New Economics Papers
on Efficiency and Productivity
Issue of 2013‒10‒25
thirteen papers chosen by

  1. Growth Accounting Analysis in China 1978-2009 By Kang, Lili; Peng, Fei
  2. Factor Misallocation and Development By Diego Restuccia
  3. Is Misallocation Higher in France than in the United States? By Flora Bellone; Jérémy Mallen-Pisano
  4. Economic Reform and Productivity Convergence in China By Kang, Lili; Peng, Fei
  5. Mitigation and Heterogeneity in Management Practices on New Zealand Dairy Farms By Simon Anastasiadis; Suzi Kerr
  6. Importing, Exporting and the Productivity of Services Firms in Sub-Saharan Africa By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  7. Returns to public R&D grants and subsidies By Ådne Cappelen; Arvid Raknerud; Marina Rybalka
  8. Mining Surplus: Modeling James A. Schmitz's Link Between Competition and Productivity By Jeremy Greenwood; David Weiss
  9. Input usage and productivity in Indian manufacturing plants By Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
  10. Medium and Long Run Prospects for UK Growth in the Aftermath of the Financial Crisis By Nicholas Oulton
  11. Estimating the effects of credit constraints on productivity of Peruvian agriculture By Woutersen, Tiemen; Khandker, Shahidur R.
  12. Selection and hidden bias in cross-border bank acquisitions: Ukraine’s takeover wave By Muzaffarjon Ahunov; Leo Van Hove; Marc Jegers
  13. Incentives, Selection, and Teacher Performance: Evidence from IMPACT By Thomas Dee; James Wyckoff

  1. By: Kang, Lili; Peng, Fei
    Abstract: This paper applies the growth accounting model to Chinese economy at region and province levels from 1978 to 2009. We measure the components in the growth accounting model such as capital services, labour inputs and Total Factor Productivity (TFP) using various data sources. The economic growth has been decomposed into the contribution of physical capital, labour inputs, labour composition index (LCI) and TFP. We find that Chinese economic growth was mainly pushed by the growth of physical capital, especially in the fastest growing Coastal region. Labour inputs and TFP growth contribute more in the Interior and West regions. Moreover, the contribution shares of physical capital in labour productivity have been declining for the Coastal region, as the TFP contributions have been increasing over the same period. Our results show that the human capital formation from technological and institutional shifts is becoming more and more important in the Coastal region.
    Keywords: Growth Accounting, Total Factor Productivity, Labour Cost
    JEL: D24 J30 O47
    Date: 2013–10–20
  2. By: Diego Restuccia
    Abstract: The large differences in income per capita across countries are mostly explained by differences in total factor productivity (TFP). This article summarizes the evidence on the importance of resource allocation across productive units in explaining the observed differences in TFP across countries.
    Keywords: misallocation, productivity, heterogeneous establishments, distortions.
    JEL: O1 O4
    Date: 2013–10–14
  3. By: Flora Bellone (GREDEG CNRS; University of Nice-Sophia Antipolis, France); Jérémy Mallen-Pisano (GREDEG CNRS; University of Nice-Sophia Antipolis, France)
    Abstract: In this paper, we apply the Hsieh and Klenow (2009) methodology to French microdata on manufacturing firms to quantify the potential extent of intra-industry misallocation in France versus the United States. In contrast to what has been found for developing countries, such as China, India and some countries in Latin America, we do not find any sizeable ”efficiency gap” between France and the U.S. in the manufacturing industry. This new evidence is robust to a series of tests addressing both measurement and specification issues. In light of recent advances in the fields of productivity and misallocation, and in particular Bartelsman et al. (2013), we also discuss to what extent our new empirical findings challenge the established view on which continental European economies have higher input and output distortions than the American economy.
    Keywords: Misallocation, Productivity, Manufacturing, Firm-level data, France
    JEL: O47 O57
    Date: 2013–10
  4. By: Kang, Lili; Peng, Fei
    Abstract: This paper examines effects of the formation of physical and human capital on the growth of labour productivity, Total Factor Productivity (TFP) and wages in China, incorporating the market reform factors such as ownership shifts, population policy, openness and fiscal expenditures on education. We find that Chinese economic miracle is mainly pushed by the (physical) capital service rather than formation of human capital. The physical capital inputs contribute even more after 1994 as the returns to education decrease with the education expansion and increasing tuition fees. The traditional four economic regions of China show different growth patterns. The capital inputs mostly help the labour productivity growth in the West region and the wages growth in the Interior region, while human capital formation contributes to the TFP in all four regions. Moreover, provinces within each region present strong evidence of convergence of economic growth. The convergence is most prominent in the provinces within the Northeast and Coastal regions for labour productivity and TFP growth, suggesting fast technology spill-over within these regions.
    Keywords: labour productivity, convergence, regional inequality
    JEL: D24 D63 J24 O47
    Date: 2013–04–10
  5. By: Simon Anastasiadis (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research)
    Abstract: Pastoral farming can result in adverse environmental effects such as nitrogen leaching and greenhouse gas emissions. However, the cost of mitigation and hence the socially appropriate level of tolerance for environmental effects is still unclear. Research to date within New Zealand has either estimated the costs of specific mitigation technologies or used simulation modelling at a farm scale. This is limited for two key reasons: neither approach uses data from actual implementation of technologies and practices on real farms and hence costs are speculative; and both largely treat farms as homogenous when in reality they vary greatly. We use data on 264 farms to estimate a distribution of “farm management” residuals in how efficiently nitrogen leaching and greenhouse gas are used to generate production. We interpret this distribution as a measure of the potential for feasible, relatively low-cost mitigation to take place as less efficient farmers move toward existing best practice. We can explain only 48% percent of the OVERSEER-modelled variation in New Zealand dairy farms’ nitrogen use efficiency based on geophysical factors, specific mitigation technologies and practices that move emissions across farms such as wintering off animals. This suggests a potentially large role for management factors and farmer skill. In contrast, OVERSEER-modelled variation in greenhouse gas use efficiency is more easily explained by the observable factors (73%) but the potential for mitigation through management changes is still not insignificant. Using management practices that are already in commercial use, this first study using this approach suggests that improvements in nitrogen use efficiency may be able to reduce leaching by more than 30 percent, while improvements in greenhouse gas use efficiency may be able to reduce emissions by more than 15 percent; the potential varies considerably across farms.
    Keywords: Marginal abatement cost curves, climate change, agriculture, greenhouse gas, heterogeneity, leaching, mitigation, nitrogen, use efficiency
    JEL: Q53 Q57
    Date: 2013–10
  6. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: Abstract In this paper we examine productivity differences between trading and non-trading firms in the services sector using recently collected data on a sample of 19 sub-Saharan African firms. A variety of parametric and non-parametric tests are implemented in order to examine whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms. Our results indicate that services firms that are engaged in international trade perform significantly better than those firms that trade on the domestic market only. Two-way traders and exporters only are found to perform better than importers only, with no significant difference in performance found between two-way traders and exporters only. We further present evidence indicating that there is no significant difference in performance between export starters and export continuers, a result consistent with the self-selection hypothesis for African services firms.
    Keywords: productivity, imports, exports, services firms
    JEL: D24 F10 L10
    Date: 2013–03
  7. By: Ådne Cappelen; Arvid Raknerud; Marina Rybalka (Statistics Norway)
    Abstract: We address the question of whether the returns to R&D differ between R&D projects funded by public grants and R&D in general. To answer this question, we use a flexible production function that distinguishes between different types of R&D by source of finance. Our approach requires no adjustment of the sample or data in order to include firms that never invest in R&D, in contrast to the standard Cobb-Douglas production specification. We investigate the productivity and profitability effects of R&D using a comprehensive panel of Norwegian firms over the period 2001-2009. The results suggest that the returns to R&D projects subsidized by the Research Council of Norway do not differ significantly from R&D spending in general. Our estimate of the average rate of return to R&D is about 10 percent. This estimate is robust with respect to whether firms with zero R&D are included in the estimation sample or not. In contrast, using a standard Cobb-Douglas specification and restricting the sample of firms to those with positive R&D, leads to implausibly high estimates of the rate of returns.
    Keywords: Returns to R&D; Public grants; Public subsidies; Productivity
    JEL: C33 C52 D24 O38
    Date: 2013–05
  8. By: Jeremy Greenwood; David Weiss
    Abstract: James A. Schmitz (2005) documents, in a well-known case study, a dramatic rise in productivity in the U.S. and Canadian iron-ore industry following an increase in competition from Brazil. Prior to the increased competition, the industry was not competitive. Surplus in profits was divided between business and unions. Schmitz attributes the increase in productivity to a change in work practices in the industry, as old negotiated union work rules were abandoned or modified. This research formalizes a mechanism through which a rise in competition can lead to increased productivity in the iron-ore industry.
    JEL: E13 J51 O47
    Date: 2013–10
  9. By: Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
    Abstract: This paper analyzes the scale and productivity consequences of varied input use in Indian manufacturing using detailed plant-level data. Counts of distinct material inputs are higher in urban settings than in rural locations, unconditionally and conditional on plant size, and they are also higher in the organized sector than in the unorganized sector. At the district level, higher input usage in the organized sector is generally observed in wealthier districts and those with greater literacy rates. If looking within states, the usage is more closely associated with electricity access, population density, and closer spatial proximity to one of India's largest cities. Plants in the organized sector utilizing a greater variety of inputs display higher productivity, with the effects mostly concentrated among smaller plants with fewer than 50 employees. For the unorganized sector, there is little correlation of input counts and local conditions, for better or for worse, and a more modest link to productivity outcomes.
    Keywords: Water and Industry,E-Business,Transport Economics Policy&Planning,Economic Theory&Research,Environmental Economics&Policies
    Date: 2013–10–01
  10. By: Nicholas Oulton
    Abstract: The productivity performance of the UK economy in the period 1990-2007 was excellent. Based entirely on pre-crisis data, and using a two-sector growth model, I project the future growth rate of GDP per hour in the market sector to be 2.61% p.a. But the financial crisis and the Great Recession which began in Spring 2008 have dealt this optimistic picture a devastating blow. Both GDP and GDP per hour have fallen and are still below the level reached at the peak of the boom. So I discuss a wide range of hypotheses which seek to explain the productivity collapse, including the impact of austerity. Most of the conclusions here are negative: the explanation in question doesn't work. I next turn to the long run impact of financial crises, particularly banking crises, on productivity, capital, TFP and employment. Based on a cross-country panel analysis of 61 countries over 1950-2010, I argue that banking crises generally have a long run impact on the level of productivity but not necessarily on its long run growth rate. I therefore predict that the UK will eventually return to the growth rate predicted prior to the crisis. This prediction is conditional on the UK continuing to follow good policies in other respects, in particular not allowing the government debt-GDP ratio to rise excessively. Nonetheless the permanent reduction in the level of GDP per worker resulting from the crisis could be substantial, about 5½%. The cross-country evidence also suggests that there are permanent effects on employment, implying a possibly even larger hit to the level of GDP per capita of about 9%.
    Keywords: productivity, potential output, growth, financial, banking crisis, recession
    JEL: J24 E32 O41 G01 H63
    Date: 2013–10
  11. By: Woutersen, Tiemen; Khandker, Shahidur R.
    Abstract: This paper proposes an estimator for the endogenous switching regression models with fixed effects. The estimator allows for endogenous selection and for conditional heteroscedasticity in the outcome equation. Applying the estimator to a dataset on the productivity in agriculture substantially changes the conclusions compared to earlier analysis of the same dataset. This paper proposes an estimator for the endogenous switching re-gression models with fixed effects. The estimator allows for endogenous selection and for conditional heteroscedasticity in the outcome equation. Applying the estimator to a dataset on the productivity in agriculture substantially changes the conclusions compared to earlier analysis of the same dataset.
    Keywords: Economic Theory&Research,E-Business,Knowledge for Development,Econometrics,Labor Policies
    Date: 2013–10–01
  12. By: Muzaffarjon Ahunov (EBRD); Leo Van Hove (Free University Brussels (VUB)); Marc Jegers (Free University Brussels (VUB))
    Abstract: We investigate the impact of cross-border takeovers on the performance of target banks in Ukraine. We combine propensity score matching and a difference-in-difference methodology, checking for temporary unobservables. Acquirers mainly targeted large less-capitalised banks with average efficiency and profitability. After takeover, the cost efficiency of the acquired banks improved thanks to a decreased reliance on deposits but this did not result in higher profitability or higher loan market shares. Overall, our findings only tally piecemeal with the existing multi-country studies for transition economies.
    Keywords: cross-border takeovers, bank performance, selection bias, hidden bias
    JEL: G15 G21 G34 F36
    Date: 2013–10
  13. By: Thomas Dee; James Wyckoff
    Abstract: Teachers in the United States are compensated largely on the basis of fixed schedules that reward experience and credentials. However, there is a growing interest in whether performance-based incentives based on rigorous teacher evaluations can improve teacher retention and performance. The evidence available to date has been mixed at best. This study presents novel evidence on this topic based on IMPACT, the controversial teacher-evaluation system introduced in the District of Columbia Public Schools by then-Chancellor Michelle Rhee. IMPACT implemented uniquely high-powered incentives linked to multiple measures of teacher performance (i.e., several structured observational measures as well as test performance). We present regression-discontinuity (RD) estimates that compare the retention and performance outcomes among low-performing teachers whose ratings placed them near the threshold that implied a strong dismissal threat. We also compare outcomes among high-performing teachers whose rating placed them near a threshold that implied an unusually large financial incentive. Our RD results indicate that dismissal threats increased the voluntary attrition of low-performing teachers by 11 percentage points (i.e., more than 50 percent) and improved the performance of teachers who remained by 0.27 of a teacher-level standard deviation. We also find evidence that financial incentives further improved the performance of high-performing teachers (effect size = 0.24).
    JEL: I2 J45
    Date: 2013–10

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