New Economics Papers
on Efficiency and Productivity
Issue of 2013‒12‒15
thirty papers chosen by

  1. Assessing productivity performance of basic and secondary education in Tunisia: a Malmquist analysis By António AFONSO,; Mohamed AYADI,; Sourour RAMZI
  2. Efficiency And Productivity Growth Across The Italian Regions: The Regional Divide Revisited By Pompei, Fabrizio
  3. Productivity Measurement In Radial Dea Models With Multiple Constant Inputs By Giannis Karagiannis; C. A. K. Lovell
  4. Public sector efficiency: evidence for Latin America By António Afonso,; Alma Romero; Emma Monsalve
  5. Measuring Firm-Level Productivity Convergence in the UK: The Role of Taxation and R&D Investment By Ioannis Bournakis; Sushanta Mallick; David Kernohan; Dimitris A.Tsouknidis
  6. Can capital grants help microenterprises reach the productivity level of SMEs? Evidence from an experiment in Sri Lanka By Laurin Janes
  7. Bank performance and economic growth: evidence from Granger panel causality estimations By Cândida Ferreira
  8. Effects of Productivity and Import on Firm-Level Export By Jienwatcharamongkhol, Viroj
  9. Land Tenure and Productivity in Agriculture: The Case of the Stolypin Reform in Late Imperial Russia By Paul Castaneda Dower; Andrei Markevich
  10. Efficiency Aspects of Government Secondary School Finances in New South Wales: Results from a Two-Stage Double-Bootstrap DEA at the School Level By Alfred A. Haug; Vincent C. Blackburn
  11. Long-term Agricultural Growth in India, Pakistan, and Bangladesh from 1901/02 to 2001/02 By Kurosaki, Takashi
  12. Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit By Marc Melitz; Saso Polanec
  13. Structural change, productivity growth and trade policy in Brazil By Firpo, Sergio; Pieri, Renan
  14. School inputs and skills: complementarity and self-productivity By Nicoletti, Cheti; Rabe, Birgitta
  15. The Impact of Cooperation on R&D, Innovation and Productivity: an Analysis of Spanish Manufacturing and Services Firms By Fernández Gual, Verónica; Segarra Blasco, Agustí, 1958-
  16. Incentives in the Public Sector: Evidence from a Government Agency By Ratto, Marisa; Tominey, Emma; Propper, Carol; Burgess, Simon M.
  17. Resampling in DEA By Kaoru Tone
  18. Structural Change in Advanced Nations By Dale W. Jorgenson; Marcel P. Timmer
  19. The Role of Product Innovation Output on Export Behavior of Firms By Tavassoli, Sam
  20. Incentives Matter: Reflections on the Role of Incentives in Scientific Productivity By Fabella, Raul V.
  21. Managing the Family Firm: Evidence from CEOs at Work By Oriana Bandiera; Andrea Prat; Raffaella Sadun
  22. Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm By Bogaard, Hein; Svejnar, Jan
  23. Spillover versus Ownership: A Meta-Analysis of Transition Literature By Iwasaki, Ichiro; Tokunaga, Masahiro
  24. Bank Risk - Return Efficiency and Bond Spread: Is There Evidence of Market Discipline in Europe By Cecile Casteuble; Emmanuelle Nys; Philippe Rous
  25. Practice what you preach: Microfinance business models and operational efficiency By Millone M.M.; Bos J.W.B.
  26. Productive cities: Sorting, selection, and agglomeration By Kristian Behrens; Gilles Duranton; Frédéric Robert-Nicoud
  27. The Economic Performance of Clustered and Non Clustered Firms along the different Phases of the Cluster Life Cycle: The Portuguese Cork Industry Case By Amélia Branco; João Carlos Lopes
  28. Regional Convergence in Europe: A Dynamic Heterogeneous Panel Approach By Vogel, Johanna
  29. Relative Price Effects on Decompositions of Change in Aggregate Labor Productivity By Dumagan, Jesus C.
  30. Delegation and Performance By Olena Senyuta

  1. By: António AFONSO,; Mohamed AYADI,; Sourour RAMZI
    Abstract: We analyze the productivity changes in basic and secondary education for 24 governorates in Tunisia over the period 2004-2008. In methodological term, we employ the Malmquist index, to estimate changes in total factor productivity which can be decomposed into two main components namely, technological change and technical efficiency change. We use four input variables (number of teacher per students, number of classes per students, number of schools per inhabitants, and expenditure in education per student) and two output variables measuring success rate of baccalaureate exam and rate of non-doubling in the 9th year. Our results show that on average, changes in TFP growth during the period 2004-2008 has been more linked to the changes in technology. The managerial efficiency does not have an important effect on the variation of TFP change. Generally, productivity is associated with technological innovations
    Keywords: basic and secondary education, productivity change, efficiency change, DEA, Malmquist index.
    JEL: C61 D24 I21
    Date: 2013–12
  2. By: Pompei, Fabrizio
    Abstract: In this paper we study the efficiency and total factor productivity growth of Italian regions by implementing a bootstrap Data Envelopment Analysis method. This approach allows us to perform a sensitivity analysis of the efficiency scores at regional level, in which human capital is included besides traditional inputs. Higher levels of average years of schooling were important for efficiency and TFP growth in the Northern and Central regions. Conversely, the overall scarce human capital accumulation in Southern regions negatively affected their performances. However, both DEA and analysis of decomposition of productivity growth, conducted by means of Malmquist’s index, highlighted that also in Southern regions, in which the growth rate of human capital and TFP was remarkable, the contribution of the improvement in pure efficiency to economic growth was totally nonessential.
    Keywords: Italian regions, Productivity, Data Envelopment Analysis
    JEL: O3 O4 R11
    Date: 2013–12–09
  3. By: Giannis Karagiannis; C. A. K. Lovell (CEPA - School of Economics, The University of Queensland)
    Abstract: We consider productivity measurement based on radial DEA models with multiple constant inputs. We show that in this case the Malmquist and the Hicks- Moorsteen productivity indices coincide and are multiplicatively complete, the choice of orientation for the measurement of productivity change does not matter, and there is a unique decomposition of productivity change containing three independent sources, namely technical efficiency change and the magnitude and output bias components of technical change. We also show that an aggregate productivity index is given by the simple arithmetic mean of individual productivity indices.
    Date: 2013–12
  4. By: António Afonso,; Alma Romero; Emma Monsalve
    Abstract: We compute Public Sector Performance (PSP) and Public Sector Efficiency (PSE) indicators and Data Envelopment Analysis (DEA) efficiency scores for a sample of twenty-three Latin American and Caribbean Countries (LAC) to measure efficiency of public spending for the period 2001-2010. Our results show that the PSE is inversely correlated with the size of the government, while the efficiency frontier is essentially defined by Chile, Guatemala, and Peru. Moreover, on average, output quantities could theoretically be proportionally increased by 19 percent with the same level of inputs. In addition, the performed Tobit analysis suggests that more transparency and regulatory quality improve the efficiency scores, while more transparency and control of corruption increase output-oriented efficiency.
    Keywords: public sector performance, technical efficiency, Tobit, DEA, Latin America, Caribbean.
    JEL: C14 C61 H50 N16 O54
    Date: 2013–12
  5. By: Ioannis Bournakis; Sushanta Mallick; David Kernohan; Dimitris A.Tsouknidis
    Abstract: This paper examines the direct effects of corporate tax on firm productivity along with the interaction effects of tax policy and R&D activity on productivity at firm level for over 13,062 firms during 2004-2011. Our main findings are first, that there is evidence for productivity convergence and we find that there is a positive robust relationship between R&D and firm productivity, whereas tax policy has a negative distortionary effect on TFP. Second, firms with greater export orientation do not seem to achieve much improvement in productivity, whereas the favourable productivity effect in the case of R&D-based firms suggests that if there are tax incentives in place for R&D type activity, it can promote innovation and drive productivity convergence (lagging firms closing the technology gap with those at the frontier), particularly so when there is a continued decline in overall economic activity. The results also show a significant non-linear effect of tax rate on firm-level productivity, identifying an inverse U-shaped relationship
    Keywords: Total Factor Productivity, Catch-Up, Effective Tax Rate, Firm-level Productivity Convergence, UK.
    JEL: O3 O4
    Date: 2013–11
  6. By: Laurin Janes
    Abstract: Using data from a randomized control trial in Sri Lanka, this paper explores whether cash and in-kind grants helped microenterprises approach the productivity level of SMEs. The paper first estimates production functions and subsequently treatment effects on TFP levels. Most significantly, more able and more risk-averse owners benefit from the larger in-kind grant. Also, the larger in-kind grants allowed for increases in productivity to the least productive firms. The paper then uses data from a representative sample of formal firms to put the TFP levels and treatment effects in the microenterprises into perspective. The results suggest that the least productive firms where able to catch up with the average microenterprise and formal SMEs, while a gap remains with large firms. This finding encourages a positive view of the potential for productivity growth in microenterprises.
    Keywords: Economic development, microenterprises, formal informal, total factor productivity, embodied technology
    JEL: L25 O12 O14 O17 O33
    Date: 2013
  7. By: Cândida Ferreira
    Abstract: This paper provides empirical evidence on the causality relations between bank performance and economic growth in a panel including 27 European Union member-states from 1996 through to the onset of the 2008 financial crisis. Bank performance is represented not only by the Return on Assets (ROA) and Return on Equity (ROE) ratios but also by bank cost efficiency, measured through Data Envelopment Analysis (DEA). For economic growth, we consider not only the GDP per capita but also the gross fixed capital formation growth. Deploying a panel Granger causality approach, we confirm positive causality running from bank performance to economic growth. However, as regards the opposite causality, running from growth to bank performance, we conclude that economic growth positively contributes to the bank ROA and ROE ratios but not so certainly in the case of the DEA bank cost efficiency.
    Keywords: Bank performance, Economic growth, DEA, Panel Granger causality, European Union.
    JEL: G21 G31 E44 F43 F36
    Date: 2013–12
  8. By: Jienwatcharamongkhol, Viroj (The Ratio Institute & Lund University)
    Abstract: There are several studies that find a positive effect of productivity on firm-level export, but little is known about the role of import. This paper fills this gap by looking at the interaction between import and productivity in influencing exports. The main hypothesis is that imports stimulate learning, which in turn means that the productivity effect on export is greater for firms with previous import experience. To test this, I examine whether productivity increases the probability to engage in exports and for existing exporters total value of exports when firms have imported from a period before. Using data of Swedish manufacturing firms from 1997-2006,I find that imports enhance productivity in promoting firm’s exports.
    Keywords: productivity; import; export; firm-level
    JEL: F12 F14 F41
    Date: 2013–12–04
  9. By: Paul Castaneda Dower (New Economic School and Centre of Economic and Financial Research); Andrei Markevich (New Economic School and University of Warwick)
    Abstract: We study the effect of improvements in peasants’ land tenure, launched by the Stolypin reform, on agricultural productivity in late imperial Russia. The reform allowed peasants to obtain land titles and consolidate plots. We find that land consolidations increased productivity. We argue that changes in peasant de facto land usage rights caused this effect. In contrast, the titling component of the reform was associated with a decrease in land productivity. We present evidence that this negative effect was driven by transaction costs to exit the commune and the outflow of labor from the countryside.
    Date: 2013–12
  10. By: Alfred A. Haug (Department of Economics, University of Otago, New Zealand); Vincent C. Blackburn (Finance and Investment New South Wales, Department of Education and Communities)
    Abstract: This study measures the efficiency of government secondary schools in New South Wales, Australia, using a recently developed methodology of two-stage semi-parametric modeling. In contrast to previous research comparing school performance, we control for prior academic achievement of students by looking at the changes in academic achievements over a two year period, at the school level, from 2008 to 2010, and employ detailed financial data for deriving the envelope for the production frontier of the schools. Using Simar and Wilson's (2007) double bootstrap procedure for data envelopment analysis (DEA), the study finds that schools with higher student retention rates, higher total student numbers, boys or girls only, and selective admissions do better than other schools. On the other hand, a negative influence comes from a school's location in provincial and outer metropolitan areas, a higher ratio of disadvantaged students at a school, and a school's specialization in areas such as languages, performing arts, sports, etc. A surprising result is that the socio-economic characteristics of the families of students attending the school has no significant effect on their academic performance, nor does the average of the years of service of the teachers at a specific school.
    Keywords: Two-stage data envelopment analysis; double-bootstrap; efficiency of high schools in New South Wales, Australia.
    JEL: C44 C61 H53 I21 I22
    Date: 2013–11
  11. By: Kurosaki, Takashi
    Abstract: This paper investigates the growth performance of agriculture in India, Pakistan, and Bangladesh in the twentieth century. The use of unusually long-term data that correspond to the current borders for the period 1901-2002 and the focus on crop shifts as a source of growth distinguish this study from the existing ones. The empirical results show a sharp discontinuity between the preand the post- independence periods in all three countries: growth rates in total output, labor productivity, and land productivity rose from zero or very low figures to significantly positive levels, which were sustained throughout the post-independence period. The improvement in aggregate land productivity explained the most of this output growth, of which approximately one third was attributable to shifts to more lucrative crops.
    Date: 2013–11
  12. By: Marc Melitz; Saso Polanec
    Date: 2013–01
  13. By: Firpo, Sergio; Pieri, Renan
    Date: 2013–12–06
  14. By: Nicoletti, Cheti; Rabe, Birgitta
    Abstract: Using administrative data on schools in England, we estimate an education production model of cognitive skills at the end of secondary school. We provide empirical evidence of selfproductivity of skills and of complementarity between secondary school inputs and skills at the end of primary school. Our inference relies on idiosyncratic variation in school expenditure and child fixed effect estimation that controls for the endogeneity of past skills. The persistence in cognitive ability is 0.22 and the return to school expenditure is three times higher for students at the top of the past attainment distribution than for those at the bottom.
    Date: 2013–12–04
  15. By: Fernández Gual, Verónica; Segarra Blasco, Agustí, 1958-
    Abstract: This paper investigates relationships between cooperation, R&D, innovation and productivity in Spanish firms. It uses a large sample of firm-level micro-data and applies an extended structural model that aims to explain the effects of cooperation on R&D investment, of R&D investment on output innovation, and of innovation on firms’ productivity levels. It also analyses the determinants of R&D cooperation. Firms’ technology level is taken into account in order to analyse the differences between high-tech and low-tech firms, both in the industrial and service sectors. The database used was the Technological Innovation Panel (PITEC) for the period 2004-2010. Empirical results show that firms which cooperate in innovative activities are more likely to invest in R&D in subsequent years. As expected, R&D investment has a positive impact on the probability of generating an innovation, in terms of both product and process, for manufacturing firms. Finally, innovation output has a positive impact on firms’ productivity, being greater in process innovations. Keywords: innovation sources; productivity; R&D Cooperation
    Keywords: Tecnologia -- Innovacions, Indústria -- Productivitat, Investigació industrial, 338 - Situació econòmica. Política econòmica. Gestió, control i planificació de l'economia. Producció. Serveis. Turisme. Preus,
    Date: 2013
  16. By: Ratto, Marisa; Tominey, Emma; Propper, Carol; Burgess, Simon M.
    Abstract: This paper addresses a lack of evidence on the impact of performance pay in the public sector by evaluating a pilot scheme of incentives in a major government agency. The incentive scheme was based on teams and covered quantity and quality targets, measured with varying degrees of precision. We use data from the agency's performance management system and personnel records plus matched labour market data. We focus on three main issues: whether performance pay matters for public service worker productivity, what the team basis of the scheme implies, and the impact of the differential measurement precision. We show that the use of performance pay had no impact at the mean, but that there was significant heterogeneity of response. This heterogeneity was patterned as one would expect from a free rider versus peer monitoring perspective. We found that the incentive scheme had a substantial positive effect in small teams, and a negative response in large teams. We found little impact of the scheme on quality measures, which we interpret as due to the differential measurement technology. We show that the scheme in small teams had non-trivial effects on output, and our estimates suggest that the use of incentive pay is much more cost effective than a general pay rise.
    Keywords: Incentives; public sector; teams; performance; personnel economics;
    JEL: J33 J45 D23
    Date: 2012–07
  17. By: Kaoru Tone (National Graduate Institute for Policy Studies)
    Abstract: In this paper, we propose new resampling models in data envelopment analysis (DEA). Input/output values are subject to change for several reasons, e.g., measurement errors, hysteretic factors, arbitrariness and so on. Furthermore, these variations differ in their input/output items and their decision-making units (DMU). Hence, DEA efficiency scores need to be examined by considering these factors. Resampling based on these variations is necessary for gauging the confidence interval of DEA scores. We propose three resampling models. The first one assumes downside and upside measurement error rates for each input/output, which are common to all DMUs. We resample data following the triangular distribution that the downside and upside errors indicate around the observed data. The second model utilizes historical data, e.g., past-present, for estimating data variations, imposing chronological order weights which are supplied by Lucas series (a variant of Fibonacci series). The last one deals with future prospects. This model aims at forecasting the future efficiency score and its confidence interval for each DMU.
    Date: 2013–12
  18. By: Dale W. Jorgenson; Marcel P. Timmer
    Abstract: We provide new evidence on patterns of structural change in advanced economies, reconsidering the stylised facts put forward by Kaldor (1963), Kuznets (1971), and Maddison (1980). Since 1980, the services sector has overwhelmingly predominated in the economic activity of the European Union, Japan, and the US, but there is substantial heterogeneity among services. Personal, finance, and business services have low productivity growth and increasing shares in employment and GDP. By contrast, shares of distribution services are constant, and productivity growth is rapid. We find that the labour share in value-added is declining, while the use of ICT capital and skilled labour is increasing in all sectors and regions.
  19. By: Tavassoli, Sam (CSIR, Blekinge Inst of Technology)
    Abstract: This paper analyzes the role of innovation on the export behavior of firms. Using two waves of Swedish CIS data merged with register data on firm-specific characteristics. I estimate the influence of the innovation output of a firm on its export propensity and intensity, respectively. I find that the innovation output of firms (measured as sales due to innovative products) has a positive and significant effect on export behavior of firms. The results also show that it is indeed innovation output, rather than innovation input (innovative efforts), that matters for export behavior of firms. Specifically, innovation output leads to increase in later export propensity and intensity of firms. Moreover, there is also strong association of productivity and ownership structure of firms with export propensity and intensity of firms. The results are robust when unobserved time-invariant heterogeneity of firm and also potential endogeneity of innovation-export are taken into accounted.
    Keywords: Innovation output; innovation input; export propensity; export intensity
    JEL: F14 O31 O33
    Date: 2013–12–03
  20. By: Fabella, Raul V.
    Abstract: Depicting the Philippines as a prescientific society, this paper discusses how the environment plays a significant role in shaping the culture of research and scientific productivity. Such conducive environment includes having an adequate think space, a supportive and engaging critical mass, and most importantly, an efficient incentives system. The paper cites several examples of research institutions in the Philippines which highlighted the importance of collaborative efforts, research networks, strong leadership, and generous rewards in attaining success in their endeavor. It also mentions detriments to productivity such as implicit publication costs, the politics of fairness of equality, and the bias for quantity over quality.
    Keywords: Philippines, research culture, research incentives, research institutions
    Date: 2013
  21. By: Oriana Bandiera; Andrea Prat; Raffaella Sadun
    Abstract: CEOs affect the performance of the firms they manage, and family CEOs seem to weaken it. Yet little is known about what top executives actually do, and whether it differs by firm ownership. We study CEOs in the Indian manufacturing sector, where family ownership is widespread and the productivity dispersion across firms is substantial. Time use analysis of 356 CEOs of listed firms yields three sets of findings. First, there is substantial variation in the number of hours CEOs devote to work activities, and longer working hours are associated with higher firm productivity, growth, profitability and CEO pay. Second, family CEOs record 8% fewer working hours relative to professional CEOs. The difference in hours worked is more pronounced in low competition environments and does not seem to be explained by measurement error. Third, difference in diffrences estimates with respect to the cost of effort, due to weather shocks and popular sport events, reveal that the observed difference between family and professional CEOs is consistent with heterogeneous preferences for work versus leisure. Evidence from six other countries reveals similar findings in economies at different stages of development.
    Date: 2013–12
  22. By: Bogaard, Hein (George Washington University); Svejnar, Jan (Columbia University)
    Abstract: We exploit organizational reforms in a foreign-owned bank in Central-East Europe to study the implementation of modern HRM policies in an emerging market context. We have branch-level data and use our knowledge of the process that led to the adoption of the reforms to implement two estimators that address endogeneity bias in a complementary fashion: an IV approach and Generalized Propensity Score estimation. Our results show that some of the reforms had a positive impact on productivity, but they also underscore the risks of quantity-based incentives where quality is important.
    Keywords: insider econometrics, endogeneity of HRM policies, incentives, foreign ownership, banking, Central and Eastern Europe
    JEL: F23 G21 M52
    Date: 2013–12
  23. By: Iwasaki, Ichiro; Tokunaga, Masahiro
    Abstract: In this paper, we conduct a meta-analysis of the literature that empirically examines the microeconomic impacts of foreign direct investment (FDI) in Central and Eastern Europe and the former Soviet Union. The meta-synthesis of estimates collected from relevant studies shows that both the effect size and the statistical significance of the indirect effect of FDI, namely the productivity spillover effect, are obviously lower than those of the direct effect caused by foreign participation in company management through ownership. Moreover, the meta-regression analysis reveals that, probably due to the presence of publication selection bias, previous studies have not yet provided empirical evidence of a non-zero productivity spillover effect in the region. Further research efforts are required to capture the true effect.
    Keywords: foreign direct investment (FDI), technology spillover, foreign ownership, meta-analysis, publication selection bias, Central and Eastern Europe, former Soviet Union
    JEL: D22 F21 F23 P33
    Date: 2013–11
  24. By: Cecile Casteuble (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société); Emmanuelle Nys (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société); Philippe Rous (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)
    Abstract: The aim of this paper is to empirically investigate the relationship between bank risk-return efficiency and bond spread priced in the primary market. Our study is based on a sample of European listed banks for the period 1996-2011. Applying a parametric frontier based on the Battese and Coelli (1993) model, we can compute risk-return efficiency score for each bank at each date. Compared to previous studies, we investigate the effectiveness of market discipline taking into account not only risk and return independently, but also the level of profitability for a given level of risk on the pricing of bond spread. We find that, over the complete sample period, bondholders require a higher spread from more inefficient banks. A closer analysis actually shows that market discipline is not effective during sound economic period, but market investors comes to discipline banks during distressed economic period by pricing lower spread to more efficient banks.
    Date: 2013
  25. By: Millone M.M.; Bos J.W.B. (GSBE)
    Abstract: The microfinance sector is an example of a sector in which firms with different business models coexist. Next to pure for-profit microfinance institutions MFIs, the sector has room for non-profit organizations, and includes social for-profit firms that aim to maximize a double bot- tom line and do well while doing good. We introduce a benchmarking approach that accommodates these three business models and allows us to estimate the efficiency of MFIs when they operate true to their busi- ness model, but also when they drift away from their original design. Using a simple model, we hypothesize that it is more difficult to operate efficiently when pursuing a double bottom line. Our empirical results for a large sample of MFIs are in line with this hypothesis pure for-profit and non-profit FMIs are more efficient than social for-profit MFIs. In addition, efficiency decreases for all MFIs when they move away from their original business model. Increasing the risk of the loan portfolio reduces efficiency and lending to woman increases efficiency. Finally, our finding that multiple lending to borrowers is efficiency-enhancing may help explain the mission drift in microfinance.
    Keywords: Econometrics; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; Microeconomic Analyses of Economic Development; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance;
    JEL: G21 O12 O16 C01
    Date: 2013
  26. By: Kristian Behrens; Gilles Duranton; Frédéric Robert-Nicoud
    Abstract: Large cities produce more output per capita than small cities. This higher productivity may occur because more talented individuals sort into large cities, because large cities select more productive entrepreneurs and firms, or because of agglomeration economies. We develop a model of systems of cities that combines all three elements and suggests interesting complementarities between them. The model can replicate stylized facts about sorting, agglomeration, and selection in cities. It also generates Zipf’s law for cities under empirically plausible parameter values. Finally, it provides a useful framework within which to reinterpret extant empirical evidence. Large cities produce more output per capita than small cities. This higher productivity may occur because more talented individuals sort into large cities, because large cities select more productive entrepreneurs and firms, or because of agglomeration economies. We develop a model of systems of cities that combines all three elements and suggests interesting complementarities between them. The model can replicate stylized facts about sorting, agglomeration, and selection in cities. It also generates Zipf’s law for cities under empirically plausible parameter values. Finally, it provides a useful framework within which to reinterpret extant empirical evidence.
    Keywords: sorting, selection, agglomeration, urban premium, city size, Zipf’s law
    Date: 2013–11
  27. By: Amélia Branco; João Carlos Lopes
    Abstract: This paper is about the relative economic performance of clustered and non-clustered companies in the different phases of the cluster life cycle. It starts with the explanation of a puzzling localization behaviour, namely that most of the Portuguese cork manufacturing firms are concentrated in Santa Maria da Feira, a small county in the north of the country, whereas the bulk of the cork is produced in the south (Alentejo and Ribatejo). The historical roots and past and path dependence of the trajectory of this cluster are examined, as well as the identification of its life cycle phases. A comparative analysis of the economic performance of firms localized in Santa Maria da Feira and in other regions of the country is then made, using labour productivity data for a long time span of several decades. This exercise is a quantitative illustration of the crucial importance of history for the understanding of cluster dynamics, as well as many other (evolutionary) economic phenomena.
    Keywords: Cork Industry, Cluster Life Cycle, Santa Maria da Feira, Portugal.
    JEL: R12 L73 N60 O14
    Date: 2013–12
  28. By: Vogel, Johanna
    Abstract: This paper studies the effects of allowing for heterogeneous slope coefficients in the Mankiw, Romer and Weil (1992) model, based on panel data for 193 EU-15 regions from 1980 to 2005. We first estimate the model using conventional pooled panel data estimators, based on data at five-year intervals, allowing at most intercepts to differ across regions. Then we relax the restriction of homogeneous slope coefficients by estimating separate time-series models for each region based on annual data, using Pesaran and Smith's (1995) mean group estimator. To account for spatial dependence, we employ the common correlated effects approach of Pesaran (2006). Our empirical analysis indicates important differences across regions in the speed of adjustment to region-specific long-run paths for the level of income per capita. Allowing for heterogeneous coefficients doubles the speed of adjustment to 22% per year on average compared to the homogenous case, which suggests downward bias in the latter. We also find a positive and significant effect of the rate of investment, although the implied capital elasticity and the estimated long-run effect of investment are smaller than expected.
    Keywords: Convergence, European regions, dynamic heterogeneous panels, mean group estimation, cross-section dependence
    JEL: C23 O40 R11
    Date: 2013–12
  29. By: Dumagan, Jesus C.
    Abstract: This paper shows that the decomposition of log-change in aggregate labor productivity (ALP) devised by Balk (2013) based on Sato-Vartia indexes is inexact when applied to gross domestic product (GDP) in chained or in constant prices so that sectoral contributions do not necessarily add up to "actual" log-change in ALP. However, this paper adjusts Balk`s decomposition by incorporating "relative prices"--from the "generalized exactly additive" (GEAD) decomposition of "arithmetic change" in ALP (Dumagan 2013)--and shows that the adjusted Balk decomposition is exact for GDP in chained or in constant prices like GEAD. An important finding is that relative prices could reverse the signs of sectoral contributions from Balk`s inexact decomposition. Hence, results from related decompositions of log-change in ALP, e.g., those based on the Tornqvist framework, that do not explicitly recognize relative prices could be misleading and, therefore, may need reconsideration.
    Keywords: relative prices, productivity change decomposition, index number theory
    Date: 2013
  30. By: Olena Senyuta
    Abstract: This paper empirically investigates how the level of authority delegation is related to the performance of an organization. Decentralized, horizontal organizational structure takes advantage of more effcient decision making, mainly due to more efficient use of "soft" information. The cost of such decentralization is the loss of control and the need to properly incentivise agents who are legitimately given the authority to make decisions. This is the trade-off organization faces when deciding on the level of authority delegation. The effect of authority delegation is studied using empirical data from the banking sector. Different specifications were used to estimate the effect of authority delegation on performance characteristics. Estimates demonstrate that more authority delegated has a positive effect on quantitative measures of bank performance; however, it decreases the quality of decisions taken. Results demonstrate that there is a trade-off between the quantitative and qualitative performance characteristics. While the local bank branch is able to increase loan generation when more authority is delegated to it, there is also some evidence of loan quality deterioration.
    Keywords: banking; organizational structure; authority delegation; soft information; small business lending;
    JEL: D23 D83 G21 L22
    Date: 2013–11

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