New Economics Papers
on Efficiency and Productivity
Issue of 2013‒05‒11
twelve papers chosen by

  1. Technical efficiency of Kansas arable crop farms: a local maximum likelihood approach By Guesmi, Bouali; Serra, Teresa; Featherstone, Allen M.
  2. R&D and Non-Linear Productivity Growth of Heterogeneous Firms By d'Artis Kancs; Boriss Siliverstovs
  3. The Heterogeneous Effects of Workforce Diversity on Productivity, Wages and Profits By Garnero, Andrea; Rycx, Francois
  4. Exploring Reallocations Apparent Weak Contribution to Growth By Mitsukuni Nishida; Amil Petrin; Sašo Polanec
  5. Technical efficiency in small-scale irrigation cooperative and its determinants from the perspective of social capital heterogeneity–the case of northwestern China By Wang, Xin; McIntosh, Christopher S.; Watson, Philip; Zhang, Hua; Lu, Qian
  6. Growth of African economies: Productivity, policy syndromes, and the importance of institutions By Fosu, Augustin Kwasi
  7. Does cutting back the public sector improve efficiency? Some evidence from 15 European countries By Sabrina Auci; Laura Castellucci; Manuela Coromaldi
  8. The Labor Productivity Puzzle By Edward Prescott; Ellen McGrattan
  9. Globalization, occupational restructuring and firm performance By Maliranta, Mika
  10. Legal Reform, Contract Enforcement and Firm Size in Mexico By Sean Dougherty
  11. Back to Basics: Basic Research Spillovers, Innovation Policy and Growth By Nicolas Serrano-Velarde; Douglas Hanley; Ufuk Akcigit
  12. Policies To Encourage Home Energy Efficiency Improvements: Comparing Loans, Subsidies, and Standards By Walls, Margaret

  1. By: Guesmi, Bouali; Serra, Teresa; Featherstone, Allen M.
    Abstract: The present study uses local maximum likelihood (LML) methods recently proposed by Kumbhakar et al. (2007) to assess the technical efficiency of arable crop Kansas farms. LML techniques overcome the most relevant limitations associated to mainstream parametric stochastic frontier models. Results suggest that Kansas farms reach technical efficiency levels on the order of 90%. These results are compared with another flexible efficiency assessment alternative: the deterministic data envelopment analysis (DEA).
    Keywords: Technical efficiency, Nonparametric, Local maximum likelihood approach, Crop Production/Industries, Production Economics, Productivity Analysis, C14, Q12, D24,
    Date: 2013
  2. 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
  3. By: Garnero, Andrea (Paris School of Economics); Rycx, Francois (Free University of Brussels)
    Abstract: We estimate the impact of workforce diversity on productivity, wages and productivity-wage gaps (i.e. profits) using detailed Belgian linked employer-employee panel data. Findings, robust to a large set of covariates, specifications and econometric issues, show that educational (age) diversity is beneficial (harmful) for firm productivity and wages. The consequences of gender diversity are found to depend on the technological/knowledge environment of firms. While gender diversity generates significant gains in high-tech/ knowledge intensive sectors, the opposite result is obtained in more traditional industries. Overall, findings do not point to sizeable productivity-wage gaps except for age diversity.
    Keywords: wages, productivity, labour diversity, linked panel data, GMM
    JEL: D24 J24 J31 M12
    Date: 2013–04
  4. By: Mitsukuni Nishida; Amil Petrin; Sašo Polanec
    Abstract: Two recent meta-analyses use variants of the Baily, Hulten, and Campbell (1992) (BHC) decompositions to ask whether recent robust growth in Aggregate Labor Productivity (ALP) across twenty-five countries is due to lower barriers to input reallocation. They find weak gains from measured reallocation and strong within-plant productivity gains. We show these findings may be because BHC indices decompose ALP growth using plant-level output-per-labor (OL) as a proxy for the marginal product of labor and changes in OL as a proxy for changes in plant-level productivity. We provide simple examples to show that 1) reallocation growth from labor should track marginal changes in labor weighted by the marginal product of labor, 2) BHC reallocation growth can be positively correlated, negatively correlated, or uncorrelated with actual growth arising from the reallocation of inputs, and that 3) BHC indices can mistake growth from reallocation as growth from productivity, principally because OL is neither a perfect index of marginal products nor plant-level productivity. We then turn to micro-level data from Chile, Colombia, and Slovenia, and we find for the first two that BHC indices report weak or negative growth from labor reallocation. Using the reallocation definition based on marginal products we find a positive and robust role for labor reallocation in all three countries and a reduced role of plant-level technical efficiency in growth. We close by exploring potential corrections to the BHC decompositions but here we have limited success.
    JEL: J24 L60 O47
    Date: 2013–05
  5. By: Wang, Xin; McIntosh, Christopher S.; Watson, Philip; Zhang, Hua; Lu, Qian
    Abstract: Increased attention has recently been given to technical efficiency of small-scale irrigation to achieve food security and increase agricultural development. In this paper, the authors classify irrigation supply management methods as cooperative or non-cooperative, introduce social capital by four dimensions (social network, social trust, social reputation, and social participation), and highlight the impacts of both social capital and cooperative agreements on technical efficiency in the context of small-scale irrigation management. Efficiency is assessed using data envelopment analysis (DEA), and the impact of cooperative agreements and social capital on efficiency is estimated using path analysis. The result of DEA indicates that cooperative and social capital can improve technical efficiency of irrigation. Results of path analysis show that the presence of a cooperative has a positive, significant and direct impact on efficiency. Additionally, the effect of social capital on efficiency is estimated to be reinforced via participation in cooperative methods.
    Keywords: Technical efficiency, Cooperative agreement, Social capital, Small-scale irrigation, Consumer/Household Economics, Institutional and Behavioral Economics, Public Economics,
    Date: 2013
  6. By: Fosu, Augustin Kwasi
    Abstract: Recent evidence from an exhaustive political economy study of growth of African economies.the growth project of the African Economic Research Consortium (AERC) suggests that .policy syndromes. have substantially contributed to the generally poor growth in
    Keywords: growth of African economies, productivity, policy syndromes, institutions
    Date: 2013
  7. By: Sabrina Auci (University of Palermo); Laura Castellucci (University of Rome "Tor Vergata"); Manuela Coromaldi (University of Rome “Niccolò Cusano)
    Abstract: The successful development of the welfare state that transpired for three decades after WWII in the developed countries, came to a halt around the end of the 1980s. Since then, the number of articles and books dedicated to the crisis of the welfare state has increased. We can now assert that at the turn of the century, almost all industrialized countries had cut at least “some” entitlements in their welfare program along with other expenditure items, and the trend continued in the first decade of this century. To defend the cuts and possibly to justify continuing cuts, several economic reasons, both theoretical and empirical, have been highlighted. From mention of Baumol’s disease to the fiscal crisis, the support for making such decisions by governments gained momentum, with their political inspiration changing during the same period in favor of more conservative, right-wing positions. The low productivity of the public sector and the high level of tax burden were the substantial arguments used to support cuts. The aim of this paper is to provide an empirical investigation into the impact of retrenchment of the public sector on the performance of 15 European countries. In particular, we aim to empirically test the view that “big government” reduces a country's efficiency. We have found that no such empirical support exists. We have also included analysis of the distribution of income through the Gini index and have found the standard trade-off relation between inequality and efficiency.
    Keywords: Stochastic frontier production function, public sector productivity, welfare
    JEL: H11 H53 O4 D6
    Date: 2013–04–30
  8. By: Edward Prescott (Federal Reserve Bank of Minneapolis); Ellen McGrattan (Federal Reserve Bank of Minneapolis)
    Abstract: Prior to the mid-1980s, labor productivity growth was a useful barometer of the U.S. economy's performance: it was low during economic recessions and high during expansions. Since then, labor productivity has become significantly less procyclical. In the recent recession of 2008-2009, labor productivity actually rose as GDP plummeted. These facts have motivated the development of new business cycle theories because the conventional view is that they are inconsistent with existing business cycle theory. In this paper, we analyze recent events with existing theory and find that the labor productivity puzzle is much less of a puzzle than previously thought. In light of these findings, we argue that policy agendas arising from new untested theories should be disregarded.
    Date: 2012
  9. By: Maliranta, Mika
    Abstract: In this study, the patterns of occupational restructuring and their micro-level mechanisms are examined by applying standard measures of job and worker flows at the occupation and firm levels using longitudinal employeremployee data from the Finnish business sector for the years 2000-2006. Special attention is given to determining how global firms (i.e., multinational enterprises and offshoring firms) contribute to occupational restructuring and to establishing the role of occupational structures when explaining productivity and profitability gaps between global and local firms. The findings indicate that global firms have contributed to reshaping occupational structures, and although this contribution is clearly reflected in their productivity, it is not as clearly reflected in their profitability.The findings imply that employees have captured a dominant share of the productivity advantage of global firms.
    Keywords: globalization, offshoring, occupational restructuring, productivity, profitability
    JEL: J24 F23
    Date: 2013–01–29
  10. By: Sean Dougherty
    Abstract: Legal systems provide the basic institutions for firms and markets to operate. Their quality can have important consequences on the size distribution of firms, who rely on them for contract enforcement. This paper uses the variation in legal system quality across states in Mexico to examine the relationship between judicial quality and firm size. Although the country has a single legal system, its implementation and procedures vary widely, while development outcomes there are more imbalanced and unequal than in any other country of the OECD. The effect of the legal system on inter-state firm efficiency is therefore examined. Building on Laeven and Woodruff (2007), this study uses economic census microdata and contract enforcement ratings to examine the impact of state-level legal institutions on firm and industrylevel outcomes. A robust effect of judicial quality is observed on the firm size distribution and efficiency, instrumenting for underlying historical determinants of institutions. Indicative evidence is found that the effect is strongest in more capital-intensive industries. Market size and distance-to-market are also found to matter for firm size outcomes, consistent with the new trade literature.<P>La réforme juridique, la mise en application des contrats et la taille des entreprises au Mexique<BR>Les systèmes juridiques fournissent les institutions de base pour que les entreprises et les marchés fonctionnent. La qualité du système juridique peut avoir des conséquences importantes sur la distribution de la taille des entreprises. Ces mêmes entreprises comptent sur le système juridique pour la mise en application des contrats. Cet article utilise la variation de la qualité du système juridique dans tous les États du Mexique pour examiner la relation entre la qualité judiciaire et la taille des entreprises. Bien que le pays dispose d’un système juridique unique, sa mise en oeuvre et les procédures varient considérablement, tandis que les résultats de développement y sont plus déséquilibré et inégal que dans n’importe quel autre pays de l'OCDE. L’effet du système juridique sur l’efficacité des entreprises interétatique est donc examiné. S'appuyant sur les travaux de Laeven et Woodruff (2007), cette étude utilise les microdonnées du recensement économique et les notes sur la mise en application des contrats pour examiner l’impact des institutions juridiques étatiques sur l’entreprise et les résultats au niveau de l’industrie. Un effet significatif de la qualité judiciaire est observé sur la distribution de la taille des entreprises et leur efficacité, en instrumentation pour les déterminants sous-jacents historiques des institutions. Nous trouvons également que l’effet est plus important dans les industries à forte intensité de capital. La taille du marché et la distance aux marchés sont également influents sur les résultats de la taille de l’entreprise, conforme à la nouvelle littérature sur le commerce.
    Keywords: international trade, legal institutions, judicial efficiency, firm scale, commerce international, institutions juridiques, efficacité judiciaire, taille des entreprises
    JEL: F12 K4 L11 O12
    Date: 2013–04–11
  11. By: Nicolas Serrano-Velarde (Oxford University); Douglas Hanley (University of Pennsylvania); Ufuk Akcigit (University of Pennsylvania)
    Abstract: This paper introduces endogenous technical change through basic and applied research in a growth model. Basic research differs from applied research in two significant ways. First, significant advances in technological knowledge come through basic research rather than applied research. Second, these significant advances could potentially be applicable to multiple industries. Since these applications are not immediate, the innovating firm cannot exploit all the benefits of the basic innovations for production. We analyze the impact of this appropriability problem on firmsâ basic research incentives in an endogenous growth framework with private firms and an academic sector. After characterizing the equilibrium, we estimate our model using micro level data on research expenditures and behavior by French firms. We then decompose the aggregate growth by the source and type of innovation. Moreover, we quantitatively document the size of the underinvestment in basic research and consider various research policies to alleviate this inefficiency. Our analysis highlights the need for devoting a larger fraction of GDP for basic academic research, as well as higher subsidy rates for private research.
    Date: 2012
  12. By: Walls, Margaret (Resources for the Future)
    Abstract: Residential buildings are responsible for approximately 20 percent of U.S. energy consumption, and single-family homes alone account for about 16 percent. Older homes are less energy efficient than newer ones, and although many experts have identified upgrades and improvements that can yield significant energy savings at relatively low, or even negative, cost, it has proved difficult to spur most homeowners to make these investments. In this study, I analyze the energy and carbon dioxide (CO2) impacts from three policies aimed at improving home energy efficiency: a subsidy for the purchase of efficient space heating, cooling, and water heating equipment; a loan for the same purchases; and efficiency standards for such equipment. I use a version of the U.S. Energy Information Administration’s National Energy Modeling System, NEMS-RFF, to compute the energy and CO2 effects and standard formulas in economics to calculate the welfare costs of the policies. I find that the loan is quite cost-effective but provides only a very small reduction in emissions and energy use. The subsidy and the standard are both more costly but generate emissions reductions seven times larger than the loan. The subsidy promotes consumer adoption of very high-efficiency equipment, whereas the standard leads to purchases of equipment that just reach the standard. The discount rate used to discount energy savings from the policies has a large effect on the welfare cost estimates.
    Keywords: energy efficiency, building retrofits, welfare costs, cost-effectiveness
    JEL: L94 L95 Q40
    Date: 2012–12–06

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.