nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒11‒12
twelve papers chosen by

  1. Decomposition of productivity considering multi-environmental pollutants in Chinese industrial sector By Hidemichi Fujii; Jing Cao; Shunsuke Managi
  2. On the Sources of Heterogeneity in Banking Efficiency Literature By Aiello, Francesco; Bonanno, Graziella
  3. Total factor productivity : Lessons from the past and directions for the future By Bart van Ark
  4. Acquisitions, productivity, and profitability : Evidence from the Japanese cotton spinning industry By Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson
  5. A constrained nonparametric regression analysis of factor-biased technical change and TFP growth at the firm level By Marijn Verschelde; Michel Dumont; Bruno Merlevede; Glenn Rayp
  6. Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: An Empirical Analysis Based on the Firm-Level Data Underlying the Basic Survey on Business Structure and Activities(in Japanese) By Keiko ITO
  7. The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy By Pierre-Daniel Sarte; Fernando Parro; Esteban Rossi-Hansberg; Lorenzo Caliendo
  8. Misallocation and productivity in the lead up to the Eurozone crisis By Daniel Dias; Carlos Robalo Marques; Christine Richmond
  9. Forms, Factors and Efficiency of Eco-management in Bulgarian Farms with High Eco-activity By Bachev, Hrabrin
  10. Incentive Compensation and Incentive Regulation: Empirical Evidence By Carlo Cambini; Sara De Masi; Laura Rondi
  11. What Drives Profitability of Banks: Do Interest rate, and Fee and Commissions impact the profitability of Banks? Evidence from the European Countries By el Alaoui, AbdelKader; Diwandaru, Ginanjar; Rosly, Saiful Azhar; Masih, Mansur
  12. Exchange Rate Policy and Export Performance in Efficiency-Driven Economies By Nicola Kim Rowbotham, Adrian Saville & Douglas Mbululu

  1. By: Hidemichi Fujii (Graduate School of Fisheries Science and Environmental Studies, Nagasaki University); Jing Cao (Tsinghua University); Shunsuke Managi (Graduate School of Environmental Studies, Tohoku University)
    Abstract: The objective of this study is to calculate and decompose productivity incorporating multi-environmental pollutants in Chinese industrial sectors from 1992 to 2008. We apply a weighted Russell directional distance model to calculate productivity from both the economic and environmental performance. Main findings are, 1) Chinese industrial sectors increased productivity, with the main contributing factors being labor saving prior to 2000. 2) The main contributing factors for productivity growth in coastal areas include both economic and environmental performance improvement. While central and west regions improved productivity due to economic development, they have a trade-off relationship between economic and environmental performance.
    JEL: O47 Q53 Q56
    Date: 2014–10
  2. By: Aiello, Francesco; Bonanno, Graziella
    Abstract: One learns two main lessons from studying the great quantity of banking efficiency literature. These lessons regard the heterogeneity in results and the absence of a comprehensive review aimed at understanding the reasons for this variability. Surprisingly, although this issue is well-known, it has not been systematically analyzed before. In order to fill this gap, we perform a Meta-Regression-Analysis (MRA) by examining 1,661 efficiency scores retrieved from 120 papers published over the period 2000-2014. The meta-regression is estimated by using the Random Effects Multilevel Model (REML), because it controls for within-study and between-study heterogeneity. The analysis yields four main results. Firstly, parametric methods yield lower levels of banking efficiency than nonparametric studies. This holds true even after controlling for the approach used in selecting the inputs and outputs of the frontier. Secondly, we show that banking efficiency is highest when using the value added approach, followed by estimates from studies based on the intermediation method, whereas those based on the hybrid approach are the lowest. Thirdly, efficiency scores also depend on the quality of studies and on the number of observations and variables used in the primary papers. As far as the effects of sample size, dimension and quality of papers are concerned, there are significant differences in sign and magnitude between parametric and nonparametric studies. Finally, cost efficiency is found to be higher than profit and production efficiency. Interestingly, MRA results are robust to the potential outliers in efficiency and sample size distributions
    Keywords: Banking industry, Frontier Models, Efficiency, Meta-analysis, Study design
    JEL: C13 C14 C80 D23 G21 L25
    Date: 2014–09–12
  3. By: Bart van Ark (University of Groningen)
    Date: 2014–10
  4. By: Serguey Braguinsky (Carnegie Mellon University); Atsushi Ohyama (Hokkaido University); Tetsuji Okazaki (University of Tokyo); Chad Syverson (University of Chicago Booth School of Business and NBER)
    Abstract: We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward “higher productivity buys lower productivity” story commonly appealed to in the literature. Acquired firms’ production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable, however, due to consistently higher inventory levels and lower capacity utilization—differences that reflected problems in managing the uncertainties of demand. When purchased by more profitable firms, these less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.
    Date: 2014–10
  5. By: Marijn Verschelde (Ghent University and KU Leuven KULAK); Michel Dumont (Federal Planning Bureau and Ghent University); Bruno Merlevede (Ghent University); Glenn Rayp (Ghent University and SHERPPA)
    Abstract: Using firm-level data for Belgium, we study the validity of Hicks neutrality in several sectors that cover the spectrum of knowledge intensity. We find that Hicks neutrality is clearly not supported by the data in different sectors. The results are not sensitive to altering the specification of the technology by including firm age and R&D into the analysis. We also reject Hicks neutrality for a balanced sample, pointing to `within-firm' factor-biased technical change and we also find factor-biased technical change in the pre-crisis era, indicating that unobserved heterogeneity in demand does not drive the results. Overall, our results point towards low-skilled laboursaving and materials-using technical change. So far, this has received little attention and may be linked to ofshoring and global value chain networks. Finally, we show that nonparametric estimates of TFP change that allow for factor biases support the evidence of the recent slowdown in TFP growth in many manufacturing sectors in Belgium. Estimations of TFP and technical change are shown to be sensitive to the estimation method and the specification of the factor bias of technical change.
    Keywords: total factor productivity, factor bias, nonparametric estimation
    JEL: C35 D24
    Date: 2014–10
  6. By: Keiko ITO
    Abstract: This paper examines whether and how the entry of foreign multinational firms affects the productivity growth of domestically-owned firms, i.e., foreign direct investment (FDI) spillover effects, using a large-scale Japanese firm-level dataset including a large number of services firms. The results suggest that foreign presence in a particular industry does not generate positive spillover effects and both in manufacturing and service sector industries in fact tends to negatively affect the productivity growth of domestically-owned firms. Moreover, the negative FDI spillover effect tends to be larger in the service than in the manufacturing sector, implying that there may be systematic differences in FDI spillover effects between these sectors. However, the negative spillover effects are smaller for firms catching up towards the productivity frontier than for other firms, and in the long run, their productivity growth is positively associated with foreign presence in the same industry. Nevertheless, the overall effect of inward FDI is still negative and further investigation on which factors lead to positive FDI spillovers is desirable. A possible interpretation of these results is that foreign entry increases the productivity gap between firms with high productivity growth and other firms. If this interpretation is correct, the results suggest that to raise macro-level productivity growth, the promotion of inward FDI should be accompanied by policies to encourage firms with low productivity growth to accelerate their productivity growth or to force them to exit from the market.
    Date: 2013–01
  7. By: Pierre-Daniel Sarte (Federal Reserve Bank of Richmond); Fernando Parro (Federal Reserve Board); Esteban Rossi-Hansberg (Princeton University); Lorenzo Caliendo (Yale University)
    Abstract: We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we calibrate the model and carry out a variety of counterfactual experiments that allow us to gauge the impact of regional and sectoral productivity changes. We find that such changes can have dramatically different effects depending on the sectors and regions affected. In extreme cases, increases in productivity can have negative effects on real GDP (although welfare effects remain positive).
    Date: 2014
  8. By: Daniel Dias; Carlos Robalo Marques; Christine Richmond
    Abstract: We use Portuguese firm-level data to investigate whether changes in resource misallocation may have contributed to the poor economic performance of some southern and peripheral European countries leading up to the Eurozone crisis. We extend Hsieh and Klenow's (2009) methodology to include intermediate inputs and consider all sectors of the economy (agriculture, manufacturing, and services). We find that within-industry misallocation almost doubled between 1996 and 2011. Equalizing total factor revenue productivity across firms within an industry could have boosted valued-added 48 percent and 79 percent above actual levels in 1996 and 2011, respectively. This implies that deteriorating allocative eficiency may have shaved around 1.3 percentage points of the annual GDP growth during the 1996-2011 period. Allocative eficiency deterioration, despite being a widespread phenomenon, is significantly higher in the service sector, with 5 industries accounting for 72 percent of the total variation. Capital distortions are the most important source of potential value-added eficiency gains, especially in the service sector, with a relative contribution increasing over time.
    JEL: D24 O11 O47 O41
    Date: 2014
  9. By: Bachev, Hrabrin
    Abstract: This paper presents the results of a first large-scale study on forms, factors, and efficiency of eco-management in Bulgarian farms with a high eco-activity. First, a brief characterisation of surveyed “eco-active†farms is made. After that, diverse (internal, private, contract, market, formal, informal, hybrid etc.) forms and the scope of eco-management in agricultural farms are analysed. Next, different (ideological, economic, market, social etc.) factors of eco-management in farms are specified. After that, analysis is made on costs, effects, efficiency and perspectives of eco-management in agricultural farms. Finally, conclusions from the study are summarised.
    Keywords: environmental management, agriculture, agro-eco-management, Bulgaria, forms, factors, efficiency
    JEL: Q12 Q18 Q2 Q20 Q3 Q30
    Date: 2014–08–31
  10. By: Carlo Cambini; Sara De Masi; Laura Rondi
    Abstract: This paper examines the relationship between CEO pay and firm performance within a sample of European publicly listed energy utilities from 2000 to 2010, focusing on the differential responses that arise from being subject to different regulatory regimes. In particular, we investigate the difference in pay-performance sensitivity across regulated and unregulated firms as well as the impact of different regulatory schemes – incentive vs. cost-based regulation - on CEO monetary incentives. Using various measures of performance, we find that European energy utilities link CEO compensation to firm performance, but CEO pay-performance is higher for unregulated companies. When we focus on the effect of alternative regulatory schemes, our results show that payperformance sensitivity is significantly higher for firms under incentive regulation than within firms under cost-based regulation. This result holds after controlling for firm - private vs. state - ownership and for varying degrees of market liberalization across countries.
    Keywords: Managerial compensation, Incentive contracts, Incentive regulation, Energy utilities
    JEL: G30 J33 L51 M12
    Date: 2013
  11. By: el Alaoui, AbdelKader; Diwandaru, Ginanjar; Rosly, Saiful Azhar; Masih, Mansur
    Abstract: Traditionally, the main role of the bank is to offer loans to its customers, to facilitate the intermediary role in the financial market between the investors and feed the need of the big corporations in terms of investment. This study is an attempt to analyze, at the same time, the impact of three factors that are involved in the income of the European banks. The first two are endogenous to the bank and the third one is deemed, a priori, to be exogenous to the bank. Our objective is to look at the influence of “Fee & commissionsâ€, the “Net Non-interest income†and the interest rate on banks’ profitability in a panel data of 34 banks chosen from different European countries. The interest rate of reference is supposed to be under the control of the central bank but subject to movement due to the interactions between the cross-border countries and the competitive framework within the same country. The “Fee & commissions†and the “Net Non-interest income†are more related to the efficiency of the management team and the effectiveness of the processing inside the same bank. Our main finding is that the “Fee & commissions†are not really influencing the profitability of the European banks. However, the “Net Non-interest income†and the interest rate are significantly impacting the profitability of the European banks.
    Keywords: Banking System, Regulation, Fee and commissions, Bank Profitability, panel data
    JEL: C22 C58 G21 G28
    Date: 2014–10–28
  12. By: Nicola Kim Rowbotham, Adrian Saville & Douglas Mbululu
    Abstract: Increased globalisation, coupled with rising domestic competition, has led a growing number of firms to search beyond their traditional domestic markets for business opportunities in recent years. As a result, export-led economic growth has gained renewed attention amongst policy makers, particularly amongst those in industrialising nations, or so-called efficiency-driven economies. This search for drivers of economic growth has gained further impetus from the economic pressures brought about by the fall in growth in advanced markets following the global financial crisis coupled with the rising competitiveness of other industrialising emerging economies. A common policy proposal amongst countries trying to improve their competitiveness is to weaken the domestic exchange rate as a means to stimulate exports. However, depreciation also increases exchange rate risk. Given the renewed emphasis on this policy lever, this research examines the impact of exchange rate on export performance in a sample of nine efficiency-driven economies over the period 1990 to 2009. These economies that we survey include Brazil, the Dominican Republic, Malaysia, Mauritius, Mexico, Peru, South Africa, Thailand and Turkey, which all have floating exchange rate arrangements during the survey period. Panel data models using a fixed-effects method were used, and it was found that a weakening of the exchange rate does not necessarily improve export performance. To the contrary, for the nine countries surveyed, export growth seems to be associated with stronger exchange rates. Whilst our results suggest that the lag effect of exchange rate movement on export performance is slightly more pronounced, the relationship nevertheless remains statistically insignificant.
    Keywords: Exchange rate, export performance, efficiency-driven economy
    JEL: F31 F43
    Date: 2014

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