New Economics Papers
on Efficiency and Productivity
Issue of 2014‒06‒02
twenty-two papers chosen by

  1. Import Competition, Domestic Regulation and Firm-Level Productivity Growth in the OECD By Sarah Ben Yahmed; Sean Dougherty
  2. Just Add Milk: A Productivity Analysis of the Revolutionary Changes in Nineteenth Century Danish Dairying By Markus Lampe; Paul Sharp
  3. Firm heterogeneity in productivity across Europe. What explains what? By Aiello, Francesco; Ricotta, Fernanda
  4. Has Financial Liberalization Improved Economic Efficiency in the Republic of Korea? Evidence from Firm-Level and Industry-Level Data By Park, Jungsoo; Park, Yung Chul
  5. Capital Accumulation, Vintage and Productivity: The Japanese Experience By Taiji Hagiwara; Yoichi Matsubayashi
  6. Does Financing Spur Small Business Productivity? Evidence from a Natural Experiment By Karthik Krishnan; Debarshi Nandy; Manju Puri
  7. When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  8. The Australian multi-factor productivity growth illusion By John Foster
  9. Persistent and Transient Productive Inefficiency: A Maximum Simulated Likelihood Approach By Massimo Filippini; William Greene
  10. Tecnical efficeincy in the European TLC sector By Alessandro Manello; Clementina Bruno
  11. The Impact of Trade Liberalization on Industrial Productivity By Segerstrom, Paul; Sugita, Yoichi
  12. Regional inequalities in the impact of broadband on productivity: Evidence from Brazil By Jung, Juan
  13. Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm By Bogaard, Hein; Svejnar, Jan
  14. Eco-Efficiency in the Italian Waste Management sector By Alessandro Manello; Matteo Ferraris
  15. Technological Progress and Economic Geography By Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
  16. Extensive Margins of Imports and Profitability: First Evidence for Manufacturing Enterprises in Germany By Joachim Wagner
  17. Technological Innovations in Agricultural Tractors: Adopters’ behaviour towards new technological trajectories and future directions By Ester Ferrari; Luigi Bollani; Mario Coccia; Eugenio Cavallo
  18. The Efficiency of Australian Schools: Evidence from the NAPLAN Data 2009-2011 By Nghiem, Son; Nguyen, Ha; Connelly, Luke
  19. The Global Welfare Impact of China: Trade Integration and Technological Change By di Giovanni, Julian; Levchenko, Andrei A.; Zhang, Jing
  20. Managerial capacity in the innovation process and firm profitability By Giovanni Cerulli; Bianca Potì
  21. The New Empirical Economics of Management By Nicholas Bloom; Renata Lemos; Raffaella Sadun; Daniela Scur; John Van Reenen
  22. Productivity Spillovers Through Labor Mobility By Heggedal, Tom-Reiel; Moen, Espen R; Preugschat, Edgar

  1. By: Sarah Ben Yahmed (IEP Aix-en-Provence - Sciences Po Aix - Institut d'études politiques d'Aix-en-Provence - Institut d'Études Politiques [IEP] - Aix-en-Provence - Aix Marseille Université - Fondation Nationale des Sciences Politiques [FNSP], GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR7316); Sean Dougherty (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, OCDE - Organisation de coopération et de développement économiques - OCDE)
    Abstract: This paper examines how import penetration affects firms' productivity growth taking into account the heterogeneity in firms' distance to the efficiency frontier and country differences in product market regulation.
    Keywords: Firm productivity growth ; Behind-the-border regulatory barriers ; Product market regulation ; Import competition, international trade
    Date: 2014–03–14
  2. By: Markus Lampe; Paul Sharp
    Abstract: The late nineteenth century Danish agricultural revolution saw the modernization and growth of the dairy industry. Denmark rapidly caught up with the leading economies, and Danish dairying led the world in terms of productivity. Uniquely in a world perspective, high quality micro-level data exist documenting this episode. These allow the use of the tool of modern agricultural economists, stochastic frontier analysis, to estimate production functions for milk and thus find the determinants of these productivity and efficiency advances. We identify the contribution of modernization through specific new technologies and practices.
    Keywords: Dairies, Denmark, Development, Stochastic Frontier Analysis
    JEL: L2 N5 O3 Q1
    Date: 2014–05
  3. By: Aiello, Francesco; Ricotta, Fernanda
    Abstract: This paper analyses the TFP heterogeneity of a sample of manufacturing firms operating in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and UK). TFP data refer to 2008. The empirical setting is based on the multilevel modelling which provides two main results. Firstly, we show that TFP heterogeneity is largely due to firm-specific features (85% of TFP variability in the empty-model). Interestingly, we find that some key-drivers of TFP (size, family-management, group membership, innovations and human capital) influence heterogeneity in productivity with the expect sign, but do not, on the whole, absorb much of firm-TFP variance, implying that differences in productivity are due to sizable yet unobservable firm characteristics. Secondly, as far the role of localization is concerned, we demonstrate that country-effect is more influential than region-effect in explaining individual productivity. Net of the country-effect, the localisation in different European regions explains about 5% of TFP firm heterogeneity. When considering the case of three individual countries (France, Italy and Spain), location in different regions explains 4.7% of TFP heterogeneity in Italy, while this proportion is lower (2.9%) in France and higher (7.6%) in Spain.
    Keywords: TFP heterogeneity, firm-behavior, localization, European countries, multilevel model
    JEL: C30 D22 D24 L60 R11 R15
    Date: 2014–05–26
  4. By: Park, Jungsoo (Asian Development Bank Institute); Park, Yung Chul (Asian Development Bank Institute)
    Abstract: This study analyzes the effects of financial liberalization on the lending behavior of banks and non-bank financial institutions (NBFIs) before and after the 1997 Asian financial crisis, using panel regressions on Republic of Korea firm-level and industry-level data of the period 1991–2007. It also develops a financial liberalization index to incorporate the multifaceted nature of financial reform. Findings show that financial liberalization has led banks and NBFIs to allocate more of their loans to small and medium-sized firms with good performance histories, thereby helping these entities to improve their total factor productivity growth. This paper does not find similar effects of financial liberalization on efficiency at large firms or at the industry level. Heavier reliance on direct financing after the crisis has not improved the productivity of large firms.
    Keywords: financial liberalization; economic efficiency; banking; external finance
    JEL: G20 O40
    Date: 2014–05–19
  5. By: Taiji Hagiwara (Graduate School of Economics, Kobe University); Yoichi Matsubayashi (Graduate School of Economics, Kobe University)
    Abstract: We empirically examine the relationship between capital accumulation and vintage as well as the productivity of industries in Japan from 1980 to 2007. Based on the empirical analyses, we confirmed that vintage exerted a significant influence on the productivity during the period of economic expansion, particularly during the economic upturn that started in 2000, where strong vintage effects were observed in all industries. The rejuvenation of capital equipment during this period clearly resulted from a strong productivity effect. In contrast, during the bubble period of the late 1980s, vintage exerted no observable effects on productivity despite significant increases in investment. This finding shows that increase of capital stock during this period was not necessarily Productive and was likely to produce a merely temporary boom. From this view, we reconfirm that the relationship between vintage and productivity changed in subtle ways in response to the phases of business cycles.
    Keywords: Vintage, productivity, Business cycle
    JEL: F32 F41
    Date: 2014–05
  6. By: Karthik Krishnan; Debarshi Nandy; Manju Puri
    Abstract: We analyze how increased access to financing affects firm total factor productivity (TFP) by exploiting a natural experiment following interstate banking deregulations which increased access to bank financing. We find that firms' TFP increases after their states implement these deregulations. Using a regression discontinuity approach based on Small Business Administration’s funding eligibility criteria, we show that TFP increases following the deregulations are significantly greater for financially constrained firms. Our results suggest that greater access to financing allows financially constrained firms to invest in productive projects that may otherwise not be taken up.
    JEL: G21
    Date: 2014–05
  7. By: Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
    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: efficiency; FDI; spillovers; transition economies
    JEL: F23 M16 O16 P23
    Date: 2014–02
  8. By: John Foster (School of Economics, The University of Queensland)
    Abstract: Multi-factor productivity growth is widely discussed in the media and among policymakers in Australia. Over the past decade it has been predominantly negative often leading to the view that there is a ‘productivity crisis.’ It is shown that such a measure is wholly misleading. Preliminary econometric investigation suggests that it is economies of scale and scope that are the primary drivers of productivity growth in Australia. However, much more research needs to be undertaken, with the inter-related processes of innovation and entrepreneurship at its core, before any new policies to promote productivity growth are designed and implemented.
    Date: 2014–05–08
  9. By: Massimo Filippini (ETH Zurich, Switzerland); William Greene (Stern School of Business, New York University, USA)
    Abstract: The productive efficiency of a firm can be seen as composed of two parts, one persistent and one transient. The received empirical literature on the measurement of productive efficiency has paid relatively little attention to the difference between these two components. Ahn, Good and Sickles (2000) suggested some approaches that pointed in this direction. The possibility was also raised in Greene (2004), who expressed some pessimism over the possibility of distinguishing the two empirically. Recently, Colombi (2010) and Kumbhakar and Tsionas (2012), in a milestone extension of the stochastic frontier methodology have proposed a tractable model based on panel data the promises to provide separate estimates of the two components of efficiency. The approach developed in the original presentation proved very cumbersome actually to implement in practice. Colombi (2010) notes that FIML estimation of the model is ‘complex and time consuming.’ In the sequence of papers, Colombi (2010), Colombi et al. (2011, 2014), Kumbhakar, Lien and Hardaker (2012) and Kumbhakar and Tsionas (2012) have suggested other strategies, including a four step least squares method. The main point of this paper is that full maximum likelihood estimation of the model is neither complex nor time consuming. The extreme complexity of the log likelihood noted in Colombi (2010), Colombi et al. (2011, 2014) is reduced by using simulation and exploiting the Butler and Moffitt (1982) formulation. In this paper, we develop a practical full information maximum simulated likelihood estimator for the model. The approach is very effective and strikingly simple to apply, and uses all of the sample distributional information to obtain the estimates. We also implement the panel data counterpart of the JLMS (1982) estimator for technical or cost inefficiency. The technique is applied in a study of the cost efficiency of Swiss railways.
    Keywords: productive efficiency; stochastic frontier analysis; panel data; transient and persistent efficiency.
    JEL: C1 C23 D2 D24
    Date: 2014–05
  10. By: Alessandro Manello (Ceris - Institute for Economic Research on Firms and Growth,Turin, Italy); Clementina Bruno (Università del Piemonte Orientale "Amedeo Avogadro" & HERMES Research Centre)
    Abstract: This paper proposes an efficiency analysis of the major European incumbent firms in the fixed telecommunications sector. The non-parametric approach, that has been adopted here, expresses the efficiency according to a directional distance measure, allowing to consider the different nature of outputs categories, according to their technological content. Efficiency measures are analysed in relation to some indicators that capture the effect of recent reforms in the direction of liberalization, privatization and vertical separation. The results show that while private ownership and market concentration do not significantly affect the operational efficiency, the vertical separation has a positive effect on performances. This suggest that any losses of vertical scope economies, are more than balanced by performance improvements generated by the expectation of an increase in competition in the medium to long term.
    Keywords: Efficiency, Directional Distance Function, Telecommunications sector
    JEL: D24 L22 L25 L43
    Date: 2013–06
  11. By: Segerstrom, Paul; Sugita, Yoichi
    Abstract: This paper calls into question the currently most influential model of international trade. An empirical finding by Trefler (2004, AER) and others that industrial productivity increases more strongly in liberalized industries than in non-liberalized industries has been widely accepted as evidence for the Melitz (2003, Econometrica) model. We show that a multi-industry version of the Melitz model does not predict this relationship. Instead, it predicts the opposite relationship that industrial productivity increases more strongly in non-liberalized industries than in liberalized industries.
    Keywords: firm heterogeneity; industrial productivity; trade liberalization
    JEL: F12 F13
    Date: 2014–04
  12. By: Jung, Juan
    Abstract: The aim of this paper is to perform an analysis of the impact of broadband on regional productivity in Brazil. The possibility of performing a regional approach, instead of the usual country-level analysis, constitutes an opportunity to decode the economic impact of broadband at territories which share a common institutional and regulatory framework as are the regions inside a same country. The main focus of this paper is to find out if the economic impact of broadband is uniform across all territories of the country. Results suggest that the impact of broadband on productivity is not uniform across regions, and seems to be yielding higher productivity gains for less developed regions, a result which is robust after controlling for differences in quality, network effects, human capital, sectorial composition, urbanism and the age of the workforce. Another important result verified in this paper is that faster download speed and critical mass to account for network externalities enhance of the economic impact of broadband. The fact that most underdeveloped regions in Brazil seem to be benefiting more from broadband may suggest that broadband can constitute a factor favoring regional cohesion in Brazil, although further research will be needed to confirm that asseveration.
    Keywords: Broadband, Information and Communication Technologies, Regional Productivity
    JEL: O33 O47 R11
    Date: 2014–05–23
  13. By: Bogaard, Hein; Svejnar, Jan
    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: Banking; Central and Eastern Europe; Endogeneity of HRM Policies; Foreign Ownership; Incentives; Insider Econometrics
    JEL: F23 G21 M52
    Date: 2014–01
  14. By: Alessandro Manello (Ceris - Institute for Economic Research on Firms and Growth,Turin, Italy); Matteo Ferraris (Università degli Studi di Milano, Milan, Italy DEMM Dipartimento di Economia, Management e Metodi Quantitativi)
    Abstract: In the light of the recent European environmental regulation, in Italy, waste collection management has been involved in some important changes both from environmental and management point of view. From the one hand, firms want to maximize the quantity of collected Municipal Solid Waste (MSW) showing an increasing capacity of waste collection per unit of labor and capital, from the other hand they want to minimize the level of Undifferentiated Solid Wastes (USW) in order to meet environmental goals. This paper extends the concept of Directional Distance Function (DDF) to the waste sector, in which previous applications of efficiency models have been mainly focused on the cost-function side. The idea of DDF (by Chambers et al.,1996; 1998) is here applied to treat asymmetrically two categories of outputs: one desirable (amount of MSW) and one undesirable (level of undifferentiated wastes) both observed (with inputs) from a sample of around 450 Italian municipalities during 2006. Computed efficiency scores are analyzed in light of different tariff systems (e.g. flat fee and pay as you through), different socio-economic contexts (e.g. Northern vs Southern Italy) and prevalent political side in local government (Left wings vs Right-wing parties). Keywords: 4-6 nanocompounds, atmospheric pollutants, social costs evaluation, social saving, titanium dioxide.
    Keywords: DEA, DDF, Waste Management, Waste Policies
    JEL: Q53 Q56 L23
    Date: 2013–12
  15. By: Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
    Abstract: New economic geography focuses on the impact of falling transport costs on the spatial distribution of activities. However, it disregards the role of technological innovations, which are central to modern economic growth, as well as the role of migration costs, which are a strong impediment to moving. We show that this neglect is unwarranted. Regardless of the level of transport costs, rising labor productivity fosters the agglomeration of activities, whereas falling transport costs do not affect the location of activities. When labor is heterogeneous, the number of workers residing in the more productive region increases by decreasing order of productive efficiency when labor productivity rises.
    Keywords: labor heterogeneity; labor productivity; migration costs; new economic geography; technological progress
    JEL: J61 R12
    Date: 2014–03
  16. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses a tailor-made newly available data set for enterprises from manufacturing industries in Germany to investigate for the first time the links between the extensive margins of imports (the number of imported goods and the number of countries imported from) and firm profitability. While both extensive margins are highly positively linked with firm productivity, profits are not higher in firms that import more goods and from more countries. This demonstrates that productivity advantages of importers are eaten up by extra costs related to buying more goods in more countries.
    Keywords: Imports, intensive margins, profitability, Germany
    JEL: F14
    Date: 2014–05
  17. By: Ester Ferrari (PhD Postdoctoral Research Fellow, Institute for Agricultural and Earthmoving Machines (IMAMOTER), Italian National Research Council (CNR), Torino, Italy.); Luigi Bollani (Researcher, University of Turin, Department of Economics and Statistics, Torino, Italy); Mario Coccia (Ceris - Institute for Economic Research on Firms and Growth,Turin, Italy); Eugenio Cavallo (PhD Postdoctoral Research Fellow, Institute for Agricultural and Earthmoving Machines (IMAMOTER), Italian National Research Council (CNR), Torino, Italy.)
    Abstract: Latest advancements in tractors engineering have allowed farmers to increase productivity, and simultaneously to reduce operator’s hazards. However, little attention has been given to farmers’ behaviour and attitude toward the adoption of technological innovations concerning agricultural tractors. The study explores farmers’ behaviours on agricultural tractors current and future technological trajectories. A main case study concerning Italy is analyzed. Results show three different behaviours of farmers concerning tractors’ technological innovations. These adopters’ profiles would help developing new technologies that satisfy, more and more, farmers’ needs and expectations, speeding up the adoption process, enhancing agricultural tractors’ efficacy and efficiency.
    JEL: Q16 Q55 O33
    Date: 2013–06
  18. By: Nghiem, Son; Nguyen, Ha; Connelly, Luke
    Abstract: This study examines the technical efficiency of schools in Australia and its determinants using NAPLAN test results of about 6,800 schools in 2009-2011 and other information from the “My School” website. For each school, we use the average growth of test scores for the same students between 2009 and 2011 as the measure of the school's output and four input measures: the student-teacher ratios, student-non-teaching staff ratios, recurrent income per student and (averaged) capital expenditure per student. We are also able to compare schools by type: including whether or not the school is a public school or a private school, a single sex or co-educational schools, a primary or secondary school, or a school that provides both primary and secondary schooling. In addition we control for several other environmental indicators for each school including: an index of social and educational advantage, the proportion of school children who identify as an Aborigine or Torres Strait Islander, the proportion of students from a non English-speaking background, the proportion of students female, as well as the region, state and territory in which the school is located. We estimate that the average technical efficiency score of Australian schools is 59 per cent and find evidence of input congestion for all of the inputs studied. On average, the growth target for schools in the sample to reach the efficiency frontier is 100 NAPLAN points. Our results suggest that eliminating inputs congestion could, in theory, reduce expenditure per school student by A$2,000. At the primary level, Catholic and independent schools are less efficient than public schools, but this story is reversed at the secondary level. We also find that schools with students from more advantageous social and economic backgrounds and schools with higher ratios of students from non-English speaking backgrounds tend to be more efficient. The results are robust to the choices about how to construct the frontier (e.g., in aggregate or for disaggregates by school type) and to our treatments of output and super-efficiency.
    Keywords: Efficiency, Australia, data envelopment analysis, double bootstrap
    JEL: D24 I21
    Date: 2014–05–27
  19. By: di Giovanni, Julian; Levchenko, Andrei A.; Zhang, Jing
    Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a multi-country quantitative Ricardian-Heckscher-Ohlin model. We simulate two alternative growth scenarios: a "balanced" one in which China's productivity grows at the same rate in each sector, and an "unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries experience significantly larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade.
    Keywords: China; International Trade; Productivity growth
    JEL: F11 F43 O33 O47
    Date: 2013–10
  20. By: Giovanni Cerulli (Ceris - Institute for Economic Research on Firms and Growth,Rome,Italy); Bianca Potì (Ceris - Institute for Economic Research on Firms and Growth,Rome,Italy)
    Abstract: This paper studies at firm level the relation between managerial capacity in doing innovation and profitability. Moving along the intersection between the evolutionary/neo-Schumpeterian theory and the Resource-Based-View of the firm, we prove econometrically that managerial efficiency in mastering the production of innovation is an important determinant of firm innovative performance and market success, and that it complements traditional Schumpeterian drivers. By using a Stochastic Frontier Analysis, we provide a “direct” measure of innovation managerial capacity, then plugged into a profit margin equation augmented by the traditional Schumpeterian drivers of profitability (size, demand, market size and concentration, technological opportunities, etc.) and other control-variables. We run both a OLS and a series of Quantile Regressions to better stress the role played by companies’ heterogeneous response of profitability to innovative managerial capacity at different points of the distribution of the operating profit margin.Results find evidence of an average positive effect of the innovation managerial capacity on firm profitability, although quantile regressions show that this “mean effect” is mainly driven by a stronger magnitude of the effect for lower quantiles (i.e., for firms having negative or low positive profitability). It means that lower profitable firms might gain more from an increase of managerial efficiency in doing innovation than more profitable businesses.
    JEL: O31 D22 C22
    Date: 2013–06
  21. By: Nicholas Bloom (Stanford); Renata Lemos; Raffaella Sadun (Harvard); Daniela Scur; John Van Reenen
    Abstract: Over the last decade the World Management Survey (WMS) has collected firmlevel management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management.
    Keywords: Keywords: management, organization, and productivity
    JEL: L2 M2 O14 O32 O33
    Date: 2014–04
  22. By: Heggedal, Tom-Reiel; Moen, Espen R; Preugschat, Edgar
    Abstract: Do firms have the right incentives to innovate in the presence of productivity spillovers? This paper proposes an explicit model of spillovers through labor flows in a framework with search frictions. Firms can choose to innovate or to imitate by hiring a worker from a firm that has already innovated. We show that if innovation firms can commit to long-term wage contracts with their workers, productivity spillovers are fully internalized. If firms cannot commit to long-term wage contracts, there is too little innovation and too much imitation in equilibrium. Our model is tractable and allows us to analyze welfare effects of various policies in the limited commitment case. We find that subsidizing innovation and taxing imitation improves welfare.Moreover, allowing innovation firms to charge quit fees or rent out workers to imitation firms also improves welfare. By contrast, non-pecuniary measures like covenants not to compete, interpreted as destruction of matches between imitation firms and workers from innovation firms, always reduce welfare.
    Keywords: efficiency; imitation; innovation; productivity; search frictions; spillovers; worker flows
    JEL: J63 J68 O38
    Date: 2014–03

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