nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒09‒05
twenty-one papers chosen by

  1. Financial Centre Productivity and Innovation prior to and during the Financial Crisis By Claudia Curi; Ana Lozano-Vivas
  2. Grease or sand the wheel? The effects of individual bribe payments on aggregate productivity growth By Julien Hanoteau; Virginie Vial
  3. Reforms, Incentives and Banking Sector Productivity: A Case of Nepal By Luintel, Kul B; Selim, Sheikh; Bajracharya, Pushkar
  4. Work incentive and productivity in Spain By Rosario Sanchez; Mª Isabel Pisa
  5. On the Measure of Distortions By Hugo A. Hopenhayn
  6. The Determinants of Total Factor Productivity in the EU: Insights from Sectoral Data and Common Dynamic Processes By Agnieszka Gehringer; Inmaculada Martinez-Zarzoso; Felicitas Nowak.Lehmann Danziger
  7. Innovation, exports and technical efficiency in Spain By Rosario Sanchez; Angeles Díaz
  8. Social fairness and sustainability of economic productivity By Mihai, Iris
  9. The Costs of Corruption in the Italian Solid Waste Industry By davide vannoni; Graziano Abrate; Fabrizio Erbetta; Giovanni Fraquelli
  10. Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all? By Claudia Curi; Ana Lozano-Vivas; Valentin Zelenyuk
  11. The relationship between innovation, exports and economic performance. Empirical evidence for 21 EU countries By Fabian Unterlass
  12. Agricultural Productivity, Hired Labor, Wages and Poverty: Evidence from Bangladesh By Emran, M. Shahe; Shilpi, Forhad
  13. A model of firm exit under inefficiency and uncertainty By Simone Pieralli; Silke Hüttel; Martin Odening
  14. Did Bank Distress Stifle Innovation During the Great Depression? By Ramana Nanda; Tom Nicholas
  15. Relaxing the Financial Constraint: The Impact of Banking Sector Reform on Firm Performance - Emerging Market Evidence from Turkey By Can Erbil; Kit Baum; Ferhan Salman
  16. CSR related management practices and Firm Performance: An Empirical Analysis of the Quantity-Quality Trade-off on French Data By Patricia Crifo; Marc-Arthur Diaye; Sanja Pekovic
  17. Estimation of the elasticity of substitution of production factors in CEE economies By Lukáš Rečka
  18. The effect of climate and technological uncertainty in crop yields on the optimal path of global land use By Cai, Yongyang; Steinbuks, Jevgenijs; Elliott, Joshua; Hertel, Thomas W.
  19. Competitive Advantages and Performance of Banks in India In Post Reforms Period: Application of Diamond Theory By Medha Tapiawala
  20. A Direct Estimate of the Technique Effect: Changes in the Pollution Intensity of US Manufacturing 1990 – 2008 By Arik Levinson
  21. Measuring the effect of government ESG performance on sovereign borrowing cost By Patricia Crifo; Marc-Arthur Diaye; Rim Oueghlissi

  1. By: Claudia Curi (Free University of Bozen); Ana Lozano-Vivas (University of Brescia)
    Abstract: This paper assesses and tests the response of banks operating in the financial centres to the financial crisis in terms of the actual productivity change and its main components: the pure efficiency change, scale efficiency change and technological change (innovation). The heterogeneity in the organizational form and the size that exists among banks have been accounted for with the Aggregated Malmquist Productivity Index and the bootstrap techniques extended to this index. Our findings indicate that both the branch and subsidiary banks respond to the financial crisis with productivity improvements, and in both cases, this improvement is driven mostly by the positive technical change. However, the branch banks outperform the subsidiary banks. In addition, for the three categories of big, medium and small banks, we find a positive productivity reaction to the crisis, driven by the technical change. However, as small banks not only respond to the financial crisis with improvements in the technical change but also in the scale-efficiency change, they seem to reach a higher productivity growth, compared with larger banks, as a response to the financial crisis.
    Keywords: Financial Centre, Bank Productivity, Data Envelopment Analysis, Aggregated Malmquist Productivity Index, Sensitivity Analysis, Financial crisis
    JEL: C14 D24 G01 G21 F23
    Date: 2014–08
  2. By: Julien Hanoteau; Virginie Vial
    Abstract: While the Asian Paradox literature evidences a grease-the-wheel effect of corruption on individual firm productivity growth, the results call into question the aggregate effect of individual bribery. A large literature analyzes the drivers of productivity growth at the firm and sector levels, and suggests that corruption may affect these drivers through the resulting less favorable conditions for investment and technological progress, as well as distortions and misallocation in output and inputs markets. We are not aware of any literature that investigate the effects of micro-level corruption on aggregate productivity growth (APG) and its different components (intra-plant productivity growth; market shares reallocation between incumbents; and the effect of firm entry and exit in the industry). Filling this gap is important for understanding the dynamics by which corruption damages countries’ economic performance (Dal Bo and Rossi 2007) as measured by its main driver: productivity growth (Barro and Sala-i-Martin 2003). Using a unique panel dataset covering the population of Indonesian manufacturing establishments over the long period 1975-1995, we assess the cumulated effect of micro-bribe payments to aggregate productivity growth. Following Foster et al. (2001) methodology so as to model and decompose Aggregate Labour Productivity Growth (ALPG), and using establishment-level measures of productivity and bribe payments, we assess the contribution of three different corruption-classes of plants: plants paying zero, low, or high bribes. As a robustness check, and to account for the overestimation of the net entry effect, we use the Melitz and Polanec (2012) modeling approach that is a dynamic version of Olley and Pakes (1996).We demonstrate that the aggregate class of high-corruption plants contributes negatively to aggregate labour productivity growth, while the aggregate class of plants paying zero or low bribes contributes positively. Our results are robust to the use of two different measures of corruption. Thus, this paper shows that the two diverging effects of corruption, that is the grease- and the sand-the-wheel effects, coexist at different aggregation levels and for different classes of plants. While corruption has beneficial effects if kept low, the cost of high corruption in terms of aggregate productivity growth becomes evident.
    Keywords: Indonesia, Growth, Developing countries
    Date: 2014–07–03
  3. By: Luintel, Kul B (Cardiff Business School); Selim, Sheikh (Cardiff Business School); Bajracharya, Pushkar
    Abstract: We model banks as profit-cum-utility maximizing firms and study, inter alia, bankers’ incentives (optimal effort) and incentive driven productivity following deregulations. Our model puts to test a panel of Nepalese commercial banks which went through deep financial reforms in the recent past. We find that (i) bankers’ efforts and productivity have notably improved in Nepal, (ii) bankers’ efforts significantly explain the banking sector’s productivity, (iii) the proportion of non-performing loans has considerably declined, and (iv) banking services have become costly, although the bank spread has moderately declined. Our approach is different from the widely used data envelopment analysis (DEA) of bank productivity, hence complements the literature. It also informs the current policy debate in Nepal where the Central Bank is seen to be geared towards regulating the financial system and micro-managing the banking institutions.
    Keywords: Reforms; incentives; productivity; panel integration; cointegration; simulation
    JEL: G21 G28 O43 O53
    Date: 2014–08
  4. By: Rosario Sanchez; Mª Isabel Pisa
    Abstract: Work incentives are closely related with production performance. This paper presents evidence that firm level value added increases when the relative labour cost rises, or the level of unemployment increases. Both facts imply evidence in favour of the efficiency wage model. This theory is consistent with the views of many managers and personal administrator, who tend to ascribe primary importance in wage setting to incentive effort. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier of firm’s value added and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by the Fundación Empresa Pública (FEP). See above See above
    Keywords: Spain, Impact and scenario analysis, Impact and scenario analysis
    Date: 2013–06–21
  5. By: Hugo A. Hopenhayn
    Abstract: Abstract The paper considers formally the mapping from distortions in the allocations of resources across firms to aggregate productivity. TFP gaps are characterized as the integral of a strictly concave function with respect to an employment-weighted measure of distortions. Size related distortions are shown to correspond to a mean preserving spread of this measure, explaining the stronger effects on TFP found in the literature. In general, the effect of correlation between distortions and productivity is shown to be ambiguous; conditions are given to determine its sign. An empirical lower bound on distortions based on size distribution of firms is derived and analyzed, revealing that substantial rank reversals in firm size are necessary for distortions to explain large TFP gaps. The effect of curvature on the impact and measurement of distortions is also considered.
    JEL: O11 O4 O47
    Date: 2014–08
  6. By: Agnieszka Gehringer; Inmaculada Martinez-Zarzoso; Felicitas Nowak.Lehmann Danziger
    Abstract: This paper examines the development of total factor productivity (TFP) and the drivers of TFP for a panel of 17 EU countries in the period of 1995-2007. We estimate aggregated and sectoral TFP for 17 EU countries by means of the augmented mean group estimator to control for endogeneity, cross-section dependence and heterogeneous production technology. We find that although wages are the main driver of TFP, ICT, extra-EU trade and human capital also play a role.
    Keywords: 17 EU countries , Growth, Sectoral issues
    Date: 2013–06–21
  7. By: Rosario Sanchez; Angeles Díaz
    Abstract: The main purpose of this work is to analyse the effect of exports intensity and R & D activities in technical efficiency using data of Spanish manufacturing firms during the period 2004-2009. In a previous work, Diaz and Sanchez (2008) found that size was an important determinant of technical efficiency. Also, in Sánchez and Díaz (2013) innovation was an important determinant of efficiency for large firms but not for small and medium sized firms. Perhaps because large firms are more easily able to obtain external financing and thus finance their R & D activities and obtain product and process innovation that allows them to gain competitiveness in foreign markets. Size is also related to the ability of firms to compete in foreign markets. So we will focus on exporting companies to investigate the relationship between exports, and efficiency. As it is well known the exporting firms are more competitive than those that are not focused on foreign markets. To obtain empirical evidence we estimate a value added production function following the methodology of the Stochastic Frontier Approach, first developed by Farrell (1957) and widely used in empirical works. Using this methodology several works have analysed technical inefficiency: Caves and Barton (1990) analyse technical efficiency for manufacturing firms in United States; Green and Mayes (1991) analyse technical inefficiency for United Kingdom; and Patibandla (1998) proves the relevance of capital market imperfections on the structure of an industry; Dilling-Hansen et al. (2003), and Kumbhakar et al., (2011) analyse the effect of R&D investment on relative efficiency; Diaz and Sánchez (2008) analyse the impact of size on efficiency; and Sánchez and Diaz (2013) focus in the effect of product and process innovation over technical efficiency, obtaining that large firms’ innovation are more efficient than the small one. The inefficiency determinants can be due to environmental or firm specific factors. Here we focus on these firms specific factors to provide an explanation to the differences in technical inefficiency across Spanish manufacturing firms. Inefficiency tends to be smaller for firms with a higher ratio of gross investment over capital. Firms that account for this kind of investment become more competitive as a consequence of having a higher efficiency in their production process. Also, we found that exporting firms are closer to the stochastic frontier. They have to be more competitive to sell in international markets. Only the most efficient firms survive in the highly competitive international market. Size is another determinant of technical efficiency. Even though the impact of size in technical efficiency is not clearly determined in empirical and theoretical frameworks, here we obtain a positive and significant effect over efficiency. What it means that large firms are closer to the efficient frontier. In addition, efficiency tends to be smaller for those firms with a higher proportion of external funds over value added.
    Keywords: Spain, Trade issues, Sectoral issues
    Date: 2014–07–03
  8. By: Mihai, Iris
    Abstract: Economic productivity is a complex phenomenon that serves to highlight how efficient an economic process is. However, the existing paradigms for measuring productivity are not coherent, presenting us with a heterogeneous concept too scattered to prove significant for the policy makers. In this paper, we focus on the social implications of the economic development in our attempt to design an adequate measuring methodology able to capture the impact of the continuously growing productivity upon the quality of life in the selected countries. The research is based on statistical data provided by EU KLEMS, The World Bank, Eurostat and The New Maddison Project. The countries chosen for the empirical analysis belong to two groups: Baltic countries (Estonia, Latvia and Lithuania) and the Nordic countries (Denmark, Finland and Sweden). The research is based on input-output indexes used to emphasize productivity, together with its social fairness component and its sustainability over time. The fundamental research hypothesis of this paper is whether the current economic productivity, socially adjusted by GINI, is sustainable. The secondary hypothesis is whether high levels of economic productivity represent a strong enough incentive to countervail the limited biocapacity of a country. The empirical analysis will answer both questions, highlighting the importance of the ecological reserves and the importance of addressing productivity also from a social and an environmental perspective, and not only the obsolete economic perspective.
    Keywords: economic productivity, social fairness, biocapacity, sustainability
    Date: 2014–08–15
  9. By: davide vannoni; Graziano Abrate; Fabrizio Erbetta; Giovanni Fraquelli
    Abstract: The paper investigates the link between corruption and efficiency by using a rich micro-level dataset concerning solid waste collection activities in 529 Italian municipalities observed over the years 2004-2006. In order to test the impact of corruption on cost efficiency we estimate a stochastic latent class frontier approach, which accounts for technological heterogeneity across units. The results of our estimates show that corruption significantly increases inefficiency, a finding which is robust to the inclusion of alternative local corruption indicators and of other control variables such as geographical, demographic and political factors. Finally, we find that the impact of corruption tends to be greater in the southern regions of the country and for those municipalities which are less involved in recycling activities.
    Keywords: Italy, Impact and scenario analysis, Sectoral issues
    Date: 2013–06–21
  10. By: Claudia Curi (Free University of Bolzano - Bozen, School of Economics and Management); Ana Lozano-Vivas (University of Malaga); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis, the University of Queensland)
    Abstract: Diversified and focused business models may affect foreign bank efficiency differently in branches or subsidiaries. We investigate whether there is a unique optimal business model in three dimensions: assets, funding and income. We apply recently developed bootstrap methods to estimate group efficiency separately for diversified and focused banks and to test for differences across groups. We further analyze the link between bank efficiency and bank-specific characteristics including diversification measures. Using Luxembourg bank data that includes the financial crisis, we find there is no unique business model as diversified and focused foreign banks coexist and compete in all three dimensions. The most efficient business model appears to be diversified with regard to assets and focused with respect to funding and income. Over time, we find a shift to more focused assets and funding but not income.
    Keywords: foreign banks, asset funding and income diversification, financial crisis, DEA group-efficiency, heterogeneous bootstrap
    JEL: C14 G21 G28 G32 G34
    Date: 2014–08
  11. By: Fabian Unterlass
    Abstract: This paper discusses the interplay between exports and innovation and both their effects on economic performance. The European Union makes major efforts to improve the innovation performance of its companies with the aim to improve the global competitive position of the Union and create jobs and wealth. Firms that are involved in international activities through exports or foreign direct investment are typically top performers in terms of their capability to generate value added as well as employment and productivity (see e.g. Mayer and Ottaviano 2007). From the policy point of view this implies that more of Europe's innovative companies should compete and be competitive on global markets and create revenue and jobs at home. However, the relationship between innovation, exporting and economic performance is by no means unidirectional. It is difficult to show whether superior export performance is determined by a superior innovation performance, or whether internationalisation supports innovation. The major issue here is to control for endogeneity between these two dimensions. Exporting might positively affect innovation via learning effects, resource effects and / or incentive effects. On the other hand, innovation improves productivity and therefore increases a company's competitiveness such that it selects itself into the export market. Alternatively, product innovations might also create (temporary) monopolies in niche markets. Testing these issues emerging from the literature we use firm level data from the 3rd European Community Innovation Survey (CIS3) for 21 countries for the years 1998-2000 accessed at the Eurostat Safe Centre in Luxemburg. In order to overcome problems referring to endogeneity, we empirically investigate the effects of exporting in the first year of the observed time frame on innovation input, while we explain in a second model exports in the final observed year by innovation output indicators. We find strong evidence that innovation improves the export performance of companies, whereas this pattern varies with the stage of economic development. While firms in highly innovative sectors in the more advanced member states need high degrees of appropriability, i.e. the possibility to protect their innovations, and have to continuously improve their knowledge base to participate in export markets, it is productivity and price-based competitiveness for low innovation-intensive sectors. This reflects the alternative patterns of niche markets on one hand, and self-selection on the other, that allow firms to export. While the nature of the data does not allow us to draw satisfactory conclusions on the causal link between exports and innovation, we could find positive effects of exporting on innovation activities only for small companies, while large companies are not more likely to innovate when they are exporting. We therefore conclude that the positive impact of exports results from additional financial resources available for exporting SMEs, while learning effects are comparably small. However, we only investigated exports but did not consider different kinds of internationalisation due to data constraints. The picture might change in this case. Finally, we argue that both innovation and exports have positive effects on a firm's economic performance. We find strong evidence that innovation is an important driver for productivity growth, whereas the positive effect increases when a company (and the country the firm is located in) approaches the technology frontier. Furthermore, our results indicate that in the medium to low innovation intensive sectors productivity growth is mainly driven by process innovations, while in high-technology sectors in the more advanced member states productivity growth is strongly driven by product innovations. This is in line with the idea that in high-tech niche markets it is product quality which leads to higher prices. Competition in these markets is not based on prices but on product quality. In the low-technology sectors, competition is mainly based on prices and therefore process innovation plays a decisive role. In addition, we also find evidence that the effects of innovation and exporting on employment and turnover growth follow patterns that are dependent of the stage of technological development. The impact of exports on employment growth increases with an increasing distance of the company's home country from the technological frontier. Companies in these countries have a comparative advantage in wage levels. Interestingly, exporting has positive effects on labour productivity mainly in highly innovation-intensive sectors in the more advanced countries on the one hand, and in less innovation-intensive sectors in countries that are further away from the technological frontier. Probably, this result reflects comparative advantages and volume effects (economies of scale) of exporting. The prior companies increase their export share by increased competitiveness based on high-quality products, the latter based on wage levels. Finally, the joint effects of exporting and innovation on turnover growth and therefore also productivity growth are positive for high-tech sectors in technologically advanced countries. This indicates that companies that are active in these sectors have to internationalise their economic activities to reap the benefits from their innovation efforts. Domestic markets tend to be too small and niche. This result claims for supporting innovative companies in these sectors to start exporting. See above See above
    Keywords: EU, Impact and scenario analysis, Impact and scenario analysis
    Date: 2013–06–21
  12. By: Emran, M. Shahe; Shilpi, Forhad
    Abstract: This paper provides evidence on the effects of agricultural productivity on wage, labor supply to market oriented activities and labor allocation between own farming and wage labor in agriculture. To guide the empirical work, it develops a general equilibrium model that underscores the role of reallocation of family labor engaged in the production of non-marketed services at home (`home production'). The model predicts positive effects of a favorable agricultural productivity shock on wage and income, but the effect on hired labor is ambiguous; it depends on the strength of reallocation of labor from home to market production by labor surplus and deficit households. Taking rainfall variations as a measure of shock to agricultural productivity and using sub-district level panel data from Bangladesh, we find significant positive effects of a favorable rainfall shock on agricultural wage, labor supply to market work and per capita household expenditure. The share of hired labor in contrast declines substantially in response to a favorable productivity shock which is consistent with a case where labor-deficit households respond more than the labor-surplus ones in reallocating labor from home production.
    Keywords: Agricultural Productivity, Home Production, Market Work, Wage, Hired Labor, Labor Supply Response, Poverty Agricultural Productivity, Home Production, Market Work, Wage, Hired Labor, Labor Supply Response, Poverty
    JEL: J2 J3 O3
    Date: 2014–08–23
  13. By: Simone Pieralli; Silke Hüttel; Martin Odening
    Abstract: Analyzing the dynamics of structural change of an industry is a fundamental but challenging issue in economics. Accordingly, many attempts have been made to rationalize entry and exit decisions of firms, which, in total, appear as structural change of a sector. Among the most often hypothesized determinants of entry and exit behavior are (in)efficiency and uncertainty in conjunction with sunk costs of irreversible investments. According to the efficient market hypothesis competitive superiority discriminates among firms (Demsetz 1973). In the long run inefficient firms should be driven out of the market. In fact, inefficiency seems to increase the probability of exit. Among others, Wheelock and Wilson (2000) have shown that there exists a correlation between inefficiency and exit. However,many firms that are found inefficient persist in the market (Emvalomatis, Stefanou, and Lansink 2011). Another relevant strand of literature is the real options approach. Uncertainty and irreversibility generate a value of waiting which, in turn, leads to (dis)investment reluctance and economic inertia (Dixit and Pindyck 1994). Empirical evidence of the presence of real options effects has been provided, for example by Hinrichs, Musshoff, and Odening (2008). Both aforementioned explanations of firm’s entry and exit behavior have received extensive attention in the literature, but only separately. A joint treatment of these two aspects is the topic of this paper. We derive a model of firm exit under output price risk allowing for inefficiency of firms. To the best of our knowledge the interaction of inefficiency and uncertainty has not been analyzed so far in the framework of dynamic firm models. The consideration of inefficiency into the real options approach requires to introduce a production function. We do not impose a priori specific functional forms on the production function. We derive the properties inherited to the instantaneous profit function from the original production function by using a dual Legendre transformation. This allows deriving flexibly the substitution properties of the production function among multiple inputs and multiple outputs in a general setting. We derive two classes of profit functions imposing structure on the primal technology. The difference among the classes depends on how the inefficiency is considered. In the first class, inefficiency is considered separately from inputs and outputs, and acts as a shifter. In the second case inefficiency modifies the production function, directly interacting with inputs and outputs. Specific calculations to simulate the exit trigger prices are carried out on the particular case of a Cobb-Douglas production function. In both the separable and the non-separable classes inefficiency causes firms to exit from the market earlier compared with more efficient firms. Higher volatility of output price makes more reluctant the firms to decide to exit irreversibly the market. Higher unit costs, as well as a higher salvage value, decrease the reluctance to exit the market. Calculations are done for different hypothetical returns to scale cases, a higher and a lower one without qualitative difference in the findings. But these results show that, for the same price, it is possible to have a range of firms of different levels of efficiency and different returns to scale present in the market. Our model results generate a rich set of hypothesis that can be empirically tested, for example, in the case of German dairy sector.
    Keywords: Germany, Modeling: new developments, Microsimulation models
    Date: 2013–06–21
  14. By: Ramana Nanda; Tom Nicholas
    Abstract: We find a negative relationship between bank distress and the level, quality and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.
    JEL: G21 N22 O30
    Date: 2014–08
  15. By: Can Erbil; Kit Baum; Ferhan Salman
    Abstract: We examine the impact of banking reform and financial crisis of 2001 on non-financial firm dynamics. Our analysis integrates the two lines of literature on financial liberalization, banking reform and access to capital and banking competition, which were addressed earlier by Bertrand, Schoar and Thesmar (2007) and Cetorelli and Strahan (2006). Our unique firm level survey data from Turkey sheds light on market structure and firm performance. We find that increased banking competition for credit along with banking concentration and financial crisis severely affects access to capital. Moreover, this effect is more pronounced with varying firm size. See above See above
    Keywords: Turkey, Finance, Finance
    Date: 2013–06–21
  16. By: Patricia Crifo; Marc-Arthur Diaye; Sanja Pekovic
    Abstract: This paper analyzes how different combinations of Corporate Social Responsibility (CSR) dimensions affect corporate economic performance. We use various dimensions of CSR to examine whether firms rely on different combinations of CSR, in terms of quality versus quantity of CSR practices. Our empirical analysis based on an original database including 10,293 French firms shows that different CSR dimensions in isolation impact positively firms’ profits but their effect in term on intensity varies among CSR dimensions. Moreover, the findings on the qualitative CSR measure, based on interaction between its dimensions, show that the substitutability of these dimensions is highly significant for firm performance. However, in terms of the intensity, those interactions produce differential effects.
    Keywords: corporate social responsibility, firm performance, substitutability, complementarity, trade-off, simultaneous equations models,
    Date: 2014–07–01
  17. By: Lukáš Rečka
    Abstract: I estimate the elasticity of substitution between capital, labour and energy in Central and Eastern European countries to make CGE models more accurate. The CGE models often use elasticity of substitution of production factors estimated for another countries or average of elasticities taken from literature. I want to provide new estimates of elasticity of substitution of production factors for CGE models. I focus on CEE countries where no estimates of elasticity of substitution of production factors have been done yet. The CEE economies differ from the Western European economies therefore we have reasonable argument to suppose that also the elasticities of substitution of production factors are different in these countries. The newly estimated elasticities of production can be used as parameters for the CGE models and enable comparison of the results, when using the newly estimated parameters and when using the conventional value of parameters. The need to estimate constant elasticity of substitution (CES) production function with nested structure is discussed since Berndt and Wood (1979). In 2-level nested ((KE)(LM)) production function, Berndt and Wood (1979) distinguish the gross substitution effect and the expansion effect. They explain that the engineering studies supporting the E-K substitutability capture only the gross substitution effect and therefore these studies might not be in contradiction with econometric studies supporting the E-K complementarity, because the expansion effect could outweigh the gross substitution effect. Kemfert (1998) estimates the substitution elasticities of a nested CES production function for the entire German industry and individual industrial sectors. She estimates the elasticities for tree nested structures [((KE)L), ((KL)E) and ((EL)K)] and concludes that a nested CES function with a nest of capital and energy ((KE)L) is the most useful for the entire German industry, but for several industrial sectors a nest of capital and labour ((KL)E) might be closer to the reality. Van der Werf (2008) estimates a 2-level nested production function, using the industrial level data from 12 OECD countries in for 1978-1996. He finds that the nesting structure having capital and labour in the same node fits reality most closely. Similarly, Okagawa and Ban (2008) estimate a nested CES function using another OECD dataset. Their data set is more refined compared to that used in Van der Werf (2008), where the data are disaggregated into 7 sectors; the Okagawa and Ban (2008) data set disaggregated into 19 sectors. Following these findings I estimate a production function with a nested structure and examine, which nested structure fits data best. I use the World Input-Output Database (WIOD) which includes data from 27 EU countries plus 13 other major countries for the period from 1995 to 2009. The database distinguishes 35 industries, so I estimate sector specific elasticities for each CEE country from the EU. New estimates of elasticity of substitution between capital, labour and energy in Central and Eastern European countries that can be used as parameters in CGE models.
    Keywords: CEE countries (Czech Republic, Slovakia, Poland, Hungary, Austria, Latvia, Lithuania, Estonia, Slovenia, Romania, Bulgaria), Energy and environmental policy, General equilibrium modeling
    Date: 2013–06–21
  18. By: Cai, Yongyang; Steinbuks, Jevgenijs; Elliott, Joshua; Hertel, Thomas W.
    Abstract: The pattern of global land use has important implications for the world's food and timber supplies, bioenergy, biodiversity and other eco-system services. However, the productivity of this resource is critically dependent on the world's climate, as well as investments in, and dissemination of improved technology. This creates massive uncertainty about future land use requirements which compound the challenge faced by individual investors and governments seeking to make long term, sometimes irreversible investments in land conversion and land use. This study assesses how uncertainties associated with underlying biophysical processes and technological change in agriculture affect the optimal profile of land use over the next century, taking into account the potential irreversibility in these decisions. A novel dynamic stochastic model of global land use is developed, in which the societal objective function being maximized places value on food production, liquid fuels (including bio-fuels), timber production, and biodiversity. While the uncertainty in food crop yields has anticipated impact, the resulting expansion of crop lands and decline in forest lands is relatively small.
    Keywords: Climate Change Mitigation and Green House Gases,Environmental Economics&Policies,Climate Change and Environment,Forestry,Environment and Energy Efficiency
    Date: 2014–08–01
  19. By: Medha Tapiawala
    Abstract: To be completed To be completed To be completed
    Keywords: India, Finance, Finance
    Date: 2014–07–03
  20. By: Arik Levinson
    Abstract: From 1990 to 2008, the real value of US manufacturing output grew by one-third while the pollution emitted from US factories fell by two-thirds. What accounts for this cleanup? Prior studies have documented that a relatively small share can be explained by changes in the composition of US manufacturing – a shift towards producing relatively more goods whose production processes involve less pollution. Those studies attribute the unexplained majority to “technique”, a mix of input substitution, process changes, and end-of-pipe controls. But because that technique effect is a residual left over after other explanations, any errors or interactions in the original calculation could inflate the estimated technique. In this paper I provide the first direct estimate of the technique effect. I combine the National Emissions Inventories with the NBER-CES Manufacturing Industry Database for each of over 400 manufacturing industries. I aggregate across industries using analogs to the Laspeyres and Paasche price indexes for each of six major air pollutants. The calculations using this direct estimation of the technique effect support the research findings using indirect measures. From 1990 to 2008, production technique changes account for more than 90 percent of the overall cleanup of US manufacturing.
    JEL: Q55
    Date: 2014–08
  21. By: Patricia Crifo; Marc-Arthur Diaye; Rim Oueghlissi
    Abstract: This article examines whether the extra-financial performance of countries on environmental, social and governance (ESG) factors matter for sovereign bonds markets. We propose an econometric analysis of the relationship between ESG performances and government bond spreads of 23 OECD countries over the 2007-2012 period. Our results reveal that ESG ratings significantly decrease government bond spreads and this finding is robust for a wide range of model setups. We also find that the impact of ESG ratings on the cost of sovereign borrowing is more pronounced in bonds of shorter maturities. Finally, we show that extra-financial performance plays an important role in assessing risk in the financial system. In particular, the informational content of ESG ratings goes beyond the set of quantitative variables traditionally used as determinant of a country's extra-financial rating such as CO2 emissions, the share of protected areas, social expenditure and health expenditure per GDP, or the quality of institutions, and offers an additional evaluation of governments' ESG performance that matters for government bond spreads.
    Keywords: Extra-financial ratings, ESG performance, Government bond spreads,
    Date: 2014–07–01

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