New Economics Papers
on Efficiency and Productivity
Issue of 2013‒08‒31
twelve papers chosen by

  1. Productivity Analysis in Power Generation Plants Connected to the National Grid: A New Case of Bio Economy in Nicaragua. By Blanco Orozco, Napoleón Vicente; Zuniga Gonzalez, Carlos Alberto
  2. Assessing education's contribution to productivity using firm-level evidence By Lara LEBEDINSKI; Vincent VANDENBERGHE
  3. Is mining fuelling long-run growth in Russia? Industry productivity growth trends since 1995 By Timmer , Marcel P.; Voskoboynikov , Ilya B.
  4. Land Use Regulation and Productivity - Land Matters: Evidence from a UK Supermarket Chain By Paul Cheshire; Christian A. L. Hilber; Ioannis Kaplanis
  5. With a little help from my friends: Supplying to multinationals, buying from multinationals, and domestic firm performance By Holger Görg; Adnan Seric
  6. Energy intensity developments in 40 major economies: Structural change or technology improvement? By De Cian, Enrica; Schymura, Michael; Verdolini, Elena; Voigt, Sebastian
  7. Econometric Mediation Analyses: Identifying the Sources of Treatment Effects from Experimentally Estimated Production Technologies with Unmeasured and Mismeasured Inputs By Heckman, James J.; Pinto, Rodrigo
  8. Imported Intermediate Inputs and Workforce Composition: Evidence from India's Tariff Liberalization By Shruti Sharma
  9. Measuring bank competition in China: a comparison of new versus conventional approaches applied to loan markets By Bing Xu; Adrian Van Rixtel; Michiel Van Leuvensteijn
  10. State Incentives for Innovation, Star Scientists and Jobs: Evidence from Biotech By Enrico Moretti; Daniel J. Wilson
  11. Modelling italian potential output and the output gap By Antonio Bassanetti; Michele Caivano; Alberto Locarno
  12. Customer Driven Establishment Dynamics and Allocative Efficiency By Allen Tran

  1. By: Blanco Orozco, Napoleón Vicente; Zuniga Gonzalez, Carlos Alberto
    Abstract: The purpose of this paper was to study the productivity where renewable energy resources and non-renewable resources for generating electricity in power plants connected to the national grid of Nicaragua were used. This article analyzed the total factor productivity of Bioeconomy for the generation of electricity from plants using sugarcane bagasse (biomass) as a renewable resource and petroleum. The data envelopment analysis (DEA) and the Malmquist index were used to measure the total factor productivity of power generation utilities connected to the national grid of Nicaragua. The results obtained by comparing sugar mills connected to the SIN was that Monte Rosa mill has a higher rate of increase in productivity due to the change of total factor productivity and when comparing thermal plants that employ petroleum products in power generation, the more efficient were ALBANISA, GECSA and TIPITAPA POWER; but when comparing thermal plants and some using renewable energy San Antonio sugar mill and ALBANISA were more efficient.
    Keywords: Productivity, Malmquist index, Biomass, Bio Economy, Oil fuel, Energy
    JEL: O14 O43 Q20 Q28
    Date: 2013–02–08
  2. By: Lara LEBEDINSKI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: There is plenty of individual-level evidence, based on the estimation of Mincerian equations, showing that better-educated individuals earn more. This is usually interpreted as a proof that education raises labour productivity. Some macroeconomists, analysing cross-country time series, also support the idea that the continuous expansion of education has contributed positively to growth. Surprisingly, most economists with an interest in human capital have neglected the level of the firm to study the education-productivity-wage nexus. And the few published works considering firm-level evidence are lacking a proper strategy to cope with the endogeneity problem inherent to the estimation of production and wage functions. This paper taps into a rich, firm-level, Belgian panel database that contains information on productivity, labour cost and the workforce’s educational attainment. It aims at providing estimates of the causal effect of education on productivity and wage/labour costs. Therefore, it exclusively resorts to within firm changes to deal with time-invariant heterogeneity bias. What is more, it addresses the risk of simultaneity bias (endogeneity of firms’ education-mix choices in the short run) using the structural approach suggested by Ackerberg, Caves & Frazer (2006), alongside more traditional system-generalized method of moments (GMM) methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Results suggest that human capital, in particular larger shares of university-educated workers inside firms, translate into significantly higher firm-level labour productivity, and that labour costs are relatively well aligned on education-driven labour productivity differences. In other words, we find evidence that the Mincerian relationship between education and individual wages is driven by a strong positive link between education and firm-level productivity.
    Keywords: Education, Human capital, Firm-Level Productivity and Labour Cost, Cobb-Douglas, CES, imperfect substitutability
    JEL: J24 E24 C51
    Date: 2013–08–26
  3. By: Timmer , Marcel P. (BOFIT); Voskoboynikov , Ilya B. (BOFIT)
    Abstract: GDP per capita growth rates in Russia have been among the highest in the world since the mid-1990s. Previous growth accounting research suggests that this was mainly driven by multi-factor productivity (MFP) growth. In this paper we analyse for the first time the drivers of Russian growth for thirty-four industries over the period 1995 to 2008. We pay in particular attention to the construction of a proper measure of capital services, to use in place of the stock measures employed in previous research. Based on these new measures, we find that aggregate GDP growth is driven as much by capital input as by MFP growth. Mining and Retailing account for an increasing share of the inputs, but are weak in terms of MFP performance. In contrast, MFP growth was rapid in goods-producing industries, but the sector’s GDP share declined. The major drivers of MFP growth were in the high-skilled services industries that were particularly underdeveloped in the Russian economy in the 1990s.
    Keywords: industrial growth accounting; structural change; Russia
    JEL: L16 O47 P28
    Date: 2013–08–12
  4. By: Paul Cheshire; Christian A. L. Hilber; Ioannis Kaplanis
    Abstract: We use store-specific data for a UK supermarket chain to estimate the impact of planning on store output. Exploiting the variation in policies between England and other UK countries, we isolate the impact of Town Centre First (TCF) policies introduced in England. We find they directly reduced output by forcing stores onto less productive sites. We estimate TCF policies imposed a loss of output of 32 percent on a representative store opening after their rigorous implementation in 1996. Additionally, we show that, household numbers constant, more restrictive local authorities have fewer stores and lower chain sales within their areas.
    Keywords: retail productivity, land use regulation, Town Centre First, local regulatoryconstraints
    JEL: D2 L51 L81 R32
    Date: 2013–08
  5. By: Holger Görg; Adnan Seric
    Abstract: This paper uses firm level data for 19 African countries to look at the link between domestic firms’ business relationship with multinationals and their performance in terms of innovation and productivity. Quite uniquely, we also evaluate the importance of support received by the domestic firm, either from the government or the multinational business partner, for this link. Overall, our data analysis shows that for the average domestic firm, supplying to a foreign multinational in the country (the backward linkage) is positively associated with product innovation. Buying from a multinational (the forward linkage) is positively associated with labor productivity. These results are independent of any type of support from the government or multinationals. We also find that domestic firms’ process innovation activity is only positively associated with supplying a multinational if the firm also receives assistance from the government or multinational. Furthermore, we find that supplying a multinational is only positively associated with domestic firms’ productivity if the firm received technology transfer from the multinational customers
    Keywords: multinationals, technology transfer
    JEL: F23
    Date: 2013–08
  6. By: De Cian, Enrica; Schymura, Michael; Verdolini, Elena; Voigt, Sebastian
    Abstract: This study analyzes energy intensity trends and drivers in 40 major economies using the WIOD database, a novel harmonized and consistent dataset of input-output table time series accompanied by environmental satellite data. We use logarithmic mean Divisia index decomposition to (1) study trends in global energy intensity between 1995 and 2007, (2) attribute efficiency changes to either changes in technology or changes in the structure of the economy, and (3) highlight sectoral and regional differences. We first show that heterogeneity within each sector across countries is high. These general trends within the sectors are dominated by large economies, first and foremost the United States. In most cases, heterogeneity is lower within each country across the different sectors. Regarding changes of energy intensity at the country level, improvements between 1995 and 2007 are largely attributable to technological change while structural change is less important in most countries. Notable exceptions are Japan, the United States, Australia, Taiwan, Mexico and Brazil where a change in the industry mix was the main driver behind the observed energy intensity reduction. --
    Keywords: Energy intensity,Logarithmic mean Divisia index decomposition,WIOD database
    JEL: Q43 C43
    Date: 2013
  7. By: Heckman, James J. (University of Chicago); Pinto, Rodrigo (University of Chicago)
    Abstract: This paper presents an econometric mediation analysis. It considers identification of production functions and the sources of output effects (treatment effects) from experimental interventions when some inputs are mismeasured and others are entirely omitted.
    Keywords: production function, mediation analysis, measurement error, missing inputs
    JEL: C21 C38 C43 D24
    Date: 2013–08
  8. By: Shruti Sharma (University of California, Santa Cruz)
    Abstract: This paper extends the literature on trade liberalization and labour by investigating the relationship between imports of intermediate inputs and plant-level workforce composition during India’s tariff liberalization. Using detailed plant-level data from the Indian manufacturing sector, I first show that the increase in imports of intermediate inputs in response to input tariff liberalization has strong displacement effects on production workers employed by importing plants. Next, I decompose the impact of intermediate inputs on labour into “quality”, “variety”, and “scale” effects, based on the availability and prices of domestically-produced inputs. I find that the displacement of production workers is driven by lower-priced imported intermediate inputs, the “scale” effect. Finally, I examine the differential effect of tariff liberalization based on whether plants experience import competition or not. This analysis reveals that domestic plants facing import competition experience a displacement of both skilled and unskilled workers in response to tariff liberalization. Plants that switch from in-house production to importing some intermediate inputs however only displace production workers while retaining skilled workers. This suggests that skilled workers are indispensable to plants switching to importing as a productivity enhancing strategy.
    Date: 2013–06
  9. By: Bing Xu; Adrian Van Rixtel; Michiel Van Leuvensteijn
    Abstract: Since the 1980s, important and progressive reforms have profoundly reshaped the structure of the Chinese banking system. Many empirical studies suggest that financial reform promoted bank competition in most mature and emerging economies. However, some earlier studies that adopted conventional approaches to measure competition concluded that bank competition in China declined during the past decade, despite these reforms. In this paper, we show both empirically and theoretically that this apparent contradiction is the result of flawed measurement. Conventional indicators such as the Lerner index and Panzar-Rosse H-statistic fail to measure competition in Chinese loan markets properly due to the system of interest rate regulation. By contrast, the relatively new Profit Elasticity (PE) approach that was introduced in Boone (2008) as Relative Profit Differences (RPD) does not suffer from these shortcomings. Using balance sheet information for a large sample of banks operating in China during 1996–2008, we show that competition actually increased in the past decade when the PE indicator is used. We provide additional empirical evidence that supports our results. We find that these firstly are in line with the process of financial reform, as measured by several indices, and secondly are robust for a large number of alternative specifications and estimation methods. All in all, our analysis suggests that bank lending markets in China have been more competitive than previously assumed.
    Keywords: Competition, banking industry, China, lending markets, marginal costs, regulation, deregulation
    Date: 2013–08
  10. By: Enrico Moretti (Berkeley, USA; NBER, USA; CEPR, UK; IZA, Germany); Daniel J. Wilson (Federal Reserve Bank of San Francisco, USA; University of Michigan, USA)
    Abstract: We evaluate the effects of state-provided financial incentives for biotech companies, which are part of a growing trend of placed-based policies designed to spur innovation clusters. We estimate that the adoption of subsidies for biotech employers by a state raises the number of star biotech scientists in that state by about 15 percent over a three year period. A 10% decline in the user cost of capital induced by an increase in R&D tax incentives raises the number of stars by 22%. Most of the gains are due to the relocation of star scientist to adopting states, with limited effect on the productivity of incumbent scientists already in the state. The gains are concentrated among private sector inventors. We uncover little effect of subsidies on academic researchers, consistent with the fact that their incentives are unaffected. Our estimates indicate that the effect on overall employment in the biotech sector is of comparable magnitude to that on star scientists. Consistent with a model where workers are fairly mobile across states, we find limited effects on salaries in the industry. We uncover large effects on employment in the non-traded sector due to a sizable multiplier effect, with the largest impact on employment in construction and retail. Finally, we find mixed evidence of a displacement effect on states that are geographically close, or states that economically close as measured by migration flows.
    Date: 2013–07
  11. By: Antonio Bassanetti; Michele Caivano; Alberto Locarno
    Abstract: The aim of the paper is to estimate a reliable quarterly time-series of potential output for the Italian economy,exploiting four alternative approaches: a Bayesian unobserved component method, a univariate time-varying autoregressive model, a production function approach and a structural VAR. Based on a wide range of evaluation criteria, all methods generate output gaps that accurately describe the Italian business cycle over the past three decades. All output gap measures are subject to non-negligible revisions when new data become available. Nonetheless they still prove to be informative about the current cyclical phase and, unlike the evidence reported in most of the literature, helpful at predicting inflation compared with simple benchmarks. We assess also the performance of output gap estimates obtained by combining the four original indicators, using either equal weights or Bayesian averaging, showing that the resulting measures (i) are less sensitive to revisions; (ii) are at least as good as the originals at tracking business cycle fluctuations; (iii) are more accurate as inflation predictors.
    Keywords: Potential output, business cycle, Phillips curve, output gap
    JEL: E37 C52
    Date: 2013–08
  12. By: Allen Tran (UCLA)
    Abstract: A common result from models of misallocation is that allocative efficiency is reflected in the correlation between size and productivity. But establishments start small which raises the question: how does the distribution of size have to evolve over the lifecycle to achieve allocative efficiency? Simply put, it must be that more productive establishments grow faster at the expense of less productive establishments. As evidence of this selection mechanism, I use establishment level data to construct cohorts of entrants and show that the spread of growth between fast and slow growing establishments is positively associated with higher exit rates. But unlike typical models that feature selection, I show that neither increases in input costs nor greater volatility are the force behind selection. To reconcile these facts, I present a model where the degree to which customers are willing to match with establishments who produce low quality goods introduces a new margin that affects selection. In the model, 60 per cent of changes in the intensity of selection come from changes in demand side behavior. To assess this new margin of selection, I recalibrate a parameter which controls the degree to which establishments can crowd out others for customers to match the slower fanning out in the evolution of the size distribution in Chile relative to the US. The model suggests that going from the US to Chile in this dimension would result in a 44 per cent loss in welfare.
    Date: 2013

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