nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒05‒09
nine papers chosen by
Angelo Zago
University of Verona

  1. Efficiency and benchmarking with directional distances. A data driven approach By Cinzia Daraio; LŽopold Simar
  2. China's national production function since 1997: A reinvestigation By Zhu, Yanyuan; Feng, Xiao
  3. Business environmental constraints for Egyptian firms By María Dolores Parra; Inmaculada Martínez-Zarzoso; Celestino Suarez-Burguet
  4. Productivity Spillovers among Linked Sectors By Ling Peng; Yongmiao Hong
  5. What does (or does not) determine persistent corporate high-growth ? By Stefano Bianchini; Giulio Bottazzi; Federico Tamagni
  6. What drives the volatility of firm level productivity in China ? By Luo, Xubei; Zhu, Nong
  7. Measuring bank competition in China: A comparison of new versus conventional approaches applied to loan markets By Bing Xu; Adrian van Rixtel; Michiel van Leuvensteijn
  8. Price-cost mark-ups in the Spanish economy: a microeconomic perspective By José Manuel Montero; Alberto Urtasun
  9. The Impact of Public Spending on the Performance of Microfinance Institutions By Janda, Karel; Zetek, Pavel

  1. By: Cinzia Daraio (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); LŽopold Simar (Institute of Statistics, Biostatistics et Actuarial Sciences, Universite' Catholique de Louvain, Louvain-la-Neuve, Belgium)
    Abstract: In efficiency analysis the assessment of the performance of Decision Making Units (DMUs) relays on the selection of the direction along which the distance from the efficient frontier is measured. Directional Distance Functions (DDFs) represent a flexible way to gauge the inefficiency of DMUs. Permitting the selection of a direction towards the efficient frontier is often useful in empirical applications. As a matter of fact, many papers in the literature have proposed specific DDFs suitable for different contexts of application. Nevertheless, the selection of a direction implies the choice of an efficiency target which is imposed to all the analyzed DMUs. Moreover, there exist many situations in which there is no a priori economic or managerial rationale to impose a subjective efficiency target. In this paper we propose a data-driven approach to find out an ÒobjectiveÓ direction along which to gauge the inefficiency of each DMU. Our approach permits to take into account for the heterogeneity of DMUs and their diverse contexts that may influence their input and/or output mixes. Our method is also a data driven technique for benchmarking each DMU. We describe how to implement our framework and illustrate its usefulness with simulated and real datasets.
    Keywords: DEA, benchmarking, directional distance functions, nonparametric estimation, heterogeneity, performance, productivity, organizational studies
    Date: 2014
  2. By: Zhu, Yanyuan; Feng, Xiao
    Abstract: We build China's national production function based on national accounting data since 1997, when China primarily transformed from the Planned economy to Market. By proxying and measuring stocks of human capital(HC), physical capital and the efficiency units, as well as government expenditure reflecting total factor productivity(TFP), we analyze CES production functions' explanation effects by numerical simulation, and then according to the findings, choose Cobb-Douglas form for further research. Our results include, first, Cobb-Douglas production function in the form of capital coefficients - capital relative density, appropriately reflects Chinaâs recent input-output relationship. Second, taking factor-augmenting technical progress into consideration, the proxy settings for two capitals are empirically plausible for future research on Chinaâs endogenous growth model. Third, expansionary government expenditure negatively affects Chinaâs TFP and output. --
    Keywords: national production function,factor-augmenting technical progress,physical capital efficiency units
    JEL: C52 E01 O47 O53
    Date: 2014
  3. By: María Dolores Parra; Inmaculada Martínez-Zarzoso; Celestino Suarez-Burguet
    Abstract: This paper evaluates the main obstacles that Egyptian enterprises face to do business in their country and investigates to what extent the constraints affect firm performance. Firm’s performance is measured as Total Factor Productivity (TFP), which is obtained using Levinsohn and Petrin (2003) methodology. Our analysis evaluates the effects of the different business indicators obtained from the World Bank Enterprise Survey using firm level data from manufacturing firms on TFP. A number of control variables commonly used in the empirical literature are also included in the model. To check the robustness of our result alternative measures of firm performance are used, namely total sales and the average number of workers. The main results indicate that access and cost to finance, tax rates, regulatory policy uncertainty, the price of land and basic infrastructures, such as access to water and electricity, are among the most relevant factors. These findings have important policy implications, in particular for policy makers and will help them decide what sort of specific actions can be taken to reduce the main obstacles and consequently to pave the way for manufacturing Egyptian firms to become more competitive.
    Keywords: firms, total factor productivity, business environment constraints, Egypt, investment climate
    Date: 2014–03
  4. By: Ling Peng; Yongmiao Hong
    Abstract: This paper estimates the impact of inter-sectoral linkages on productivity at the sectoral level. An exhaustive Chinese panel data set for capital, infrastructure and a sectoral agglomeration index is linked with an economic distance matrix derived from inter-sectoral transactions. The latter matrix can replace the conventional geographic distance matrix from spatial econometrics. The impact through spillovers is mixed—the direct impact passing to related sectors and back to the initial sector itself, and the indirect impact arising from changes in all sectors. The results suggest that (1) economic growth in a sector is driven by spillovers among sectors that are linked through flows of goods and services; economic distance plays a more important role in stimulating productivity spillover than spatial distance; a shorter economic distance transmits a larger productivity spillover between sectors; (2) infrastructure spillover improves labor productivity in linked sectors; (3) agglomeration diseconomies can be partially reduced by infrastructure investment.
    Keywords: Inter-sectoral linkages, Economic distance, Spatial econometrics, Spillover, indirect impact
    JEL: C33 O41 H41 D62 L69 P59
    Date: 2013–10–14
  5. By: Stefano Bianchini; Giulio Bottazzi; Federico Tamagni
    Abstract: Theoretical and empirical studies of industry dynamics have extensively focused on the process of growth. Theory predicts that production efficiency, profitability and financial status are central channels through which some firms can survive, grow and eventually achieve outstanding growth performance. Is the same conceptual framework a convincing explanation to account for persistent corporate high growth? Exploiting panels of Italian, Spanish, and French firms we find no evidence that this is the case: companies experiencing persistent high growth are not more productive nor more profitable, and do not display peculiarly sounder financial conditions than firms that only exhibit high, but not persistent, growth performance. The finding is robust across countries, across sectors displaying different innovation patterns, and also controlling for demographic characteristics such as age and size.
    Keywords: High-growth firms, Persistent high-growth, Productivity, Firm age, Firm size
    Date: 2014–04–05
  6. By: Luo, Xubei; Zhu, Nong
    Abstract: The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. With the deepening of market economy, the share of the state-owned and collective enterprises declined. Expansion and contraction, as well as establishment and closure, of firms became a common phenomenon. The level and volatility of firm productivity have become increasingly important aspects of the micro performance of the economy. This paper uses a firm-level data set collected annually by the National Bureau of Statistics of China in 1998-2007 to examine the role of different firm characteristics in productivity volatility. The paper measures productivity volatility at the firm level as the standard deviation of the annual growth rate of productivity. The main objectives are twofold: first, it examines the variation of productivity volatility across firms of different characteristics and their evolution over time; second, it investigates the sources of productivity volatility at the firm level in China. The results suggest that in general, productivity volatility at the firm level has declined over time in China. Among firms with different characteristics, large firms, old firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility, one in a positive way and one in a negative way. Although the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.
    Keywords: Emerging Markets,Economic Conditions and Volatility,Economic Theory&Research,Microfinance,Labor Policies
    Date: 2014–04–01
  7. By: Bing Xu (Universidad Carlos III); Adrian van Rixtel (Bank for international settlements); Michiel van Leuvensteijn (All pensions group)
    Abstract: Since the 1980s, important and progressive reforms have profoundly reshaped the structure of the Chinese banking system. Many empirical studies suggest that financial reform promoted bank competition in most mature and emerging economies. However, some earlier studies that adopted conventional approaches to measure competition concluded that bank competition in China declined during the past decade, despite these reforms. In this paper, we show both empirically and theoretically that this apparent contradiction is the result of flawed measurement. Conventional indicators such as the Lerner index and Panzar- Rosse H-statistic fail to measure competition in Chinese loan markets properly due to the system of interest rate regulation. By contrast, the relatively new Profit Elasticity (PE) approach that was introduced in Boone (2008) as Relative Profit Differences (RPD) does not evidence these shortcomings. Using balance sheet information for a large sample of banks operating in China during 1996-2008, we show that competition actually increased in the past decade when the PE indicator is used. We provide additional empirical evidence that supports our results. We find that these, firstly, are in line with the process of financial reform, as measured by several indices, and secondly are robust for a large number of alternative specifications and estimation methods. All in all, our analysis suggests that bank lending markets in China have been more competitive than previously assumed.
    Keywords: competition, banking industry, China, lending markets, marginal costs, regulation, deregulation
    JEL: D4 G21 L1
    Date: 2014–03
  8. By: José Manuel Montero (Banco de España); Alberto Urtasun (Banco de España)
    Abstract: This paper explores the dynamics of price-cost mark-ups using firm-level data, paying particular attention to the crisis period 2008-2011. To this end, we apply the econometric framework developed by Klette (1999) to a comprehensive sample of Spanish non-financial corporations in order to estimate price-cost mark-ups for the period 1995-2011 at the aggregate and sectoral levels. The results reveal a widespread pattern of increasing pricecost mark-ups since 2008, both by industry and firm size. Moreover, with the aim of interpreting the pattern identified in our findings, we also relate the changes in our industrylevel estimates of price-cost margins between 2007 and 2011 to some relevant industry characteristics suggested by the literature, with an emphasis on the extent of market power and of financial pressure. We find a positive and statistically significant association between the growth rate of estimated mark-ups and both our direct measure of market power and our proxy of financial pressure
    Keywords: mark-ups, returns to scale, production function, market power, financial pressure, GMM estimator, rolling regression
    JEL: C23 C26 D24 E31 L11 L16
    Date: 2014–05
  9. By: Janda, Karel; Zetek, Pavel
    Abstract: This paper investigates the role of public expenditures and general government debt in microfinance performance. Our panel regression applied to the data of microfinance institutions (MFIs) in Latin America and the Caribbean confirms the high significance of public finance for the growth of MFIs, especially for the size of their total assets and for their yield on gross loan portfolio. Moreover, the results indicate that MFIs, operating in the country with higher growth of GDP, are characterized by higher rate of social efficiency. The positive influence on microfinance is besides public finance also associated with a growth of rural population or an economy openness of the given country.
    Keywords: public finance, government expenditure, microfinance, microcredit, poverty
    JEL: E62 G21 O11
    Date: 2014–05–03

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