New Economics Papers
on Efficiency and Productivity
Issue of 2013‒10‒11
seventeen papers chosen by

  1. Financial Health and Firm Productivity : Firm-level Evidence from Viet Nam By Shandre M. Thangavelu; Aekapol Chongvilaivan
  2. Agglomeration Economies in Classical Music By Karol J. Borowiecki
  3. Ownership, Productivity Change in the Australian Urban Water Sector: a Bootstrap Malmquist indices approach By Ananda, Jayanath; Gitto, Simone; Mancuso, Paolo
  4. Civil conflict and firm performance : evidence from Cote d'Ivoire By Klapper, Leora; Richmond, Christine; Tran, Trang
  5. Factors Affecting Sugarcane Production in Pakistan By Nazir, Adnan; Jariko, Ghulam Ali; Junejo, Mumtaz Ali
  6. Does Unesco inscription affect the performance of tourism destinations? A regional perspective By Tiziana Cuccia; Calogero Guccio; Ilde Rizzo
  7. Investing abroad from the bottom of the productivity ladder – BRICS multinationals in Europe By Sanfilippo , Marco
  8. Cross-industry tfp growth differences with asymmetric industries and the endogenous market structure By Lei Ji
  9. Synthesis Report on the Impact of Capital Use By Petrick, Martin; Kloss, Mathias
  10. Identifying the Health Production Function: The Case of Hospitals By John A. Romley; Neeraj Sood
  11. Off-farm Labour Decision of Italian Farm Operators By Raimondi, Valentina; Curzi, Daniele; Bertoni, Danilo; Olper, Alessandro
  12. The global welfare impact of China: Trade integration and technological change By Julian Di Giovanni; Andrei A. Levchenko; Jing Zhang
  13. Institution-Induced Productivity Differences and Patterns of International Capital Flows By Matsuyama, Kiminori
  14. Are we wasting public money? No! The effects of grants on Italian university students’ performances By Tommaso Agasisti; Samuele Murtinu
  15. Central Government's Infrastructure Investment across Chinese Regions: A Dynamic Spatial Panel Data Approach By Zheng, Xinye; Li, Fanghua; Song, Shunfeng; Yu, Yihua
  16. Environmental innovations and profitability: How does it pay to be green? An empirical analysis on the German innovation survey By Ghisetti, Claudia; Rennings, Klaus
  17. Equity returns in the banking sector in the wake of the great recession and the European sovereign debt crisis By Chan-Lau, Jorge A.; Liu, Estelle X.; Schmittmann, Jochen M.

  1. By: Shandre M. Thangavelu (Asian Development Bank Institute (ADBI)); Aekapol Chongvilaivan
    Abstract: Does financial health shore up firm productivity? This paper empirically investigates this question and presents productivity as another driving factor in translating financial development into real economic progress. Our 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. Our findings suggest that liquidity and access to external credit boosts firm productivity, with the latter particularly imperative for exporting and/or importing firms. We also present supplementary results regarding economies of scale, high-tech capital accumulation, human capital investment and foreign ownership.
    Keywords: Financial health, firm productivity, Vietnam, TFP, panel data, Semiparametric Estimation
    JEL: O16 O25 O53
    Date: 2013–09
  2. By: Karol J. Borowiecki (Department of Business and Economics, University of Southern Denmark)
    Abstract: This study investigates agglomeration effects for classical music production in a wide range of cities for a global sample of composers born between 1750 and 1899. Theory suggests a trade-off between agglomeration economies (peer effects) and diseconomies (peer crowding). I test this hypothesis using historical data on composers and employ a unique instrumental variable – a measure of birth centrality, calculated as the average distance between a composer’s birthplace and the birthplace of his peers. I find a strong causal impact of peer group size on the number of important compositions written in a given year. Consistent with theory, the productivity gain eventually decreases and is characterized by an inverted U-shaped relationship. These results are robust to a large series of tests, including checks for quality of peers, city characteristics, various measures of composers’ productivity, and across different estimations in which also time-varying birth centrality measures are used as instrumental variables.
    Keywords: agglomeration economies, density effects, peer effects, productivity, urban history, cities, composer
    JEL: D24 J24 N90 R12 Z11
    Date: 2013–09
  3. By: Ananda, Jayanath; Gitto, Simone; Mancuso, Paolo
    Abstract: This paper provides a comprehensive productivity analysis of 53 Australian water service providers during the period 2006-2012. Pressures for sector reform have stimulated interest in identifying and understanding the factors that can contribute to improve the performance of Australian water utilities. The aim is to provide to the policy-makers quantitative-evidences that allow to identify the best interventions, in relation to the alternative forms of ownership that characterize the water utilities in the different territories\states of Australia, to obtain productivity gains.
    Keywords: Australian water utilities, DEA, bootstrap, kernel density, ownership
    JEL: D24 L95
    Date: 2013–10
  4. By: Klapper, Leora; Richmond, Christine; Tran, Trang
    Abstract: This paper investigates the impact of political instability and civil conflict on firms. It studies the unrest in Cote d'Ivoire that began in 2000, using a census of all registered firms for the years 1998-2003. The analysis uses structural estimates of the production function and exploits spatial variations in conflict intensity to derive the cost of conflict on firms in terms of productivity loss. The results indicate that the conflict led to an average 16-23 percent drop in firm total factor productivity and the decline is 5-10 percentage points larger for firms that are owned by or employing foreigners. These results are consistent with anecdotal evidence of increasing violent attacks and looting of foreigners and their businesses during the conflict. The results suggest increases in operating costs is a possible channel driving this impact. Finally, the paper investigates whether firms responded by hiring fewer foreign workers and finds evidence supporting this hypothesis.
    Keywords: Economic Theory&Research,Labor Policies,Microfinance,E-Business,Post Conflict Reconstruction
    Date: 2013–10–01
  5. By: Nazir, Adnan; Jariko, Ghulam Ali; Junejo, Mumtaz Ali
    Abstract: This study was undertaken to identify the factors affecting sugarcane production in Pakistan. Data were collected from 387 sugarcane growers from Sindh, Punjab and NWFP province. Data were collected during the period 2007-08. The study reveals that the costs of inputs of sugarcane i.e. urea, DAP, FYM, land preparation, seed and its application, weeding and cost of irrigation were the important factors which influenced on the returns of sugarcane growers. The effectiveness was examined by using the Cobb-Douglas production function; MVP and allocative efficiency were calculated. The coefficient of multiple determinations R2 was 0.9249, which indicated that 92% variation in the cost of inputs was explained by all explanatory variables and the adjusted R2 was 92%. The F-value was 666.94 and was highly significant at 5% level of significance, indicating that the regression model was well fitted. The high prices of inputs, low price of output, delay in payments and lack of scientific knowledge were the major problems in sugarcane production. In order to enhance the productivity of sugarcane in the country, government should solve the identified problems to increase the income of sugarcane growers.
    Keywords: Sugarcane, urea, weeding, cost of irrigation, land preparation, seed, Cobb- Douglas function, resource allocation efficiency.
    JEL: Q1
    Date: 2013
  6. By: Tiziana Cuccia (Dipartimento di Economia e Impresa, Università degli Studi di Catania, Italy); Calogero Guccio (Dipartimento di Economia e Impresa, Università degli Studi di Catania, Italy); Ilde Rizzo (Dipartimento di Economia e Impresa, Università degli Studi di Catania, Italy)
    Abstract: This paper analyses the role of tourism in the enhancement of local development focusing on the role of UNESCO World Heritage List (WHL) as attractor of tourism demand. It aims at evaluating the performance of the Italian regions as tourism destinations in the period 1995-2010, using the Data Envelopment Analysis (DEA) two-stage approach. In the first stage the efficiency scores are calculated using a smoothed DEA bootstrap procedure to generate unbiased technical efficiency estimates. In the second stage a robust semi-parametric regression is employed to assess the impact of the WHL inscription on the efficiency of tourism destinations in the short and in the long term. The empirical results show that, controlling for several environmental factors, the presence of UNESCO sites is negatively correlated to the technical efficiency of tourist destinations. Our explanation for such a result is that WHL inscription raises expectations which are not met by an equivalent increase of tourism flows: this has to be taken in account by policy-makers in the design of the local strategies to promote tourist destinations and therefore to foster local development.
    Keywords: Cultural Heritage, Tourism, Non-parametric methods
    JEL: Z10 L83 O18 D24
    Date: 2013–10
  7. By: Sanfilippo , Marco (BOFIT)
    Abstract: This paper analyses differences in total factor productivity and other competitiveness indicators of emerging multinationals (EMNEs) from Brazil, Russia, India, China and South Africa (BRICS) against their counterparts from developed countries and domestic MNEs. The current literature suggests that early internationalisation strategies by EMNEs are characterised by a lack of experience in diverse economic and cultural contexts and are explicitly driven by asset-exploration strategies. If true, this should translate into significant differences in performance, especially when they invest in developed countries. Based on a large database on foreign affiliates in Europe, results find EMNEs at the bottom of the productivity ladder, with a productivity gap around 20-30 percentage points compared to more established competitors. Moreover, the paper points to high heterogeneity among EMNEs that affects their relative performance according to their current levels of productivity or to differences in their sectorial and geographic patterns.
    Keywords: emerging market multinationals; total factor productivity; foreign direct investment
    JEL: F21 F23
    Date: 2013–10–02
  8. By: Lei Ji (Ofce sciences-po, Skema Business School)
    Abstract: I develop a multi-industry endogenous growth model with the endogenous market structure. Industries are heterogeneous in production unit costs, research and development RD productivities, fixed operating costs and industry level market sizes. The endogenous market structure allows an empirically realistic and theoretically important determination of the individual firms’ market sizes and distinguishes the model from the previous literatures. There are two sets of results. First, the balanced growth rate depends positively on RD productivities and firm market size of both industries but not industry market size. Surprisingly, the steady state total factor productivity TFP level ratio between industry 1 and 2 depends negatively on RD productivity and fixed costs in industry 1 and positively on those parameters in industry 2. Second, industry differences in both TFP growth and R&D intensity mainly reflect differences in quality-adjusted gross profits and RD productivities. Such differences depend on RD productivities and fixed operating cost parameters in general equilibrium. The industry with a higher RD productivity and fixed cost has a lower TFP growth and research intensity compared to the other industry. Differences in production unit costs and industry level market sizes do not to contribute to cross-industry TFP growth differences. These results are substantially different from what is found in the existing literature. Model also offers novel explanations for directed technical change and structural change, and it offers a structure for analyzing the interaction between trade and growth.
    Keywords: Cross-industry TFP growth differences, endogenous growth, asymmetric industries,endogenous market structure
    Date: 2013–09
  9. By: Petrick, Martin; Kloss, Mathias
    Abstract: This paper examines the drivers of productivity in EU agriculture from a factor markets perspective. Using econometrically estimated production elasticities and shadow prices of factors for a set of eight EU member states, we focus on field crop farms represented in the FADN database for the years 2002-08. As it turned out that output reacts most elastically to materials input, we investigate this factor further and find different rationing regimes represented in different member states. Marginal return on materials is low in Denmark and West Germany, but significantly above typical market interest rates in East Germany, Italy and Spain. In the latter countries and in Denmark it also increased towards the end of the observed period. This finding is consistent with a perception of tightening funding access, possibly induced or reinforced by the unfolding financial crisis. Marginal returns to land, labour and fixed capital are generally low. We conclude that the functioning of factor markets plays a crucial role for productivity growth, but that factor market operations display considerable heterogeneity across EU member states.
    Date: 2013–08
  10. By: John A. Romley; Neeraj Sood
    Abstract: Estimates of the returns to medical care may reflect not only the efficacy of more intensive care, but also unmeasured differences in patient severity or the productivity of health-care providers. We use a variety of instruments that are plausibly orthogonal to heterogeneity among providers as well as patients to analyze the intensity of care and 30-day survival among Medicare patients hospitalized for heart attack, congestive heart failure and pneumonia. We find that the intensity of care is endogenous for two out of three conditions. The elasticity of 30-day mortality with respect to care intensity increases in magnitude from -0.27 to -0.71 for pneumonia and from -0.16 to -0.33 for congestive heart failure, when we address the identification problem. This finding is consistent with the hypotheses that care intensity at hospitals tends to decrease with hospital productivity, or increase with unmeasured patient severity.
    JEL: D24 I1 I12
    Date: 2013–10
  11. By: Raimondi, Valentina; Curzi, Daniele; Bertoni, Danilo; Olper, Alessandro
    Abstract: This paper analyses the factors affecting off-farm labour decisions of Italian farm operators. Using micro-level data from the Farm Business Survey (REA) over the pre- and post-2003 CAP reform periods, we investigated the impact that operator, family, farm and market characteristics exert on these choices. Among other things, the paper focuses also on the differential impact of those variables for operators of smaller and larger holdings. The main results suggest that operator and family characteristics have a significant impact on the decision to participate in off-farm work more for smaller than for bigger farms. By contrast, farm characteristics are more relevant variables for bigger farms. In particular, decoupled farm payments, by increasing the marginal productivity of farm labour, lower the probability of working off the farm only in bigger farms, while coupled subsidies in pre-reform years do not have a significant impact on labour decisions. Finally, we show that, after accounting for the standard covariates, local and territorial labour market characteristics generally have a low effect on off-farm work operators’ choices.
    Date: 2013–08
  12. By: Julian Di Giovanni; Andrei A. Levchenko; Jing Zhang
    Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a multi-country quantitative Ricardian-Heckscher-Ohlin model. We simulate two alternative growth scenarios: a "balanced" one in which China's productivity grows at the same rate in each sector, and an "unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries experience significantly larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade.
    Keywords: China, productivity growth, international trade
    JEL: F11 F43 O33 O47
    Date: 2013–10
  13. By: Matsuyama, Kiminori (Department of Economics, Northwestern University, Evanston, USA)
    Abstract: This paper studies theoretically how the cross-country differences in the institutional quality (IQ) of the domestic credit markets shape the patterns of international capital flows when such IQ differences cause productivity differences across countries. IQ affects productivity by changing productivity-agency cost trade-offs across heterogeneous investment projects, which have opposite effects on the investment and capital flows from exogenous productivity differences. The overall effect of IQ could generate U-shaped responses of the investment and capital flows. This means that capital could flow from middle-income to low-income and high-income countries; and starting from a low IQ, a country could experience both growth and a current account surplus after an institutional reform. More generally, the results here offer some cautions when interpreting the evidence on the role of productivity and institutional differences on capital flows and question the validity of using financial frictions as a proxy for the quality of financial institutions.
    Keywords: Credit composition, domestic financial frictions, endogenous productivity, institutional quality, intertemporal trade, pledgeability, productivity-agency cost trade-off, reverse capital flows, U-shaped patterns
    JEL: E22 F49 O16
    Date: 2013–10
  14. By: Tommaso Agasisti (Politecnico di Milano); Samuele Murtinu (Politecnico di Milano)
    Abstract: In this paper, we estimate the effect of receiving a financial aid for a cohort of students who enrolled at Politecnico di Milano (Italy) in the year 2007/08, through a Propensity Score Matching approach. Using administrative data about these students for four years, we were able to evaluate the impact of the financial aid on several dimensions of academic performance: formative credits obtained after one year, dropout probability in the first and second year, graduation in the legal duration of the course, and graduation after four years. Overall, we find a positive and statistically significant effect of the grant; this finding is stable across several robustness checks. Exploring the heterogeneity of this effect, we demonstrate that this latter is higher for immigrants, Italians who moved from another region for studying, and students attending an Engineering course. We also find evidence that unobservable factors (such as students’ own intrinsic academic motivation) account for an important part of the estimated impact of the financial aid.
    Keywords: Financial aid, propensity score matching
    JEL: H52 I22 I23 I28 C21
    Date: 2013
  15. By: Zheng, Xinye; Li, Fanghua; Song, Shunfeng; Yu, Yihua
    Abstract: This study employs spatial panel techniques to examine determinants of regional allocation of infrastructure investment made by the central government. Using a sample of 31 Chinese provinces over the 2001-2008 period, we derived four major empirical findings. First, there exist substantial spatial interactions of central government's investment across regions. Second, the central investment exhibits a highly persistent effect. Third, the central government attempts to balance equity and efficiency in its decision-making. Last, the political factor plays a significant role in the regional infrastructure investment.
    Keywords: Infrastructure investment; efficiency-equity tradeoff; spatial interaction
    JEL: C33 H54 R0
    Date: 2013–10–06
  16. By: Ghisetti, Claudia; Rennings, Klaus
    Abstract: Much of the empirical literature analysing the relation between environmental innovation and competitiveness has focused on the question whether 'it pays to be green'. We differentiate between different types of environmental innovations, which will be disentangled in those aiming at reducing the negative externalities and those allowing for efficiency increases and cost savings. What we analyze is at first the extent to which these two typologies have impacts on firms' profitability with opposite signs, and, secondly, whether the motivations driving the adoption of those innovations make the difference in terms of economic gains. We find empirical evidence that both the typology of Environmental Innovation and the driver of their adoption affect the sign of the relationship between competitiveness and environmental performance. The empirical strategy is based on a sample of German firms and makes use of a merge of two waves of the Mannheim Innovation Panel in 2011 and 2009 that allow overcoming some endogeneity issues which may arise in a cross-section setting. --
    Keywords: Profitability,Externality Reducing Innovations,Energy and Material Efficiency Innovations,Mannheim Innovation Panel
    JEL: Q55 Q20 M10 K32
    Date: 2013
  17. By: Chan-Lau, Jorge A.; Liu, Estelle X.; Schmittmann, Jochen M.
    Abstract: This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment. While the equity return performance in the banking sector has been dismal in general, better capitalized and less leveraged banks have outperformed their peers, a finding that supports policymakers' efforts to strengthen bank capitalization. --
    Keywords: banks,equity returns,financial crisis,sovereign risk,sovereign debt crisis,economic growth,regulatory capital,panel data econometrics
    JEL: G01 G14 G21
    Date: 2013

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.