nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒10‒03
twelve papers chosen by

  1. Is the directional distance function a complete generalization of the Farrell approach? By Aparicio, Juan; Pastor, Jesús; Zofío, José Luis
  2. Localized Technological Change and Efficiency Wages across European Regional Labour Markets By Cristiano Antonelli; Francesco Quatraro
  3. Coordination efficiency in multi-output settings: a DEA approach By Laurens CHERCHYE; Bram DE ROCK; Veerle HENNEBEL
  4. Ranking Production Units According to Marginal Efficiency Contribution By Mujtaba Ghiyasi; Jens Leth Hougaard
  5. Export performance and product market regulation By Bruno Amable; Ivan Ledezma
  6. The cleansing effect of minimum wage : Minimum wage rules, firm dynamics and aggregate productivity in China By Sandra Poncet; Florian Mayneris; Tao Zhang
  7. Is theatre efficiency affected by the legal form type? A case study of German public theatres By Marta Zieba
  8. Vine planting rights, farm size and economic performance: do economies of scale matter in the French viticulture sector? By Bernard Delord; Alfredo Manuel De Jesus Oliveira Coelho; Etienne Montaigne
  9. International Trade and Firm-Level Markups when Location and Quality Matter By Flora Bellone; Patrick Musso; Lionel Nesta; Frederic Warzynski
  10. Top Management Turnover and Corporate Governance in China: effects on innovation performance By Martha Prevezer; Lutao Ning; Yuandi Wang
  11. The Efficiency of the Portuguese Agricultural Credit Co-operatives Governance Model By Paula CABO; João REBELO
  12. Evaluation of risk in farm planning: a case study By Rosa, franco

  1. By: Aparicio, Juan (Center of Operations Research, Universidad Miguel Hernández, Elche, Spain); Pastor, Jesús (Center of Operations Research, Universidad Miguel Hernández, Elche, Spain); Zofío, José Luis (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Cost or revenue efficiency measurement based on the approach initiated by Farrell has received great attention from academics and practitioners since the fifties. Farrell’s approach decomposes cost efficiency into two different sources, viz. technical efficiency and allocative efficiency. Technical efficiency is estimated by the implementation of the Shephard’s input or output distance functions, while allocative efficiency is derived as a residual between cost or revenue efficiency and its corresponding technical efficiency component. The directional distance function (DDF) was introduced later in the literature to complete duality theory with respect to the profit function and as a generalization of the Shephard input and output distance functions. Considering the case of cost efficiency we show that, although the DDF correctly encompasses the technical efficiency component of the Farrell approach, this is not true for the allocative component. Additionally, we show that allocative inefficiency is underestimated when the DDF-additive approach is used for decomposing cost inefficiency unless technical efficiency is assumed.
    Keywords: Technical efficiency; Allocative efficiency; Directional Distance Functions
    JEL: C61 D21 D24
    Date: 2014–09
  2. By: Cristiano Antonelli (Department of Economics, University of Turin - University of Turin); Francesco Quatraro (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS))
    Abstract: Localized technological change and efficiency wages across European regional labour markets, Regional Studies. Internal labour markets and industrial relations in Continental Europe are characterized by substantial rigidity of employed labour engendered by the tight conditions of regional labour markets. This rigidity affects both the rate and the direction of technological change. The increase of wages induces the localized introduction of biased technological change with clear effects on productivity levels. The empirical evidence across a sample of European regions confirms the significant role of the changes in wages both on the increase of the output elasticity of labour and on multifactor productivity.
    Keywords: Induced approaches, Localized technological change, Efficiency wages, Multifactor productivity growth, Regional labour markets
    Date: 2013–12–02
  3. By: Laurens CHERCHYE; Bram DE ROCK; Veerle HENNEBEL
    Abstract: We extend a recently developed methodology for measuring the efficiency of Decision Making Units (DMUs) in the case of multiple inputs and outputs. The methodology accounts for economies of scope through the use of joint inputs, and explicitly includes information about the allocation of inputs to particular outputs. We focus on possible efficiency gains by reallocating inputs across outputs. We introduce a measure of coordination efficiency, which captures these efficiency gains. We demonstrate the practical usefulness of our methodology through an efficiency analysis of education and research conducted at US universities.
    Date: 2014–08
  4. By: Mujtaba Ghiyasi (Centre of Health Economics Research, University of Southern Denmark); Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: League tables associated with various forms of service activities from schools to hospitals illustrate the public need for ranking institutions by their productive performance. We present a new method for ranking production units which is based on each units marginal contribution to the technical efficiency of various “mergers” relative to a common reference technology. The approach is radically different from the usual one based on super-efficiency indexes in DEA. We illustrate the mechanics of our method by a series of numerical examples and further demonstrate that our new index inherits all relevant and desirable properties of the Farrell efficiency index upon which it is constructed.
    Keywords: Production units, Ranking, Marginal efficiency contribution, DEA, Super efficiency, Contribution index
    Date: 2014–08
  5. By: Bruno Amable (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CEPREMAP - Centre pour la recherche économique et ses applications, IUF - Institut Universitaire de France - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique); Ivan Ledezma (LEDa - Université Paris-Dauphine, IRD - DIAL - UMR 225)
    Abstract: This paper analyses the impact of product market regulation on the propensity to export at the industry level for 13 OECD countries and 13 industries over the 1977-2007 period. Recent economic policy and academic literature insists on the negative effects of product market regulation on productivity or innovation, and hence on "competitiveness", a term that we interpret as the ability to export. Similar to the conclusions of some contributions to a recent literature on competition and growth, the "common sense" is that product market regulation should be detrimantal to competitiveness. Testing through a two-step estimation the impact of upstream pressures of product market regulation on productivity and the effect of the latter on the propensity to export, this paper shows that upstream regulatory pressures have a significantly positive impact on productivity and thereby on the capability of an industry to attract resources and to sell its production in international markets.
    Keywords: Exports; product market regulation; competitiveness
    Date: 2013–02
  6. By: Sandra Poncet; Florian Mayneris; Tao Zhang
    Abstract: We study how the 2004 reform of minimum wage rules in China has affected the survival, average wage, employment and productivity of local firms. To identify the causal effect of minimum wage growth, we use firm-level data for more than 160,000 manufacturing firms active in 2003 and complement the triple difference estimates with an IV strategy that builds on the institutional features of the 2004 reform. We find that the increase in city-level minimum wages resulted in lower survival probability for firms that were the most exposed to the reform. For surviving firms, wage costs increased without negative repercussions on employment. The main explanation for this finding is that productivity significantly improved, allowing firms to absorb the cost shock without hurting their employment nor their profitability. At the city-level, our results show that higher minimum wages fostered aggregate productivity growth thanks to productivity improvements of incumbent firms and net entry of more productive ones. Hence, in a fast-growing economy like China, there is a cleansing effect of labor market standards. Minimum wage growth allows more productive firms to replace the least productive ones and forces incumbent firms to strengthen their competitiveness, these two mechanisms boosting the aggregate efficiency of the economy.
    Keywords: minimum wages;firm-level performance;aggregate TFP;China
    JEL: F10 F14 O14
    Date: 2014–09
  7. By: Marta Zieba (Department of Economics, University of Limerick)
    Abstract: The paper aims at exploring the economic efficiency of the performing arts organisations. A parametric stochastic frontier approach is presented as a way of measuring the performance of cultural institutions. In particular, using German public theatres as a case study and summarising the empirical findings obtained in Zieba and Newman (2013), this paper examines how the efficiency of publicly funded performing arts firms, operating under different organisational structures, is affected by two types of shocks. First, we consider what happens to efficiency when there is a funding shock and second, we consider the effect on efficiency of an increase in competition. The identification of these effects was made possible by the natural experiment of the reunification of East and West Germany in 1990. The results suggest that theatres organised under public law are more efficient than theatres organised under private law. However, when exposed to the exogenous demand shock after reunification, the theatres organised under private law react positively to this competition shock as measured by their efficiency scores confirming that they better react to the changing market conditions than theatres organised as public legal forms.
    Keywords: cultural economics, cultural management, theatre
    Date: 2013–03
  8. By: Bernard Delord (Marchés, Organisations, Institutions et Stratégies d'Acteurs, INRA); Alfredo Manuel De Jesus Oliveira Coelho (UMR INRA / CIHEAM / ENSAM / CIRAD : Marchés, Organisations, Institutions et Stratégies d'Acteurs, INRA; Montpellier SupAgro); Etienne Montaigne (Marchés, Organisations, Institutions et Stratégies d'Acteurs, INRA; Montpellier SupAgro)
    Abstract: This paper assesses the existence of both greater profitability for large-scale farms and economies of scale in the French viticulture sector, thereby confirming or invalidating the argument put forward by the European Commission to justify the abolition of vine planting rights. According to this argument (1) economic efficiency increases with the extension of the vine area in vineyards, and (2) vine planting rights prevent the expansion of farms. This article discusses the issue of economies of scale in agriculture and focuses on specific matters related to viticulture. The key issue of our demonstration lies in the impossibility of defining economies of scale by comparing the profits of farms producing different types of product at different prices. By using an assessment of these variables through FADN, it proposes and justifies the interest of using a measurement of output which is the net value added per unit of labor. The report prepared on behalf of the European Parliament is criticized as it demonstrates a positive correlation between size and efficiency, without taking account of the broad farm gate price dispersion for wine. This article demonstrates that in the case of France, over the period 2005-2007, farm size has little impact on performance. The significant differences observed are the result of differences in the selling price of wine.
    Keywords: planting rights, wine growing farm, profitability, economies of scale, price, francevin, économie de plantation, exploitation viticole, prix, économie d'échelle, taille de l'exploitationviticulturedroit à la terre
    Date: 2014
  9. By: Flora Bellone; Patrick Musso; Lionel Nesta; Frederic Warzynski
    Abstract: In this paper, we estimate firm-level markups and test some micro-level predictions of a model of international trade with heterogeneous firms and endogenous markups. Our theoretical framework is an extended version of the Melitz and Ottaviano (2008) (MO) model that features both quality and spatial differentiation across firms. In line with our model, we find that firm markups are positively related to firm productivity and negatively related to the toughness of local competition. Considering the relationship between firm markups and exports, we find evidence that markups are higher for exporters, what appears to indicate that the quality-enhancing channel overbalances the price-depressing channel of global competition.
    Keywords: Mark-ups;International Trade;Productivity
    JEL: F14 D24
    Date: 2014–09
  10. By: Martha Prevezer; Lutao Ning; Yuandi Wang
    Abstract: Research Question: How does Chinese corporate governance in publicly-listed firms affect the relationship between innovation productivity and top management turnover? Is state shareholding in China a positive force for innovation productivity? Research Insights: A balance is maintained between the negative effect of (relatively high) top management turnover on investment horizons and innovation productivity, mitigated by positive effects of high state ownership, up to a certain level of ownership concentration. Beyond this level, potential for abuse by the dominant shareholder curtails positive effects on innovation. This contrasts with foreign dominant shareholders where no alignment between dominant shareholder and top management occurs and shorter investment horizons are preferred with lower innovation productivity. Theoretical Implications: In China, with state-held and controlled publicly listed firms, there is an alliance between the dominant shareholder and top management with relatively low employee protection and weak protection for lesser shareholders . This may have positive outcomes for long term innovation but may also lead to principal-principal abuses. Any such alliance needs to be tempered by stronger internal governance structures to protect minority shareholders. But stronger protection may in turn reduce investment horizons and lower innovation. Policy Implications: As well as strengthening external corporate governance mechanisms, insider corporate governance mechanisms need to be strengthened to discipline managers. However stronger countervailing powers to secondary shareholders, stronger Supervisory Board rights and greater independence of Directors may tend to decrease time horizons of investment for the firm and impede innovation.
    Keywords: Corporate governance, Top management turnover, innovation performance, China
    JEL: P3 L2 P5
    Date: 2014–09
  11. By: Paula CABO (Agriculture School and CIMO, Polytechnic Institute of Bragança, Portugal); João REBELO (University of Trás-Os-Montes and Alto Douro, Department of Economics, Management and Sociology, Vila Real, Portugal)
    Abstract: In recent years the importance of corporate governance (CG) has rising new attention, as the 2008 financial crisis illustrates. Co-operative members, staff, regulators and others stakeholders involved in the co-operative banking business became aware of the need to strengthen co-operatives governance, since this is crucial to safeguarding sound management and, ultimately, to the survival and sustainability of these organizations. With their origins rooted in the 16th century, the Portuguese Agricultural Credit Co-operatives (CCAM) have been considered central players in the economic and social development of rural regions. The goal of this paper is to determine the impact of the different governance mechanisms of co-operative banks on control management, by analysing CCAM governance and assess its efficiency in disciplining management. Hence, using data from 1995-2009 period, and multinomial logit models, the relation between CCAM performance and several control mechanisms operating within the SICAM is analysed. The results show that overall internal governance mechanisms are not related to the CCAM performance, which indicates potential weakness of the CCAM internal control mechanisms. On the other hand, external governance mechanisms are related to CCAM operational and cost efficiency indicators, demonstrating the importance of these mechanisms in disciplining CCAM management. Moreover, the results highlight the value of the supervision task of Central CCAM in the performance of the associates.
    Keywords: Governance, control mechanisms, co-operatives, integrated systems
    JEL: D23 G34 L30
    Date: 2014
  12. By: Rosa, franco
    Abstract: Many studies suggest that farmers frequently show risk averse attitudes, and choose the “riskminimizing” and “safety first” survival strategy rather than pursuing the profit maximization. This article reports on a study of the impact of risk caused by different events: climate, stock levels, price volatility and other causes affecting the yield and price variability of agricultural crops. This study will simulate the risk in farm decisions using a sumex utility function that allows to parameterize the risk for specific traits of the function, and MOTAD (minimization of total absolute deviations) to simulate an efficient combination of crops in the whole farm planning (WFP). The empirical analysis is represented by a case study consisting in the risk simulation of a farm of 100 Ha, growing vegetable crops located in the Northern region of Italy. The risk is modelled using 15 years historical observations with discrete probability distribution of some of the most diffused cereal and oilseed crops (source: Eurostat). The objective is to evaluate the risk aversion by designing a utility frontier of crop combinations using a LP approximation model. The results indicate the trade off between expected returns and risk: if the value of gross income is expected to increase, the farmers tend to specialize in the most profitable portfolio enterprise while it is not so evident that the diversification will contribute to curb the risk.
    Keywords: whole farm planning, risk, sumex utility function, LP-MOTAD, portfolio analysis, Agribusiness, Productivity Analysis, Risk and Uncertainty,
    Date: 2014

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