nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2013‒07‒28
fifteen papers chosen by
Angelo Zago
University of Verona

  1. Firm heterogeneity in TFP, sectoral innovation and geography. Evidence from Italy By Aiello, Francesco; Pupo, Valeria; Ricotta, Fernanda
  2. Are mega-farms the future of global agriculture ? exploring the farm size-productivity relationship By Deininger, Klaus; Nizalov, Denys; Singh, Sudhir K
  3. The educational efficiency drivers in Uruguay: Findings from PISA 2009. By Santín, Daniel; Sicilia, Gabriela
  4. Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy By Federico Cingano; Marco Leonardi; Julian Messina; Giovanni Pica
  5. Improved production systems for traditional food crops: The case of finger millet in Western Kenya By Christina Handschuch; Meike Wollni
  6. The Role of Costs in Irish Pension Fund Performance By Bridget McNally; Jim Stewart
  7. Does Agricultural Productivity Growth Promote a Dynamic Comparative Advantage in the Manufacturing Sector? By Kamei, Keita
  8. Do Trust-Based Relations Improve Firm’s Performance? Evidence from Transition Economies By Berulava, George
  9. Off the Rails: Is State Ownership Bad for Productivity? By Dan Bogart; Latika Chaudhary
  10. Say Pays! Shareholder Voice and Firm Performance By Cuñat, Vicente; Gine, Mireia; Guadalupe, Maria
  11. Demand Uncertainty and Hospital Costs: an Application to Portuguese NHS Hospitals By Alvaro Almeida; Joana Cima
  12. The Industry-Specific Relationships between Corporate Financial Performance and 11 Corporate Social Performance Dimensions: Taking a More Nuanced Perspective By Rathner, Sebastian
  13. Is Energy Efficiency Capitalized into Home Prices? Evidence from Three US Cities By Walls, Margaret; Palmer, Karen; Gerarden, Todd
  15. Cheating in the workplace: An experimental study of the impact of bonuses and productivity By David Gill; Victoria Prowse; Michael Vlassopoulos

  1. By: Aiello, Francesco; Pupo, Valeria; Ricotta, Fernanda
    Abstract: Sectoral and territorial specificities affect the firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of the these effects has been lacking. To this end, we combine a dataset of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004-2006 and are threefold. Firstly, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.
    Keywords: Total Factor Productivity, Firms’ Heterogeneity, Sectoral innovation, Geography, Cross-Classified Models
    JEL: L25 L60 O33
    Date: 2013–07–23
  2. By: Deininger, Klaus; Nizalov, Denys; Singh, Sudhir K
    Abstract: With farms cultivating tens or hundreds of thousands of hectares, Ukraine is often used to demonstrate the existence of economies of scale in modern grain production. Panel data analysis for all the country's farms with more than 200 hectares in 2001-2011 suggests that higher yields and profits are due to unobserved factors at rayon (district) and farm level rather than economies of scale. Productivity growth was driven not by farm expansion but by exit of unproductive and entry of more efficient farms. Higher initial shares of area under farms with more than 3,000 or 5,000 hectares at the rayon level significantly reduce subsequent exit, suggesting that land concentration reduces productivity growth. The paper draws implications for global evolution of farm structures.
    Keywords: Economic Theory&Research,Rural Development Knowledge&Information Systems,Crops and Crop Management Systems,Political Economy,Labor Policies
    Date: 2013–07–01
  3. By: Santín, Daniel; Sicilia, Gabriela
    Abstract: The aim of this research is to identify the main drivers of secondary school efficiency in Uruguay. We are particularly interested in identifying which variables could be influenced by the design of public policies in order to improve academic outcomes with the current resource allocation. To do this, we build a two-stage semiparametric model using PISA 2009 database. In the first stage, we use data envelopment analysis (DEA) to estimate efficiency scores, which are then regressed on school and student contextual variables. This second stage is carried out using four alternative models: a conventional censured regression (Tobit) and three different regression models based on the use of bootstrapping recently proposed in the literature. The results show an average inefficiency of 7.5% for the evaluated Uruguayan schools, suggesting that there is room for improving academic outcomes by adopting appropriate educational policies. Following on from this, the findings of the second stage demonstrate that increasing educational resources, such as reducing class size, has no significant effects on efficiency. In contrast, educational policies should focus on reviewing grade-retention policies, teaching-learning techniques, assessment systems and, most importantly, encouraging students to spend more time reading after school in order to reduce inefficiencies.
    Keywords: Educational production, efficiency, data envelopment analysis, bootstrap, PISA
    JEL: C61 D61 I2
    Date: 2012–03
  4. By: Federico Cingano (Bank of Italy); Marco Leonardi (University of Milan and IZA); Julian Messina (World Bank, University of Girona and IZA); Giovanni Pica (Università di Salerno, CSEF and Centro Luca D'Agliano)
    Abstract: Employment protection may affect both productivity and capital investment because higher adjustments costs hamper allocative efficiency and may therefore affect both the optimal capital labor input mix and total factor productivity. To estimate the impact of dismissal costs on capital deepening and productivity we exploit a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for bigger firms. We provide evidence that the increase in firing costs induced capital deepening and a decline in total factor productivity in small firms relative to larger firms after the reform. We also find that capital deepening is more pronounced at the low-end of the capital distribution – where the reform arguably hit harder – and among firms endowed with a larger amount of liquid resources, that have more room to react thanks to an easier access to the credit market. Our results also indicate that the EPL reform reduced the probability to access the credit market, possbily because stricter EPL reduces both the value of the firm and the amount of internal resources that the firm can pledge as collateral against lenders.
    Keywords: Capital Deepening, Severance Payments, Regression Discontinuity Design, Financial Market Imperfections, Credit Constraints
    JEL: J65 G31 D24
    Date: 2013–07–18
  5. By: Christina Handschuch (Georg-August-University Göttingen); Meike Wollni (Georg-August-University Göttingen)
    Abstract: Increasing agricultural productivity through the dissemination of improved cropping practices remains one of the biggest challenges of this century. A considerable amount of literature is dedicated to the adoption of improved cropping practices among smallholder farmers in developing countries. While most studies focus on cash crops or main staple crops, traditional food grains like finger millet have received little attention in the past decades. The present study aims to assess the factors that are influencing adoption decisions among finger millet farmers in Western Kenya. Based on cross-sectional household data from 270 farmers, we estimate a multivariate probit model to compare the adoption decisions in finger millet and maize production. While improved practices such as the use of a modern variety or chemical fertilizer are well known in maize production, they are less common in finger millet production. Results show that social networks as well as access to extension services play a crucial role in the adoption of improved finger millet practices, while the same variables are of minor importance for the adoption of improved maize practices. A Cobb-Douglas production function shows a positive effect of modern varieties and chemical fertilizer on finger millet yields.
    Keywords: finger millet; Kenya; technology adoption; social networks
    Date: 2013–07–15
  6. By: Bridget McNally (Department of Economics Finance and Accounting, National University of Ireland, Maynooth); Jim Stewart (Trinity College, Dublin)
    Abstract: This paper highlights the lack of transparency in the reporting of overall cost levels incurred by Irish pension schemes and demonstrates the impact of costs on pension fund performance. The paper relies on primary and secondary data analysis of financial statements of Irish pension schemes over a six year period. The paper finds that a significant portion of costs incurred by Irish pension schemes are not disclosed separately in the schemes’ financial statements. This results in a significant lack of transparency as to overall costs incurred annually by pension schemes. The RIY impact of pension fund costs (administrative and all other charges) over the lifetime of a scheme highlights the need for greater focus to be placed on cost efficiencies and competitiveness in any proposals for pension reform in Ireland.
    Keywords: Transparency, R.I.Y. impact, Cumulative effect
    Date: 2013
  7. By: Kamei, Keita
    Abstract: This paper develops a dynamic Ricardian trade model with a supply of productive infrastructure in the manufacturing sector. We discuss the onset of trade liberalization when the home country has a (dynamic) comparative advantage in the manufacturing sector. Moreover, we compare over time the total welfare that adds welfare during autarkic periods (pre-industrialization periods) to that during specializing in manufacturing sector periods (industrialization periods) with one that exclusively specializes in the agricultural sector. From this setting, the following results are obtained: (1) an increase in agricultural productivity may hasten the onset of liberalization, (2) an improvement in labor efficiency in the public sector necessarily hastens the onset of the trade liberalization; and (3) the total welfare that adds the welfare during autarkic periods to that during specializing in manufacturing sector periods may be higher than that of the economy that exclusively specializes in the agricultural sector.
    Keywords: Productive infrastructure, Industrialization, Timing of trade liberalization, Agricultural productivity
    JEL: F10 F43 O14
    Date: 2013
  8. By: Berulava, George
    Abstract: The purpose of this paper is to analyze the impact of trust-based relations on firm’s performance in transition economies. The trade credit variable is used as a proxy of trust-based relations and the propensity score matching method is employed to establish casual link between relational governance and business performance in the study. The research is conducted using data from a large survey of firms across 28 transition economies. The results of the study suggest that informal trust-based institutions of contract governance represent an important way for enhancing of business performance. To say distinctly, our findings indicate that in transition economies trade credits positively affect firms’ sales growth. They provide incentives for more intensive innovation activities and ensure higher labor productivity rates. The firms that trust their partners are characterized by larger proportions of reinvested profits as well. The main contribution of this paper is that it provides new empirical insights into the casual link between trust-based relations and business performance of firms in transition economies.
    Keywords: Keywords: trust-based relations, trade credit, networks, propensity score matching, business performance, transition economies
    JEL: D23 L14 P31 Z13
    Date: 2013–07–18
  9. By: Dan Bogart (Department of Economics, University of California-Irvine); Latika Chaudhary (Department of Economics, Scripps College)
    Abstract: The performance of Indian railways in the nineteenth century provides a great context to study the effects of state ownership on productivity and other aspects of operations. We rely on a key feature of the institutional background whereby the Government of India purchased a majority ownership stake in private railways at pre- determined dates set by contracts negotiated decades before the companies came under state ownership. Controlling for individual railway fixed effects, year fixed effects, and railway-specific time trends, we find no evidence of a decline in TFP following state takeovers of private companies. Instead of reducing productivity, as the recent experiences with privatization would suggest, we find that the Government of India maintained productivity when it became the owner of railways. Government ownership influenced certain areas of operations such as the capital-labor ratio, but not others such as fares. This suggests the state was able to achieve similar productivity without following the blueprint of private companies.
    Keywords: Nationalization; State owned enterprises; India; Railways; Institutions.
    JEL: D2 H54 L33 N75 O2
    Date: 2013–06
  10. By: Cuñat, Vicente; Gine, Mireia; Guadalupe, Maria
    Abstract: This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder "voice" by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.
    Keywords: Say-on-Pay;Shareholder Voice; Executive Compensation; Firm Performance; Governance
    JEL: G34 L20 M12
    Date: 2013–07–19
  11. By: Alvaro Almeida (CEF.UP and Faculdade de Economia, Universidade do Porto); Joana Cima (Faculdade de Economia, Universidade do Porto)
    Abstract: In this paper, we evaluate the effect of demand uncertainty on hospital costs. Since hospital managers want to minimize the probability of not having enough capacity to satisfy demand, hospitals have to build excess capacity since demand is uncertain, and incur on the associated costs. Using panel data that comprises information for 43 Portuguese NHS hospitals for the period 2007 to 2009, we estimate a translog cost function that relates total variable costs to the usual variables (outputs, the price of inputs, some of the hospitals’ organizational characteristics) and an additional term measuring the excess capacity related to the uncertainty of demand. Demand uncertainty is measured as the difference between actual and projected demand for emergency services. Our results indicate that the cost function term associated with the uncertainty of demand is significant, which means that cost functions that do not include this type of term may be misspecified. For most of our sample, hospitals that face higher demand uncertainty have higher excess capacity and higher costs. Furthermore, we identify economies of scale in hospital costs, at least for smaller hospitals, suggesting that a policy of merging smaller hospitals would make a significant contribution to the reduction of hospital costs.
    Keywords: hospitals, demand uncertainty, cost function
    JEL: D24 I11
    Date: 2013–07
  12. By: Rathner, Sebastian (University of Salzburg)
    Abstract: The aim of this paper is to investigate the influence of corporate social performance (CSP) dimensions on corporate financial performance (CFP). It contributes to the literature by exploring a new CSP dataset, by using a more fine-grained CSP measure than prior studies, by explicitly taking industry-specific differences in the CFP-CSP relationship into account and by using an instrumental variable approach to account for endogeneity. 3772 companies out of 10 industry classes are included in the analysis. The results suggest that some CSP dimensions positively influence CFP (e.g. corporate governance) while others impact CFP negatively (e.g. operations). These results remain largely unchanged if endogeneity is taken into account by estimating instrumental variable regressions. Further results show, that the relationships between CSP dimensions and CFP differ by industry class membership.
    Keywords: Corporate financial performance; Corporate social performance; Instrumental variable approach
    JEL: G12 M14
    Date: 2013–07–18
  13. By: Walls, Margaret (Resources for the Future); Palmer, Karen (Resources for the Future); Gerarden, Todd
    Abstract: We look for evidence of capitalization of energy efficiency features in home prices using data from real estate multiple listing services (MLS) in three metropolitan areas: the Research Triangle region of North Carolina; Austin, Texas; and Portland, Oregon. These home listings include information on Energy Star certification and, in Portland and Austin, local green certifications. Our results suggest that Energy Star certification increases the sales prices of homes built between 1995 and 2006 but has no statistically significant effect on sales prices for newer homes. The local certifications appear to have larger effects on sales prices, and that effect holds for both newer and older homes. The estimated home price premiums from certification imply annual energy cost savings that are sizeable fractions of estimated annual energy costs for homes in our sample, in some cases even above 100 percent. This suggests that the certifications either embody other attributes beyond energy efficiency that are of value to homebuyers or that buyers are overpaying for the energy savings. Further research is needed to better understand how consumers interpret home certifications and how they value the combination of “green” characteristics that many of those certifications embody.
    Keywords: Energy Star homes, energy efficiency, green certifications, hedonic model
    JEL: L94 L95 Q40
    Date: 2013–07–19
  14. By: Suhaeniti (International University of University); Sangyub Ryu (International University of University)
    Abstract: By applying Moore (1995) concept of distinctive managerial functions - managing upward, downward, and outward -, this study attempts to understand the impacts of middle-level management functions on organizational performance; and tries to investigate gender impacts on the middle-level management and performance linkages. This study employs Indonesian Family Life Survey 4 (IFLS4) crosssectional data and applies Weighted Least Squares (WLS) method to analyze some hypotheses constructed. The results indicate the significant impacts of managing downward negatively and managing outward positively on organization performance. Meanwhile, managing upward does not give the significant impact on organization performance. On the other hand, gendered managing outward effects on organization performance are strongly positive significant for female managers and strongly negative significant for males. For both male and female managers, managing downward gives significant positive impacts on organization performance, but males' effect is much greater than females. Lastly, the gendered managing upward effect is not significant related with organization performance. Therefore, it can be concluded that public managers need to give more efforts on managing outward by creating more networking to increase the organization performance. In contrast, the principals may need to modify their strategy to manage their subordinates because current managing downward strategy gives negative impacts on the organization performance.
    Keywords: managing upward, managing downward, managing outward, management, gender, performance, school, Indonesia
    Date: 2013–07
  15. By: David Gill; Victoria Prowse; Michael Vlassopoulos
    Abstract: We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating.  Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are paid.  Exposing workers to a compensation scheme based on random bonuses makes them cheat more but has no effect on their productivity.  We also find that more productive workers behave more dishonestly.  These results are consistent with workers' cheating behavior responding to the perceived fairness of their employer's compensation scheme.
    Keywords: Bonus, compensation, cheating dishonesty, lying, employee crime, productivity, slider task, real effort, experiment
    JEL: C91 J33
    Date: 2013–07–08

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