign direct investment in the service sector was associated with improvements in perceived performance of the service sector. Second, it finds that this relaxation in service sector foreign direct investment policies accounted for 8 percent of the observed increase in manufacturers'total factor productivity over the period. The total factor productivity gains accrue disproportionately to those firms that are relatively more productive, and that gains are related to the relaxation of restrictions in both the transport and electricity, gas, and water sectors. Total factor productivity gains are associated, in particular, with the relaxation of foreign equity limits, screening, and prior approval requirements, but less so with discriminatory regulations that prevent multinationals from hiring key personnel abroad.
    Keywords: E-Business,Banks&Banking Reform,Transport Economics Policy&Planning,ICT Policy and Strategies,Emerging Markets
    Date: 2013–01–01
  7. By: Allan Collard-Wexler; Jan De Loecker
    Abstract: We measure the impact of a drastic new technology for producing steel – the minimill – on the aggregate productivity of U.S. steel producers, using unique plant-level data between 1963 and 2002. We find that the sharp increase in the industry's productivity is linked to this new technology, and operates through two distinct mechanisms. First, minimills displaced the older technology, called vertically integrated production, and this reallocation of output was responsible for a third of the increase in the industry's productivity. Second, increased competition, due to the expansion of minimills, drove a substantial reallocation process within the group of vertically integrated producers, driving a resurgence in their productivity, and consequently of the industry's productivity as a whole.
    JEL: L1 O3
    Date: 2013–01
  8. By: Wikström, Daniel
    Abstract: Firms and organizations, public or private, often operate on markets characterized by non-competitiveness. For example agricultural activities in the western world are heavily subsidized and electricity is supplied by firms with market power. In general it is probably more difficult to find firms that act on highly competitive markets, than firms that are not. To measure different types of inefficiencies, due to this lack of competitiveness, has been an ongoing issue, since at least the 1950s when several definitions of inefficiency was proposed and since the late 1970s as stochastic frontier analysis. In all three articles presented in this thesis the stochastic frontier analysis approach is considered. Furthermore, in all three articles focus is on technical inefficiency. The ways to estimate technical inefficiency, based on stochastic frontier models, are numerous. However, focus in this thesis is on fixed effects panel data estimators. This is mainly for two reasons. First, the fixed effects analysis does not demand explicit distributional assumptions of the inefficiency and the random error of the model. Secondly, the analysis does not require the random effects assumption of independence between the firm specific inefficiency and the inputs selected by the very same firm. These two properties are exclusive for fixed effects estimation, compared to other stochastic frontier estimators. There are of course flaws attached to fixed effects analysis as well, and the contribution of this thesis is to probe some of these flaws, and to propose improvements and tools to identify the worst case scenarios. For example the fixed effects estimator is seriously upward biased in some cases, i.e. inefficiency is overestimated. This could lead to false conclusions, like e.g. that subsidies in agriculture lead to severely inefficient farmers even if these farmers in reality are quite homogenous. In this thesis estimators to reduce bias as well as mean square error are proposed and statistical diagnostics are designed to identify worst case scenarios for the fixed effects estimator as well as for other estimators. The findings can serve as important tools for the applied researcher, to obtain better approximations of technical inefficiency.
    Date: 2012–11–16
  9. By: Pietrovito, Filomena; Pozzolo, Alberto Franco; Salvatici, Luca
    Abstract: Trade theory traces back different patterns of internationalization to heterogeneity between firms, measured both through differences in productivity levels and size. In this paper we analyze the link between heterogeneity within sectors and internationalization choices, namely trade and foreign direct investments (FDI) for a large sample of countries and industries between 1994 and 2004. The focus of our paper is on the role played by average productivity level and the distribution of firms by size in explaining differences across sectors and countries in the extensive margin of internationalization (i.e., the number of foreign nations where firms from a given sector and country have expanded abroad). By performing an ordered probit analysis, and controlling for other factors affecting the patterns of internationalization, we confirm that industries with higher productivity levels and with a distribution of firms shifted toward large firms are more prone to internationalize in foreign markets through both trade and FDI. Moreover, the relative impact of average productivity and firm size on FDI is larger than that on trade. These results are robust to different measures of productivity and the distribution of firms.
    Keywords: exports, foreign direct investments, mergers and acquisitions, productivity, distribution of firms, ordered probit
    JEL: D24 F10 F14 F20 F23
    Date: 2013–01–25
  10. By: Kimitaka Nishitani (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Nurul Jannah (Ministry of the Environment, Indonesia); Hardinsyah Ridwan (Faculty of Human Ecology, Bogor Agriculture University, Indonesia); Shinji Kaneko (Graduate School for International Development and Cooperation, Hiroshima University, Japan)
    Abstract: This paper, using data derived from a questionnaire survey of Indonesian firms, analyzes not only whether a firm's environmental performance improves its financial performance, but also whether this relationship depends on the firm's stance on conducting environmental management voluntarily or mandatorily. The estimation results suggest that a reduction of greenhouse gas (GHG) emissions increases a firm's profit, because firms that conduct environmental management voluntarily are more likely to reduce GHG emissions. However, this is not the case for the reduction of pollution emissions, because firms that conduct environmental management mandatorily are more likely to reduce pollution emissions. These results imply that only firms conducting environmental management voluntarily can improve financial performance through better environmental performance in Indonesia.
    Date: 2013–01
  11. By: Nanditha Mathew
    Abstract: The paper presents micro evidence on firm dynamics for enterprises in Indian Manufacturing sectors on the grounds of Prowess database provided by the Cen- tre for Monitoring Indian Economy (CMIE) covering the period 1991-2010. The parameterization of the distributions of growth exhibit high level heterogeneity displayed among firms even within the same sector, which widens over time. The transition probabilities matrix reveals the coexistence of firms with very different characteristics and performance within sectors. Given the wide heterogeneities, the paper resorts to quantile regression to identify the differential effect of regressors at different deciles of the conditional distrubution.
    Keywords: Firm Dynamics, AEP Distribution, Heterogeneity, Quantile Regression
    Date: 2012–12–17

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