New Economics Papers
on Efficiency and Productivity
Issue of 2013‒10‒02
fifteen papers chosen by

  1. Financial Health and Firm Productivity: Firm-level Evidence from Viet Nam By Thangavelu, Shandre M.; Chongvilaivan, Aekapol
  2. Productivity and the Welfare of Nations By Basu, Susanto; Pascali, Luigi; Schiantarelli, Fabio
  3. Measuring national innovation systems efficiency – a review of DEA approach By Maxim Kotsemir
  4. Firms and gender: performance differentials between male and female firms By Domenico Depalo; Francesca Lotti
  5. Employee Trust and Workplace Performance By Sarah Brown; Jolian McHardy; Karl Taylor
  6. Fixed cost, variable cost, markups and returns to scale. By Xi Chen; Bertrand M. Koebel
  7. The Performance Effects of Individual and Group Incentives: A Case Study By Kato, Takao; Kauhanen, Antti; Kujansuu, Essi
  8. Sources, Reserves and Convergence of the Serbian Economic Growth - Jobless Growth of the Serbian Economy By Popović, Milenko
  9. Cheating in the workplace: An experimental study of the impact of bonuses and productivity By Gill, David; Prowse, Victoria; Vlassopoulos, Michael
  10. Does Agglomeration Promote the Internationalization of Chinese Firms? By ITO Banri; XU Zhaoyuan; YASHIRO Naomitsu
  11. Banks and Development: Jewish Communities in the Italian Renaissance and Current Economic Performance By Pascali, Luigi
  12. Methodological Problems in The Econometric Estimation of Production Functions By Maria Kazakova
  13. Performance Measurement in Healthcare Incentive Plans By Kauhanen, Antti; Salmi, Julia; Torkki, Paulus
  14. European regional convergence revisited: The role of space and the intangible assets By Jesús Peiró-Palomino
  15. Trade Liberalization, Division of Labor, and Firm Productivity By Kamei, Keita

  1. By: Thangavelu, Shandre M. (Asian Development Bank Institute); Chongvilaivan, Aekapol (Asian Development Bank Institute)
    Abstract: This paper empirically investigates whether financial health shores up firm productivity. It presents productivity as another driving factor in translating financial development into real economic progress. The authors’ empirical framework employs Levinsohn and Petrin’s (2003) semi-parametric estimation of total factor productivity (TFP) using firm-level panel data during 2002–2008, and incorporates financial health variables into conventional determinants of firm productivity. The findings suggest that liquidity and access to external credit boosts firm productivity, with the latter particularly imperative for exporting and/or importing firms.
    Keywords: financial health; total factor productivity; financial development
    JEL: O16 O25 O53
    Date: 2013–09–23
  2. By: Basu, Susanto (Boston College and NBER); Pascali, Luigi (Department of Economics, University of Warwick); Schiantarelli, Fabio (Boston College and IZA)
    Abstract: We show that the welfare of a country’s infinitely-lived representative consumer is summarized, to a firrst order, by total factor productivity (TFP) and by the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare di¤erences across countries. The result holds regardless of the type of production technology and the degree of product market competition. It applies to open economies as well, if TFP is constructed using domestic absorption, instead of gross domestic product, as the measure of output. Welfare relevant TFP needs to be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates, and will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of advanced countries with high-quality data on output, hours worked, and capital. We also present evidence for a broader sample that includes both advanced and developing countries. JEL classification: Productivity ; Welfare ; TFP ; Solow Residual JEL codes: D24 ; D90 ; E20 ; O47
    Date: 2013
  3. By: Maxim Kotsemir (Institute for Statistical Studies and Economics of Knowledge, National Research University — Higher School of Economics)
    Abstract: The paper reviews the application of the data envelopment analysis (DEA) method for measuring the efficiency of national innovation systems (NIS). The paper firstly visualizes the logic of DEA method and briefly summarizes the key advantages and main limitations of the DEA method. Further, this paper provides a comprehensive review of 11 empirical studies on cross-country analysis of NIS efficiency with DEA technique. In its main part the paper analyses the specifications of DEA models used in the reviewed studies, the content of the country samples, sets of input and output variables used and the resulting lists of efficient countries. The review detects general trends and differences in the sets of variables and the content of country samples. Moreover, this paper highlights the problem of “small countries bias” in the reviewed studies: situation when “small” (in terms of national innovation system scope and the level of development) countries (like Venezuela, Kyrgyzstan etc.) are included in the country sample, these “small” countries become the efficient ones. In general, empirical studies on cross-country analysis of national innovation systems efficiency using DEA method pay little attention to profound analysis of previous relevant studies. Therefore, this paper is among the first papers with deep review of such empirical studies
    Keywords: data envelopment analysis, DEA, national innovation systems, national innovation system efficiency, economic review, efficiency analysis, review of empirical studies
    JEL: C44 C61 P49 P51 P52 Q55
    Date: 2013
  4. By: Domenico Depalo (Bank of Italy); Francesca Lotti (Bank of Italy)
    Abstract: Many empirical analyses find that the performance of firms headed by women (female firms) varies with respect to those headed by men and that the greatest part of this gap is due to observable characteristics (i.e. gender) related to firms’ characteristics. In this paper we evaluate whether this finding also holds for Italy in terms of productivity and returns.The classification of firms by gender follows that prescribed in Law 215/92; for the purposes of this paper only partnerships and private and public corporations were considered, the sole legal forms for which balance sheets are available. Whilst male firms operate in almost all sectors, female firms tend to cluster in those areas where interpersonal relations are most important, namely the retail sector, restaurants, hotels etc.. In terms of performance, measured by profitability and productivity (and even when controlling by sector and company size), there do not appear to be any significant differences between male and female enterprises.
    Keywords: female entrepreneurship, gender economic differences
    JEL: J1 L11 L25
    Date: 2013–06
  5. By: Sarah Brown (Department of Economics, The University of Sheffield); Jolian McHardy (Department of Economics, The University of Sheffield); Karl Taylor (Department of Economics, The University of Sheffield)
    Abstract: We explore the relationship between employee trust and workplace performance. We present a theoretical framework which serves to establish a link between employee trust and firm performance as well as to identify possible mechanisms through which the relationship may operate. We then analyse matched workplace and employee data in order to ascertain whether the average level of employee trust within the workplace influences workplace performance. We exploit the 2004 and 2011 Work Place and Employee Relations Surveys (WERS) to analyse the role of employee trust in influencing workplace performance in both pre and post recessionary periods. Our empirical findings support a positive relationship between three measures of workplace performance (financial performance, labour productivity and product or service quality) and employee trust at both points in time. We then exploit employee level data from the WERS to ascertain the determinants of employee trust as well as how trust is influenced by measures taken by employers to deal with the recent recession. Our findings suggest that restricting paid overtime and access to training potentially erode employee trust. In addition, we find that job or work reorganisation experienced at either the employee or organisation level are associated with lower employee trust.
    Keywords: employee trust; financial performance; labour productivity; product quality.
    JEL: J20 J50
    Date: 2013
  6. By: Xi Chen; Bertrand M. Koebel
    Abstract: This paper derives the structure of a production function which is necessary and sufficient for generating a fixed cost. We extend the classical production function in order to allow each input to have a fixed and a variable part. We characterize and estimates both fixed and variable components of the cost function and studies how fixed and variable costs interact and affect firms' behavior in terms of price setting and returns to scale.
    Keywords: identification, imperfect competition, returns to scale, unobserved heterogeneity.
    JEL: O3
    Date: 2013
  7. By: Kato, Takao; Kauhanen, Antti; Kujansuu, Essi
    Abstract: We study a warehouse that changes its incentive plan from a group plan to an individual plan. We focus on the impact that the change had on productivity, allocation of time to different tasks, and helping across departments. Utilizing time series methods we find that average productivity increased about 15 % but that individuals reacted heterogeneously to the change. The change also affected the organization of helping across departments and the allocation of time to various tasks. In addition to the econometrics analysis we provide a description of the process of changing the incentive plan and discuss the cost effectiveness of the change of the plan.
    Date: 2013–09–24
  8. By: Popović, Milenko
    Abstract: The topic of this paper is an analysis of the growth of the Serbian economy. The paper is primarily devoted to the analysis of the sources of growth of the Serbian economy. In this regard, apart from conventional decomposition of growth (into contributions of capital, labor, and total factor productivity), the demand side and the industry composition sides of the sources-of-growth analysis are also considered. Furthermore, on the basis of these results, the reserves for further growth of the gross domestic product per capita are identified and estimated. Special attention is given to a possible increase in the total factor productivity, induced by the advance in “broader knowledge”, and to an increase in the labor participation rate. Institutional and policy prerequisites for realization of these reserves of growth are also briefly analyzed. Finally, on the basis of different assumptions regarding magnitudes of realization of these reserves, future convergence of the Serbian economy toward E15 and E27 countries is given. --
    Keywords: sources of growth,convergence
    JEL: O40 O43
    Date: 2013–03–05
  9. By: Gill, David; Prowse, Victoria; Vlassopoulos, Michael
    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 J3 J33
    Date: 2013–07–04
  10. By: ITO Banri; XU Zhaoyuan; YASHIRO Naomitsu
    Abstract: This study empirically examines the role of agglomeration in enabling firms to begin exporting, using a large dataset of Chinese firms. Knowledge spillover caused by the agglomeration of exporters can reduce the initial cost of export, thereby lowering the "productivity cut-off" required to export. A parametric estimation of an export entry model indicates that the agglomeration of incumbent exporters contributes significantly to export participation, although its magnitude is limited. These spillover effects are generated not only by the agglomeration of exporting foreign invested firms (FIFs), but also, more importantly, by that of indigenous Chinese exporters. In fact, the agglomeration of exporting FIFs only contributes to the export entry of FIFs, yet has a negative impact on indigenous Chinese firms' export participation.
    Date: 2013–09
  11. By: Pascali, Luigi (Department of Economics, University of Warwick)
    Abstract: Are differences in local banking development long-lasting? Do they affect long-term economic performance? I answer these questions by relying on an historical development that occurred in Italian cities during the 15th century. A sudden change in the Catholic doctrine had driven the Jews toward money lending. Cities that were hosting Jewish communities developed complex banking institutions for two reasons: first, the Jews were the only people in Italy who were allowed to lend for a profit and, second, the Franciscan reaction to Jewish usury led to the creation of charity lending institutions, the Monti di Pietà, that have survived until today and have become the basis of the Italian banking system. Using Jewish demography in 1500 as an instrument, I provide evidence of (1) an extraordinary persistence in the level of banking development across Italian cities (2) large effects of current local banking development on per-capita income. Additional firm-level analyses suggest that well-functioning local banks exert large effects on aggregate productivity by reallocating resources toward more efficient firms. I exploit the expulsion of the Jews from the Spanish territories in Italy in 1541 to argue that my results are not driven by omitted institutional, cultural and geographical characteristics. In particular, I show that, in Central Italy, the difference in current income between cities that hosted Jewish communities and cities that did not exists only in those regions that were not Spanish territories in the 16th century. JEL classification: Banks ; Economic development ; Persistence ; Jewish demography JEL codes: O43 ; G21 ; O10
    Date: 2013
  12. By: Maria Kazakova (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: In estimating production functions of the researcher is faced with a number of problems, which in the most general form, can be divided into two groups: the problems associated with most econometric estimation techniques, and problems of measurement factors. In the econometric estimation of production functions of the two main problems are linearization of the functional forms and elimination of endogenous explanatory variables. The latter problem is specific to mikroproizvodstvennyh functions, so it we discuss in more detail. Using statistics available in most cases leads to an inaccurate measurement of the volume and cost of factors of production firm that can shift the assessments of the technical characteristics of the production functions. In this paper we detail the mechanism and causes of such bias Example mikroproizvodstvennyh functions. Particular attention is paid to such specific microeconomic production functions as the problem of endogeneity of explanatory variables. Microfunctions also applied to the problems connected with measuring the volume of output and factor costs.
    Keywords: production functions
    Date: 2013–05
  13. By: Kauhanen, Antti; Salmi, Julia; Torkki, Paulus
    Abstract: By using quantitative survey data and conducting a case study, we examine performance measurement of incentive plans in Finnish private sector health care organizations. We find that the performance measures used in the incentive plans are in line with recent economic theories of performance measurement. The findings from the case study emphasize the importance of choosing appropriate performance measures and designing the pay package as a whole. Inadequate performance measurement leads to incentive plans that do not help organizations reach their goals.
    Date: 2013–09–24
  14. By: Jesús Peiró-Palomino (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: The number of contributions that have evaluated the convergence patterns across European regions using a wide variety of approaches is now substantial. However, if we focus on the most recent period (2003–2009), the number of contributions shrinks dramatically, and those considering the role of the intangible assets in the enlarged European Union are entirely yet to come. This article focuses on the convergence patterns of income per capita in 216 European regions during the period 1995–2009. Following the distribution dynamics approach, several conditioning schemes are considered, including geography and a set of intangible assets. Opposite to studies focused on earlier periods, the results suggest an intense process of convergence, especially in the most recent years. In addition, while the conditioning factors introduced in the analysis played a remarkable role at the beginning of the analyzed period (1995), facilitating convergence, their influence gradually decreases over time, indicating that regional convergence has obeyed to other forces in the latest years.
    Keywords: conditioning schemes, European regional convergence, income distribution dynamics, intangible assets
    JEL: C14 D30 O47 R11
    Date: 2013
  15. By: Kamei, Keita
    Abstract: In this paper, we construct a simplified general oligopolistic equilibrium (GOLE) model, in which Smith's (1776) famous theory of division of labor is embedded. In the absence of labor market integration with trading countries, we show that trade liberalization promotes a reduction of the number of firms in each country and a deeper division of labor, thus increasing firm productivity and improving welfare. Our model suggests a new interpretation of the trade-induced firm productivity effect.
    Keywords: Trade Liberalization; Division of Labor; Firm Productivity; Cournot Competition; General Oligopolistic Equilibrium (GOLE)
    JEL: F1 F12 F16 L1 L16
    Date: 2013–09–30

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