New Economics Papers
on Efficiency and Productivity
Issue of 2013‒12‒29
twenty-one papers chosen by

  1. Importing, Productivity and Absorptive Capacity in Sub-Saharan African Manufacturing Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  2. Measuring the Gap between Wage and Productivity: Wage-Tenure Profile and Productivity-Tenure Profile Cross Twice By Kodama, Naomi; Odaki, Kazuhiko
  3. Do Business Visits Cause Productivity Growth? By Tani, Massimiliano; Joyeux, Roselyne
  4. Efficiency assessment of primary care providers: A conditional nonparametric approach By Cordero Ferrera, Jose Manuel; Alonso Morán, Edurne; Nuño Solís, Roberto; Orueta, Juan F.; Souto Arce, Regina
  5. Reduced U.S. Funding of Public Agricultural Research and Extension Risks Lowering Future Agricultural Productivity Growth Prospects By Jin, Yu; Huffman, Wallace E.
  6. Assessing the losses in euro area potential productivity due to the financial crisis. By Chouard, V.; Fuentes Castro, D.; Irac, D.; Lemoine, M.
  7. Are there Scale Economies in Scientific Production? On the Topic of Locally Increasing Returns to Scale By Schubert , Torben
  8. When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  9. Energy efficiency in the European Union: What can be learned from the joint application of directional distance functions and slacks-based measures? By Roberto Gómez-Calvet; David Conesa; Ana Rosa Gómez-Calvet; Emili Tortosa-Ausina
  10. Homotheticity, duality and efficiency measures By Juan Muro; Joaquín Vera
  11. Age and firm growth. Evidence from three European countries By Navaretti , Giorgio Barba; Castellani , Davide; Pieri , Fabio
  12. The Agricultural Productivity Gap in Europe By Wenbiao Cai; Manish Pandey
  13. Development Accounting Within Intermediate Goods By Jan, Grobovsek
  14. Working Paper 191 - Do Firms Learn by Exporting or Learn to Export: Evidence from Senegalese Manufacturers’ Plants By Cisse Fatou; Ji Eun Choi
  15. Dynamic Peer Effects in Sales Teams By Aakvik, Arild; Hansen, Frank; Torsvik, Gaute
  16. Different Models for Regional Integration: Lessons from Total Factor Productivity in Europe By Lee, Jeong Yeon; Kim, Doyeon
  17. Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease? Evidence from the 50 States By Bates, Laurie; Santerre, Rexford
  18. Environmental Policies and Productivity Growth: A Critical Review of Empirical Findings By Tomasz Koźluk; Vera Zipperer
  19. Fishing for complementarities: Competitive research funding and research productivity. By Hottenrott, Hanna; Lawson, Cornelia
  20. Flip the Switch: The Spatial Impact of the Rural Electrification Administration 1935-1940 By Carl Kitchens; Price Fishback
  21. Lessons from the Financial Crisis: Bank Performance and Regulatory Reform By Neville Arjani; Graydon Paulin

  1. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: Our study extends the recent literature on the importer-productivity relationship to a firm-level dataset for sub-Saharan Africa. Using a cross-section sample of 3090 firms in 19 countries, we find that importers are more productive than non-importers. The observed importer premium is found to be robust to firm-specific characteristics and to a number of alternative estimation methods. Furthermore, we examine the importance of absorptive capacity in enhancing the benefits from importing. Using recently developed quantile threshold regression methods, we find that higher levels of absorptive capacity, as measured by human capital, are associated with a stronger relationship between importing and productivity.
    Keywords: importing, productivity, sub-Saharan Africa, absorptive capacity, human capital
    JEL: D24 F10 M20 L10
    Date: 2013–11
  2. By: Kodama, Naomi; Odaki, Kazuhiko
    Abstract: This paper proposes a new empirical method to measure the gap between wage and productivity of workers. Our method aggregates Mincer-type human capital function of all workers of a firm and obtains the total labor input. We put it into the Cobb-Douglas production function and estimate the coefficients of gap between wage and productivity. Applying the method to employer-employee matched panel data, we find that wagetenure profile and productivity-tenure profile intersect twice. The wage is higher than the productivity in junior years, then surpassed by the productivity in middle age, and becomes higher again in late career. The results are consistent with both of Becker's firm sponsored training model and Lazear's deferred compensation model.
    Keywords: Productivity, Human capital, Production function, Wage
    JEL: D24 J24 L23
    Date: 2013–12
  3. By: Tani, Massimiliano (University of New South Wales); Joyeux, Roselyne (Macquarie University, Sydney)
    Abstract: The production and diffusion of knowledge have increasingly been seen as potential causes of the observed international differences in total factor productivity and, in turn, as possible sources of economic growth. This paper presents the results of a causality study between business visits and multifactor productivity using a unique database that covers 30 sectors for 17 countries over the period 1998-2007. The results suggest that there is a causal link in some of the most innovative sectors from business visits to productivity. Business visits emerge as a fundamental channel for the spread of knowledge.
    Keywords: international business travels, panel data, causality tests
    JEL: F22 C32 C33
    Date: 2013–12
  4. By: Cordero Ferrera, Jose Manuel; Alonso Morán, Edurne; Nuño Solís, Roberto; Orueta, Juan F.; Souto Arce, Regina
    Abstract: This paper uses a fully nonparametric approach to estimate efficiency measures for primary care units incorporating the effect of (exogenous) environmental factors. This methodology allows us to account for different types of variables (continuous and discrete) describing the main characteristics of patients served by those providers. In addition, we use an extension of this nonparametric approach to deal with the presence of undesirable outputs in data, represented by the rates of hospitalization for ambulatory care sensitive condition (ACSC) and of hospital readmissions. The empirical results show that all the exogenous variables considered have a significant and negative effect on efficiency estimates
    Keywords: OR in health services, Efficiency, Data Envelopment Analysis, Environmental factors, Nonparametric analysis
    JEL: C14 I12
    Date: 2013–11–24
  5. By: Jin, Yu; Huffman, Wallace E.
    Abstract: The objective of this paper is to provide policymakers with new estimates of the separate returns to public agricultural research and extension and a perspective on future agricultural productivity growth. This requires fitting an econometric model that contains separate regressors for the stock of public agricultural research and public agricultural extension. We use net measures to create our public agricultural research and extension variables. Our model is fitted to data for the U.S. contiguous 48 states, 1970-2004. It yields statistically significant estimates of within-state and spillin stocks of public agricultural research and of within-state agricultural extension. The econometric model of state agricultural TFP yields somewhat optimistic forecasts for agricultural total factor productivity over 2004-2010. The social rate of return to public investments in agricultural research and extension are shown to remain large—both are in excess of 60 percent, which is large by any standard.
    Keywords: states; agriculture; returns to research; multifactor productivity; U.S.; forecasts
    Date: 2013–12–18
  6. By: Chouard, V.; Fuentes Castro, D.; Irac, D.; Lemoine, M.
    Abstract: In this paper, we show that the recent financial crisis has significantly affected the potential total factor productivity (TFP) of the four largest euro area economies, as well as that of the rest of the euro area. We used a reduced-form equation of TFP, based on an approach recently developed by Cahn and Saint-Guilhem (2010). Our empirical findings show that the permanent impact on potential TFP varies across countries from -3.9 points to -1.3 points in Q2 2012. When these losses are incorporated, TFP gaps develop closely in line with capacity utilisation rates (CUR). Moreover, in the case of France, including CUR in our TFP model improves the quasi real-time reliability of TFP gap estimates.
    Keywords: production function, total factor productivity, financial crisis, capacity utilisation.
    JEL: E22 E23 E32 O4
    Date: 2013
  7. By: Schubert , Torben (CIRCLE, Lund University)
    Abstract: In this paper the question of returns to scale in scientific production is analyzed using nonparametric techniques for multidimensional efficiency measurement. Based on survey data for German research groups from three scientific fields it is shown that the multidimensional production possibility sets are weakly non-convex and locally strictly non-convex. This implies that the production functions for the groups in the sample are characterised by increasing returns in some regions and at least constant returns to scale otherwise. This has two implications for organization of scientific research: first, at least some groups in our sample have suboptimal size and could benefit from growing. Second, specialisation on certain tasks in science (e.g. transfer-oriented groups vs. research-oriented groups) would increase output of the overall system.
    Keywords: Research Units; Specialisation; Production; Efficiency; Returns to scale; DEA
    JEL: C14 O30
    Date: 2013–12–20
  8. By: Gorodnichenko, Yuriy (University of California, Berkeley); Svejnar, Jan (Columbia University); Terrell, Katherine (University of Michigan)
    Abstract: We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm's distance to the technological frontier, education of workers, and other firm- and country-specific characteristics.
    Keywords: FDI, spillovers, transition economies, efficiency
    JEL: F23 M16 O16 P23
    Date: 2013–12
  9. By: Roberto Gómez-Calvet (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); David Conesa (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); Ana Rosa Gómez-Calvet (Departament de Matemàtiques per a l’Economia i l’Empresa, Universitat de València, Spain); Emili Tortosa-Ausina (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: Over the last few years there have been increasing concerns about the energy mix in many countries. These concerns have been of greater magnitude for countries with a common energy regulation such as European Union (EU) member states. In order to choose a given energy mix, an important aspect to take into account is the efficiency involved to generate it. In this context, the present study analyzes the efficiency with which electricity and derived heat is produced in 25 EU member states over the last decade. This is carried out considering not only the inputs and outputs involved but, more importantly, which undesirable by-products are generated during the production process, which is a relevant issue for the EU climate policy. To this end, two nonparametric frontier models are considered. First, a Directional Distance Function, based on Briec’s (1997) proposal and, second, a modified version of Tone’s (2001) Slack Based Measure (SBM) model, both of which are especially appropriate in this particular context due to its treatment of undesirable outputs. Results from both models show that there are remarkable efficiency differences among EU countries and, therefore, the initiatives aiming at harmonizing environmental policies have still to be intensified.
    Keywords: Data Envelopment Analysis, European Union, efficiency, energy, slackbased measure
    JEL: Q4 Q43
    Date: 2013
  10. By: Juan Muro (Departamento de Economía, Universidad de Alcalá.); Joaquín Vera (Universidad Autónoma de Madrid.)
    Abstract: As a result of the duality of cost and distance functions the efficiency of cost-minimizing behaviour can be compared to shadow-prizing behaviour, and conversely. In this framework we outline the form that dual efficiency measures, Muro (1982), Muro and Vera (1983), adopt for homothetic and linearly homogeneous technologies. To illustrate the subject we provide a numerical example for a technology described by a translog cost function.
    Keywords: Homothetic technologies, linearly homogeneous technologies, efficiency measures, scale measures, duality theory, polar forms.
    JEL: D24
    Date: 2013
  11. By: Navaretti , Giorgio Barba (Department of Economics, Management and Quantitative Methods, University of Milan, Italy); Castellani , Davide (Department of Economics, Finance and Statistics, University of Perugia, Centro Studi Luca d'Agliano, Milan, Italy Halle Institute for Economic Research (IWH), Halle, Germany CIRCLE, Lund University, Sweden); Pieri , Fabio (Depto. de Economia Aplicada II (Estructura Economica), Universitat de Valencia, Spain)
    Abstract: This paper provides new insights on the dependence of firm growth on age along the entire distribution of (positive and negative) growth rates, and conditional on survival. Using data from the EFIGE survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than 10 employees in the period from 2001 to 2008. After controlling for several firms’ characteristics, country and sector specificities we find that: (i) young firms grow faster than old firms, especially in the highest growth quantiles; (ii) young firms face the same probability of declining than their older counterparts; (iii) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity, and the financial structure; (iv) high growth is associated with younger CEOs and other attributes which capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries.
    Keywords: firm growth; age; quantile regression
    JEL: L21 L25 L26 L60
    Date: 2013–12–18
  12. By: Wenbiao Cai; Manish Pandey
    Abstract: For fifteen European countries over the 1970-2004 period we establish that there is a large and persistent agricultural productivity gap, the ratio of labor productivity in non-agriculture to that in agriculture. Correcting for under-reporting of self-employment income in both agriculture and non-agriculture significantly reduces the measured agricultural productivity gap. For countries with information on years of school and experience at the sector level, we also find substantially higher human capital in non-agriculture than in agriculture. Our findings suggest that measured labor productivity differences between agriculture and non-agriculture in European countries are not an indicator of resource misallocation, but possibly an artifact of mismeasurement of value added and sectoral differences in human capital.
    JEL: E01 O47 O52 Q10
    Date: 2013–12
  13. By: Jan, Grobovsek
    Abstract: Do intermediate goods help explain relative and aggregate productivity differences across countries? Three observations suggest they do: (i) intermediates are relatively expensive in poor countries; (ii) goods industries demand intermediates more intensively than service industries; (iii) goods industries are more prominent intermediate suppliers in poor countries. I build a standard multi-sector growth model accommodating these features to show that inefficient intermediate production strongly depresses aggregate labor productivity and increases the price ratio of final goods to services. Applying the model to data, low and high income countries in fact reveal similar relative efficiency levels between goods and services despite clear differences in relative sectoral labor productivity. Moreover, the main empirical exercise suggests that poorer countries are substantially less efficient at producing intermediate relative to final goods and services. Closing the cross-country efficiency gap in intermediate input production would strongly narrow the aggregate labor productivity difference across countries as well as turn final goods in poorer countries relatively cheap compared to services.
    Date: 2013
  14. By: Cisse Fatou; Ji Eun Choi
    Abstract: The increasing number of literatures investigating on the impact of trade openness on firm efficiency has not yet provided a definite prediction on the direction of causality (Rodrik, 1988, 1992, and Tybout 1992). We investigate the relation between exporting and productivity on the Senegalese manufacturing sectors. Using a unique firm-level panel data for the period 1998-2011, we estimate productivity and exporting dynamics, controlling for other unobserved effects, using simultaneous functions based on Bigsten and al. (2002). Our results indicate the evidences of both self-selection of the most efficient firms enter into the export market and effect of Learning in the export market. Our findings suggest that workers’ qualification and access to Patents and Licences have a positive effect on the process of learning. Also, small firms particularly learn more from exporting. From a policy perspective, this evidence of learning-by-exporting suggests that Senegal has much to gain from promoting its manufacturing sector towards exporting by supporting domestic firms to overcome the barriers to enter into foreign market, particularly by investing on skilled workers and promote access to Patents and Licences as well as disseminating benefits arising from exporting to non-exporters.
    Date: 2013–12–19
  15. By: Aakvik, Arild (Department of Economics, University of Bergen); Hansen, Frank; Torsvik, Gaute (Department of Economics, University of Bergen)
    Abstract: This paper investigates dynamic peer effects in a sales company where workers operate in teams and receive a bonus that depends on both individual worker and team sales. We examine how the past productivity of co-workers affects the current individual performance of team members. To address this question, we employ weekly productivity and administrative data obtained from the customer service center of an insurance company. We find evidence that the past performance of team co-workers influences current performance, and that this effect is larger for agents that ranked in the bottom quartile of team performance in the previous period. The effects are also strongest when bonuses depend on team performance. Overall, our findings suggest that peer effects may alleviate the free-rider problem often associated with team bonuses.
    Keywords: Peer effects; dynamic panel data; team incentives; sales organizations
    JEL: C23 D22 J33 M52
    Date: 2013–11–01
  16. By: Lee, Jeong Yeon (Asian Development Bank Institute); Kim, Doyeon (Asian Development Bank Institute)
    Abstract: The European experience offers three possible models for regional integration: a free trade arrangement, a single market, and a common currency area. This paper examines the effect of regional integration on total factor productivity to assess the long-run growth implications of each model. The findings suggest that joining a regional grouping changes the way participating economies grow. Of the three models, the free trade arrangement is found to be the most effective in promoting intra-regional dependence on R&D spillovers. The other two models are associated with largely negative windfall effects on total factor productivity.
    Keywords: regional integration; economic growth; total factor productivity
    JEL: F02 O31 O40
    Date: 2013–12–16
  17. By: Bates, Laurie; Santerre, Rexford
    Abstract: High and rising costs characterize the private education industry in the United States. This paper tests if Baumol’s cost disease of the service sector can explain some of the growth of private education spending. An empirical strategy developed by Hartwig (2008) and Colombier (2010) and a panel data set of all U.S. states over the period from 1980 to 2009 are used in the empirical analysis. The empirical results indicate that Baumol’s cost disease does infect the private education industry in the United States. The results are reasonably robust with respect to state- and time-fixed effects, two-stage least squares estimation, individual state time trends, and a variety of potentially important covariates.
    Keywords: Private education spending; Baumol's cost disease; aggregate productivity
    JEL: I20
    Date: 2013–12–16
  18. By: Tomasz Koźluk; Vera Zipperer
    Abstract: The economic effects of environmental policies are of central interest to policymakers. The traditional approach sees environmental policies as a burden on economic activity, at least in the short to medium term, as they raise costs without increasing output and restrict the set of production technologies and outputs. In contrast, the Porter Hypothesis claims that well-designed environmental policies can provide a ‘free lunch’ – encouraging innovation, bringing about gains in profitability and productivity that can outweigh the costs of the policy. This paper reviews the empirical evidence on the link between environmental policy stringency and productivity growth, and the various channels through which such effects can take place. The results are ambiguous, in particular as many of the studies are fragile and context-specific, impeding the generalisation of conclusions. Practical problems related to data, measurement and estimation strategies are discussed, leading to suggestions how they can be addressed in future research. These include: improving the measurement of environmental policy stringency; investigating into effects of different types of instruments and details of instrument design; exploiting cross-country variation; and the complementary use of different levels of aggregation. Politiques environnementales et croissance de la productivité : Un examen critique des résultats Les effets économiques des politiques environnementales revêtent un intérêt crucial pour les responsables de l'action publique. Suivant l'approche classique, les politiques environnementales sont considérées comme un fardeau pour l'activité économique, au moins dans une perspective de court à moyen terme, étant donné qu'elles entraînent une hausse des coûts sans pour autant faire augmenter la production et qu'elles limitent l'éventail des technologies de production et des produits. À l'inverse, suivant l'hypothèse de Porter, des politiques environnementales judicieusement conçues peuvent procurer des avantages sans contrepartie, en encourageant l'innovation et en débouchant sur des gains de rentabilité et de productivité qui peuvent l'emporter sur les coûts des politiques considérées. Nous examinons dans ce document de travail les données empiriques relatives à la relation existant entre la rigueur des politiques environnementales et la croissance de la productivité, ainsi que les différents canaux via lesquels les effets considérés peuvent se produire. Les résultats de cet examen sont ambigus, notamment dans la mesure où de nombreuses études sont fragiles et spécifiquement liées à un contexte donné, ce qui ne permet pas d'en généraliser les conclusions. Des problèmes pratiques liés aux données ainsi qu'aux stratégies de mesure et d'estimation sont examinés, et des propositions sont formulées en vue d'y remédier dans le cadre de futurs travaux de recherche. Il est notamment suggéré d'améliorer la mesure de la rigueur des politiques environnementales, d'analyser les effets des différents types d'instruments et d'examiner en détail leur conception, d'exploiter les variations observées entre pays, et d'utiliser de manière complémentaire différents niveaux d'agrégation.
    Keywords: productivity, environmental policy, Porter hypothesis, innovation, innovation, hypothèse de Porter, politiques environnementales, productivité
    JEL: D24 O31 O47 Q50 Q55 Q58
    Date: 2013–11–19
  19. By: Hottenrott, Hanna; Lawson, Cornelia
    Abstract: This paper empirically investigates complementarities between different sources of research funding with regard to academic publishing. We find for a sample of UK engineering academics that competitive funding is associated with an increase in ex-post publications but that industry funding decreases the marginal utility of public funding by lowering the publication and citation rate increases associated with public grants. However, when holding all other explanatory variables at their mean, the negative effect of the interaction does not translate into an effective decrease in publication and citation numbers. The paper also shows that the positive effect of public funding is driven by UK research council and charity grants and that EU funding has no significant effect on publication outcomes.
    Keywords: research funding; university-industry collaboration; scientific productivity;
    Date: 2013–12
  20. By: Carl Kitchens; Price Fishback
    Abstract: To isolate the impact of access to electricity on local economies, we examine the impact of the Rural Electrification Administration low-interest loans in the 1930s. The REA provided loans to cooperatives to lay distribution lines to farms and aid in wiring homes. Consequently, the number of rural farm homes electrified doubled in the United States within 5 years. We develop a panel data set for the 1930s and use changes within counties over time to identify the effect of the REA loans on a wide range of socio-economic measures. The REA loans contributed significantly to increases in crop output and crop productivity and helped stave off declines in overall farm output, productivity, and land values, but had much smaller effects on nonagricultural parts of the economy. The ex-ante subsidy from the low interest loans was large, but after the program was completed, nearly all of the loans were fully repaid, and the ultimate cost to the taxpayer was relatively low.
    JEL: N12 O13 O38
    Date: 2013–12
  21. By: Neville Arjani; Graydon Paulin
    Abstract: The financial systems of some countries fared materially better than others during the global financial crisis of 2007-09. The performance of the Canadian banking system during this period was relatively strong. Using a case study approach together with empirical analysis, we assess some of the factors that contributed to this favourable outcome with a view to drawing useful lessons for regulatory reform. We argue that an important contributor to positive bank performance was a solid approach to risk management on the part of the Canadian banking system, an approach that was actively fostered by the domestic authorities. Efforts to buttress risk management were favourably influenced by several stressful yet instructive episodes in Canadian financial history. The 2007-09 crisis experience suggests a need to make risk management a pervasive element of financial system culture and emphasizes the importance of robust liquidity management.
    Keywords: Financial institutions; Financial system regulation and policy
    JEL: G21 G28
    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.