New Economics Papers
on Efficiency and Productivity
Issue of 2014‒06‒22
nineteen papers chosen by

  1. Finance and Productivity Growth: Firm-level Evidence By Levine, Oliver; Warusawitharana, Missaka
  2. Evaluating italian university teaching efficiency convergence: a non-parametric frontier approach By Guccio, Calogero; Martorana, Marco; Monaco, Luisa
  3. Credit, Sectoral Misallocation and TFP: The Case of Mexico 2003-2010 By Felipe Meza; Sangeeta Pratap; Carlos Urrutia
  4. Experimental Measures of Output and Productivity in the Canadian Hospital Sector, 2002 to 2010 By Morin, Stephane; Gu, Wulong
  5. The Adequacy of Deterministic and Parametric Frontiers to Analyze the Efficiency of Indian Commercial Banks By Benjamin M. Tabak; Daniel O. Cajueiro; Marina V. B. Dias
  6. The Role of Agricultural Productivity on Structural Change By Been-Lon Chen; Shian-Yu Liao
  7. Productivity and potential output before, during, and after the Great Recession By Fernald, John G.
  8. Development as Diffusion: Manufacturing Productivity and Sub-Saharan Africa’s Missing Middle - Working Paper 357 By Alan Gelb, Christian Meyer, and Vijaya Ramachandran
  9. Productivity Dynamics in the Great Stagnation: Evidence from British businesses By Rebecca Riley; Chiara Rosazza Bondibene; Garry Young
  10. International division of labour and countries’ competitiveness: the case of Italy and Germany By Garbellini, Nadia
  11. Intellectual property rights, technology diffusion, and agricultural development: Cross-country evidence: By Spielman, David J.; Ma, Xingliang
  12. Free Trade Agreements and Firm-Product Markups in Chilean Manufacturing By A. R. Lamorgese; A. Linarello; Frederic Warzynski
  13. Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis By Coleman, Nicholas; Feler, Leo
  14. Effectiveness of capital control, economic growth and animal spirit: A cross-country analysis By Malgorzata Sulimierska
  15. Are Regional Systems Greening the Economy? the Role of Environmental Innovations and Agglomeration Forces By Davide Antonioli; Simone Borghesi; Massimiliano Mazzanti
  16. Incentive Regulation and Benchmarking of Network Security By Tooraj Jamasb; Rabindra Nepal
  17. International R&D Spillovers and Unobserved Common Shocks By Ruge-Leiva, Diego-Ivan
  18. Agricultural Technology and Structural Change By Markus Eberhardt; Dietrich Vollrath
  19. Investigating Exploitation and Productivity in Explaining the Disability Wage Penalty By Eirini-Christina Saloniki

  1. By: Levine, Oliver (University of Wisconsin); Warusawitharana, Missaka (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Using data on a broad set of European firms, we find a strong positive relationship between the use of external financing and future productivity (TFP) growth within firms. This relationship is robust to various measures of financing and productivity, and strengthens as financing costs increase. We provide evidence against a reverse-causality explanation by showing that this relationship arises from the component of TFP that is outside the information set of the firm. These findings indicate that financial development supports productivity growth within firms, and helps explain why economic activity remains persistently depressed following financial crisis.
    Keywords: Finance-growth nexus; financial crisis; total factor productivity (TFP)
    Date: 2014–02–24
  2. By: Guccio, Calogero; Martorana, Marco; Monaco, Luisa
    Abstract: The Bologna Process promoted a wide-ranging reform of High Education systems in order to improve teaching activities throughout Europe. This paper evaluates the effect of these reforms on teaching efficiency of the Italian universities in the period 2000-2010. We employ the bootstrapped Data Envelopment Analysis (DEA) algorithm to evaluate efficiency and then examine convergence using several panel data estimators. We find evidence of convergence but technical efficiency increased mainly in the first period of implemented reform. Moreover, we find strong evidences of persistence of gaps both between regions and universities.
    Keywords: HEI, Bologna process, teaching efficiency, β-convergence, DEA.
    JEL: D24 I23
    Date: 2013–10
  3. By: Felipe Meza (Centro de Investigacion Economica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Sangeeta Pratap (Hunter College & Graduate Center City University of New York); Carlos Urrutia (Centro de Investigacion Economica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: We study the relation between credit conditions, misallocation of resources, and total factor productivity (TFP) using sectoral data from Mexican manufacturing industries between 2003 and 2010. Our analysis uses a theory-based framework to account for TFP changes in the Mexican manufacturing sector due to changes in distortions in the use of capital, labor and intermediates arising from …nancial frictions. We …nd empirically that these distortions account for a large fraction of aggregate TFP changes in the period. We also show that changes in distortions in the data are statistically related to changes in the availability and the cost of credit. Taken together, the results suggest a connection between credit conditions and productivity at the sectoral level, channeled through the choice of the inputs mix by fi…rms. Moreover, our analysis suggests that the reallocation of credit from distorted sectors to undistorted sectors is as important as the overall credit availability to explain TFP growth, especially during the recovery after the crisis.
    Date: 2014
  4. By: Morin, Stephane; Gu, Wulong
    Abstract: Recent discussions about health care spending have focused on two issues: 1) the extent to which the increase in heath care spending is due to an increase in the quantity as opposed to the price of health care services, and 2) the efficiency and productivity of health care providers (e.g., hospital sectors, office of physicians, and long-term care). The key to addressing both issues is a direct output measure of health care services?a measure that does not currently exist. In the National Accounts, output of the health care sector is measured by the volume of inputs, which includes labour costs for physicians, nurses and administrative staff, consumption of capital, and intermediate inputs. An input-based output measure assumes that there are no productivity gains in the health care sector. As a result, it does not provide a measure of productivity performance, nor does it allow a decomposition of total health care expenditures into price and output quantity components. The main objective of this paper is to develop an experimental direct output measure for the Canadian hospital sector that can be used to address those issues. A large number of countries have already constructed a direct output measure of the hospital sector and other healthcare sectors.
    Keywords: Health, Health care services
    Date: 2014–04–23
  5. By: Benjamin M. Tabak; Daniel O. Cajueiro; Marina V. B. Dias
    Abstract: This study applies data envelopment analysis and stochastic frontier approach to a sample of Indian commercial banks to discuss the inconsistencies between these models. We find that DEA average efficiency scores are, in general, lower than those from the SFA model. However, both models indicate similar trends on efficiency scores over the years, which we state is more relevant than efficiency levels themselves. We also find that the rank correlation between these efficiency scores is low. This means that the application of only one frontier model may lead to misleading conclusions. We point out that a thorough consideration of the suitability of a deterministic or a parametric frontier to the framework in analysis should guide the choice between the application of parametric or non-parametric methodologies
    Date: 2014–03
  6. By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Shian-Yu Liao (Department of Economics, National Taiwan University)
    Abstract: Many authors have estimated and found that the productivity growth in agriculture was higher than that in non-agriculture in today’s richest countries. Several papers suggested that growth in agricultural productivity was essential for today’s richest countries to take off early. However, few articles noticed that growth in agricultural productivity is critical in driving structural change in today’s richest countries. This paper studies a two-sector neoclassical growth model with subsistence agricultural consumption and shows that growth in agricultural productivity plays a more important role than growth in non-agricultural productivity in governing massive structural change in today’s richest countries.
    Keywords: two-sector neoclassical growth model, subsistence agricultural consumption, sectoral productivity growth, structural transformation, sectoral reallocation, shooting algorithm
    JEL: O10 O11 O14
    Date: 2014–05
  7. By: Fernald, John G. (Federal Reserve Bank of San Francisco)
    Abstract: U.S. labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules explanations that focus on disruptions during or since the recession, and industry and state data rule out “bubble economy” stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about ¾ of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.
    Keywords: Potential output; productivity; information technology; business cycles; multi-sector growth models
    JEL: E23 E32 O41 O47
    Date: 2014–06–13
  8. By: Alan Gelb, Christian Meyer, and Vijaya Ramachandran
    Abstract: We consider economic development of Sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and across firms within sectors. Why have “productivity enclaves”, islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyze three sets of factors: First, the poor business climate, which constrains the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa’s small economies. Third, the distribution of firm capabilities. The roots of these factors lie in Africa’s geography and its distinctive history, including the legacy of its colonial period on state formation and market structure.
    Keywords: Productivity, Manufacturing, Dualism, Firms, Africa
    JEL: D24 L25 O11 O14
    Date: 2014–02
  9. By: Rebecca Riley (National Institute of Economic and Social Research (NIESR); Centre for Macroeconomics (CFM)); Chiara Rosazza Bondibene (National Institute of Economic and Social Research (NIESR); Centre for Macroeconomics (CFM)); Garry Young (Bank of England; Centre for Macroeconomics (CFM))
    Abstract: We investigate labor productivity dynamics amongst British businesses in the wake of the credit crisis of 2007/8. The external restructuring of firms (i.e. changes in market share, firm entry and exit) contributed to a fall in productivity growth relative to trend amongst small businesses in bank dependent industries, consistent with the idea that an adverse credit supply shock caused inefficiencies in resource allocation across firms. But, the major part of the decline in UK productivity growth following the credit crisis was accounted for by a widespread productivity shock within firms, pointing to the importance of other factors in explaining the Great Stagnation.
    Keywords: productivity growth, reallocation, Great Recession and Stagnation, credit shock
    JEL: L11 O47 E32
    Date: 2013–08
  10. By: Garbellini, Nadia
    Abstract: The paper is going to use the WIOD to analyse the structure, extent and evolution of production processes outsourcing in Italy and Germany from 1995 to 2011 by means of global vertically integrated sectors, in order to single out and compare the different sources of gains/losses in competitiveness. Secondly, global vertically integrated sectors are going to be employed to get a measure of labour productivity changes in the two countries. By comparing the trends of these two sets of indicators, it is possible to shed light on the evolution of international competitiveness in the two countries, to assess the extent to which competitiveness gains/losses are associated to actual productivity increases/decreases and to what extent they are simply due to a different geographical allocation of production stages.
    Keywords: Labour productivity, International fragmentation of production, offshoring
    JEL: B51 F14 R15
    Date: 2014–06–09
  11. By: Spielman, David J.; Ma, Xingliang
    Abstract: The role of intellectual property rights (IPRs) has been extensively debated in the literature on technology transfers and agricultural production in developing countries. However, few studies offer cross-country evidence on how IPRs affect yield growth, for example, by incentivizing private-sector investment in cultivar improvement. We address this knowledge gap by testing technology diffusion patterns for six major crops using a unique dataset for the period 1961–2010 and an Arellano–Bond linear dynamic panel-data estimation approach. Findings indicate that both biological and legal forms of IPRs tend to promote yield gap convergence between developed and developing countries, although effects vary between crops.
    Keywords: Technology transfer, Agricultural development, productivity, Developing countries, Intellectual property rights, Diffusion of information,
    Date: 2014
  12. By: A. R. Lamorgese (Bank of Italy); A. Linarello (Bank of Italy and UPF); Frederic Warzynski (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: In this paper, we use detailed information about firms’ product portfolio to study how trade liberalization affects prices, markups and productivity. We document these effects using firm product level data in Chilean manufacturing following two major trade agreements with the EU and the US. The dataset provides information about the value and quantity of each good produced by the firm, as well as the amount of exports. One additional and unique characteristic of our dataset is that it provides a firm-product level measure of the unit average cost. We use this information to compute a firm-product level measure of the profit margin that a firm can generate. We find that new products start being sold on foreign markets as export tariff fall. Moreover, for those products, we observe a fall in both prices and unit average costs. Those effects are mainly driven by an increase in productivity at the firm-product level. On average, adjustment on the profit margin does not appear to play a role. However, for more differentiated products, we find some evidence of an increase in markups, suggesting that firms do not fully pass-through increases in productivity on prices whenever they have enough bargaining power.
    Keywords: markups, physical productivity, free trade agreements
    JEL: F13 F14 L11
    Date: 2014–06–10
  13. By: Coleman, Nicholas (Board of Governors of the Federal Reserve System (U.S.)); Feler, Leo (Johns Hopkins University SAIS)
    Abstract: While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazil’s government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.
    Keywords: Credit; financial crises; state-owned banks; local economic activity
    Date: 2014–03–05
  14. By: Malgorzata Sulimierska (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: This paper is an attempt to understand the mechanism which is thought to be an economic growth interaction between Capital Account Liberalization (CAL) and financial instability. The effect of financial capital liberalization is investigated through a discussion of two main channels of economic performance: animal spirits and economic allocative. In the first step, all determinants of the effectiveness of capital controls are analyzed and they seem to be statistically significant. Then, the analysis investigates the causality effect between economic growth, CAL and financial crisis. Empirical evidence from a sample of 88 countries observed between 1995 and 2005 shows statistical evidence for causality effect. Also, the results suggest that CAL has a positive effect on economic growth since capital follows the rise of economic growth. Control for indirect affects, through instability of the financial sector or animal spirit through banking currency crises, have little effect on the CAL process which points to the political nature of the capital control liberalization.
    Keywords: Financial Globalisation, Capital Account Liberalization, Financial Crisis, Economic Growth and Aggregate Productivity
    JEL: G01 G18
    Date: 2014–06
  15. By: Davide Antonioli (University of Ferrara); Simone Borghesi (University of Siena); Massimiliano Mazzanti (University of Ferrara)
    Abstract: The adoption and diffusion of environmental innovations (EIs) is crucial to greening the economy and achieving win-win environmental – economic gains. A large and increasing literature has focused on the levers underlying EIs that are external to the firm, such as stakeholders’ pressure and policy pressure. Little attention, however, has been devoted so far to the possible role of local spatial spillovers which are one of the factors affecting sector/geographical specialisations. We analyse a rich dataset that covers the innovative activities and economic performances of firms in the Emilia-Romagna region in Italy, an area rich of manufacturing districts. We analyse EIs drivers and effects on firms’ performances through a two-step procedure. First, we look at the relevance of spatial levers, namely whether the agglomeration of EIs induces EIs in a given firm. Second, we test whether EIs are significantly related to firms’ economic performances. As to the importance of spatial levers, the role of agglomeration turns out to be fairly local in nature: we find that spillovers are significantly inducing innovation within municipal boundaries. Regarding economic performances, firms' productivity is positively related to EI adoption; in particular, firms that jointly adopt EIs and organizational changes show a better economic performance.
    Keywords: Environmental Innovations, Firm Economic Performances, Local Spillovers, Manufacturing, Agglomeration.
    JEL: Q5 Q55
    Date: 2014–04
  16. By: Tooraj Jamasb (Durham University Business School); Rabindra Nepal (School of Economics, The University of Queensland)
    Abstract: The incentive regulation of costs related to physical and cyber security in electricity networks is an important but relatively unexplored and ambiguous issue. These costs can be part of a cost efficiency benchmarking or alternatively dealt separately. This paper assesses the issues and options of incorporating network security costs within incentive regulation in a benchmarking framework. The relevant concerns and limitations associated with network security costs accounting and classification, choice of cost drivers, data adequacy and quality and the relevant benchmarking methodologies are discussed. The discussion suggests that the present regulatory treatment of network security costs using benchmarking is rather limited to being an informative regulatory tool than being deterministic. We discuss how alternative approaches outside of the benchmarking framework such as the use of stochastic cost-benefit analysis and cost-effectiveness analysis of network security investments can complement the results obtained from benchmarking.
    Date: 2014–06–10
  17. By: Ruge-Leiva, Diego-Ivan
    Abstract: This paper investigates whether returns to domestic R&D and international R&D spillovers should be estimated without considering the heterogeneous impact of unobserved common shocks, as has been done by the literature in this area. Using a panel of 50 economies from 1970-2011, I find that when unobserved common shocks are disregarded, estimates of domestic R&D and foreign R&D weighted by bilateral imports might be biased and inconsistent. Once unobserved common factors are accounted for, by allowing for heterogeneous technology coefficients, significant estimates become more sizable, consistent and not seriously biased in most cases. However, these estimates might be capturing not only returns to domestic R&D and trade-related knowledge spillovers, but also unobserved common spillovers and other effects. This indicates that knowledge spillovers and effects of unknown form cannot be easily separated. Therefore, unobserved common shocks should not be ignored when estimating returns to domestic R&D and international R&D spillovers.
    Keywords: Productivity, Spillovers, Cross-Section Dependence, Unobserved Common Shocks.
    JEL: C23 O11 O30 O40
    Date: 2014–06–16
  18. By: Markus Eberhardt; Dietrich Vollrath
    Abstract: Using data for 128 countries we document low (high) elasticities of agricultural output with respect to labor in economies within temperate (tropical/highland) climate zones. Adopting a standard model of structural change we show that this technology heterogeneity determines the speed of structural transformation following changes in agricultural productivity and population size. Calibration exercises document shifts in sectoral labor allocation and living standards 2–3 times larger in temperate than in otherwise identical equatorial/highland regions for a given productivity shock. Eliminating technology heterogeneity can account for up to one-fifth of the observed differences in aggregate income per capita across countries.
    Keywords: agricultural development, technology heterogeneity, agro-climatic environment, structural change
    JEL: O47 O11 C23
    Date: 2014
  19. By: Eirini-Christina Saloniki
    Abstract: The paper explains the low wages of the disabled in a monopsonistic framework. In the disabled m arket firms face different costs of adjustment ("disabled-friendly" firm vs. "disabled-unfriendly" firm), high or low, and offer wages according to these costs. Hence, there will be high- and low-paid disabled. Also, employers can exploit the disabled to increase profits knowing that they face high search costs. This mechanism describes the pre-reform period. In the post-reform period, the adjustment costs are fully covered by programmes designed to help the disabled find and stay in work (e.g. Access to Work, 1996). In addition, legislation (Disability Discrimination Act, 1995) prohibits discrimination hence firms are not allowed to treat the disabled and nondisabled differently. These mechanisms are modelled using an extension of the simple Burdett-Mortensen model (1998). Using data from the BHPS, we find that in the post-reform period wages increase for the disabled and non-disabled but more for the disabled. Also, disabled at the bottom of the wage offer distribution (i.e. mainly disabled in low productivity firms) in the pre-reform period, move more to the right of the distribution in the post-reform period.
    Keywords: disability; Burdett-Mortensen; productivity; distribution
    JEL: I10 I18 J42 J71
    Date: 2014–05

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