nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒11‒17
twenty-two papers chosen by

  1. Import competition, productivity and multi-product firms By Emmanuel Dhyne; Amil Petrin; Valerie Smeets; Frederic Warzynski
  2. Instrumental Variable Estimates of the Effect of Management Practices on Firm Performance in Korean Firms By Kang, Youngho; Chang, Jieun
  3. Innovations as factor of absorptive capacity of FDI spillovers across regions of Russian Federation By Didenko, Alexander; Egorova, Tatiana
  4. Environmental Regulation and Competitiveness: Empirical Evidence on the Porter Hypothesis from European Manufacturing Sectors By Yana Rubashkina; Marzio Galeotti; Elena Verdolini
  5. Natural Land Productivity, Cooperation and Comparative Development By Litina, Anastasia
  6. Benchmarking Methods in the Regulation of Electricity Distribution System Operators By Janda, Karel; Krska, Stepan
  7. Elasticity of substitution and the slowdown of the Italian productivity By Saltari, Enrico; Federici, Daniela
  8. Product and Labor Market Regulations, Production Prices, Wages and Productivity. By G. Cette; J. Lopez; J. Mairesse
  9. Environmental Certification and Technical Efficiency: A Study of Manufacturing Firms in India By Sahu, Santosh Kumar; Krishnan, Narayanan
  10. Wage and Productivity Dispersion: The Roles of Rent Sharing, Labor Quality and Capital Intensity By Bent Christensen; Jesper Bagger
  11. The Efficiency of Healthcare Systems in Europe: a Data Envelopment Analysis Approach By Asandului, Laura; Roman, Monica; Fatulescu, Puiu
  12. The effects of state aid on Total Factor Productivit growth By Patrick Van Cayseele; Jozef Konings; Ilona Sergant
  13. The Impact of R&D Subsidies on Labor Productivity By Pajarinen, Mika; Rouvinen, Petri
  14. The Impact of Highly-skilled ICT Labour on Firm Performance: Empirical Evidence from Six European Countries By Eva Hagsten; Anna Sabadash
  15. On the dynamics of environmental performance in the European Union By Roberto Gómez-Calvet; David Conesa; Ana Rosa Gómez-Calvet; Emili Tortosa-Ausina
  16. TFP, R&D AND SEMI ENDOGENOUS GROWTH IN RHOMOLO By Enrique Lopez Bazo; Fabio Manca
  17. Employment Growth, Productivity and Jobs reallocations in Tunisia: A Microdata Analysis By Mohamed Ali Marouani; Rim Mouelhi
  18. International competition and firm performance : Evidence from Belgium By Jan De Loecker; Catherine Fuss; Johannes Van Biesebroeck
  19. Corporate Governance Reforms, Interlocking Directorship and Company Performance in Italy By Drago, Carlo; Millo, Francesco; Ricciuti, Roberto; Santella, Paolo
  20. The linkage between bank net interest margins and non-interest income : The case of the Cambodian Banking industry By vithyea, You
  21. Testing for Distortions in Performance Measures: An Application to Residual Income Based Measures like Economic Value Added By Randolph Sloof; Mirjam van Praag
  22. To What Extent Does the Adoption of Modern Variety Increase Productivity and Income? A Case Study of the Rice Sector in Tanzania By Nakano, Yuko; Kajisa, Kei

  1. By: Emmanuel Dhyne (NBB, UMons); Amil Petrin (U. Minnesota); Valerie Smeets (Aarhus U.); Frederic Warzynski (Aarhus U.)
    Abstract: Using detailed firm-product level quarterly data, we develop an estimation framework of a Multi-Product Production Function (MPPF) and analyse firm-product level TFP estimations at various levels (industries, products). After documenting our estimation results, we relate productivity estimates with import competition, using firm and product level measures of import competition. We find that if productivity at the firm level tends to positively react to increased import competition, the multi-product firms response varies according to the relative importance of the product that faces stronger import competition in the firm’s product portfolio. When import competition associated to the main product of a firm increases, the firm tend to increase its efficiency in producing that core product, in which it has a productivity advantage. However, when the degree of foreign competition increases for non core products of a firm, it tends to lower its efficiency in producing those goods.
    Keywords: multi-product production function, productivity, import competition
    JEL: D24 L22 L25
    Date: 2014–10
  2. By: Kang, Youngho; Chang, Jieun
    Abstract: To empirically examine the unbiased effect of management practice on firm productivity, this paper aims to suggest an instrumental variable approach, which requires less costly method. This study uses three firm-level instrumental variables such as the motivations for organizational reform, empowerment, and IT investment during the organizational reform. For empirical study, we use Korean manufacturing firm-level data that contains information on management score and financial statement. The results of the instrumental variable estimation show that better management practice leads to higher level of firm productivity statistically significantly, while the effect of management practices is statistically insignificant in the ordinary least square estimation.
    Keywords: Management practices, Productivity, Organizational reform, Instrumental variable
    JEL: C26 L2 M2
    Date: 2014–09–04
  3. By: Didenko, Alexander; Egorova, Tatiana
    Abstract: We study how innovations affect increase of regional total factor productivity (TFP) as a result of productivity spillovers from foreign direct investment (FDI), and confirm the presence of phenomenon in Russian data. TFP is modeled using data envelopment analysis (DEA) with the human capital, energy and capital as inputs, and the gross regional product as output. We develop innovations index for the regions of the RF, proxying for regional absorptive capacity, based on 17 variables, characterizing economic, social and infrastructural aspects of regional development. FDI variable accounts for spatial distribution of FDI flows. We confirm the presence of FDI spillovers in Russia and moderating role of innovations.
    Keywords: FDI, productivity spillovers, innovations, absorptive capacity, data envelopment analysis
    JEL: F21 O11 O30 R11 R12
    Date: 2014–09
  4. By: Yana Rubashkina (Catholic University of Milan); Marzio Galeotti (University of Milan and IEFE-Bocconi); Elena Verdolini (Fondazione Eni Enrico Mattei and CMCC)
    Abstract: This paper represents an empirical investigation of the “weak” and “strong” Porter Hypothesis (PH) focusing on the manufacturing sectors of European countries between 1997 and 2009. By and large, the literature has analyzed the impact of environmental regulation on innovation and on productivity generally in separate analyses and mostly focusing on the USA. The few existing studies focusing on Europe investigate the effect of environmental regulation either on green innovation or on performance indicators such as exports. We instead look at overall innovation and productivity impact that are the most relevant indicators for the “strong” PH. This approach allows us to account for potential opportunity costs of induced innovations. As a proxy of environmental policy stringency we use pollution abatement and control expenditures (PACE), which represent one of the few indicators available at the sectoral level. We remedy upon its main drawback, that of potential endogeneity of PACE, by adopting an instrumental variable estimation approach. We find evidence of a positive impact of environmental regulation on the output of innovation activity, as proxied by patents, thus providing support in favor of the “weak” PH in line with most of the literature. On the other front, we find no evidence in favor or against the “strong” PH, as productivity appears to be unaffected by the degree of pollution control and abatement efforts.
    Keywords: Environmental Regulation, Innovation, Productivity, Competitiveness, Porter Hypothesis
    JEL: Q50 Q52 Q55 Q58 O31
    Date: 2014–09
  5. By: Litina, Anastasia
    Abstract: This research advances the hypothesis that natural land productivity in the past, and its effect on the desirable level of cooperation in the agricultural sector, had a persistent effect on the evolution of social capital, the process of industrialization and comparative economic development across the globe. Exploiting exogenous sources of variations in land productivity across a) countries; b) individuals within a country, and c) migrants of different ancestry within a country, the research establishes that lower level of land productivity in the past is associated with more intense cooperation and higher levels of contemporary social capital and development.
    Keywords: Land productivity, Cooperation, Social Capital, Trust, Growth, Development, Agriculture, Industrialization
    JEL: O11 O13 O14 O3 O31 O33 O4 O5 O50 O57
    Date: 2014–09–09
  6. By: Janda, Karel; Krska, Stepan
    Abstract: This paper examines the regulation of distribution system operators (DSOs) focused on the Czech electricity market. It presents an international benchmarking study based on data of 15 regional DSOs including two Czech operators. The study examines the application of yardstick methods using data envelopment analysis (DEA) and stochastic frontier analysis (SFA). We find that the cost efficiency of each of the Czech DSOs is different, which indicates a suitability of introduction of individual efficiency factors in the regulatory process.
    Keywords: Regulation, benchmarking, electricity.
    JEL: K23 L43 L94
    Date: 2014–10–22
  7. By: Saltari, Enrico; Federici, Daniela
    Abstract: In Saltari et al. (2012, 2013) we estimated a dynamic model of the Italian economy. The main result of those papers is that the weakness of the Italian economy in the last two decades has been the total factor productivity slowdown. The aim of this paper is to investigate the roots of this slowdown. Specifically, we want to analyze the specific pattern of technical progress in determining the TFP dynamics. This analysis can not be done with the Cobb-Douglas technology but requires the employ of a CES function which allows to distinguish between the direction and the bias of technical progress. We employ a CES specification embodying both labor- and capital-augmenting technical change, with a σ less than 1. We obtain three main results. 1) There seems to have been a structural break around the mid-nineties in the direction and bias of technological change; 2) The first half of the sample features a labor-augmenting technical change and a capital bias; 3) In the second part of the sample both these characteristics seem to disappear, and factor endowments evolution assumes a key role. This last fact may be view as one of the potential causes of the Italian productivity stagnation.
    Keywords: CES production function; Elasticity of substitution; Factor-augmenting technical progress and ICT technical change
    JEL: C30 E22 E23 O33
    Date: 2014–09–03
  8. By: G. Cette; J. Lopez; J. Mairesse
    Abstract: This study is to our knowledge the first attempt to infer the consequences on productivity entailed by anticompetitive regulations in product and labor markets through their impacts on production prices and wages. Results are encouraging showing that changes in production prices and wages at country*industry levels are informative about the creation of rents impeding productivity in different ways and to different extents. A simulation based on these results and on OECD regulation indicators suggests that nearly all countries, in particular European countries, could expect sizeable gains in multifactor productivity over the years from an economic policy that would be able to reform product and labor market regulation practices.
    Keywords: Productivity, market imperfections, anticompetitive regulations, rents.
    JEL: C23 L16 L50 O43 O47
    Date: 2014
  9. By: Sahu, Santosh Kumar; Krishnan, Narayanan
    Abstract: Obtaining ISO certification has become a status symbol for adopting environmentally benign practices for the corporate sector in emerging economies. Such certification can help improve the global visibility of firms and is mandated in international trade. This paper attempts to examine the impact of such certifications on technical efficiency of firms belonging to the manufacturing sector in India. In analysing the impact of ISO Certification on technical efficiency, this paper uses data from the CMIE Prowess for the period 2007-2012. In the first step, the paper estimates technical efficiency for the sample firms and then examines the determinants of inter-firm differences in technical efficiency using firm specific characteristics. The results of this study conclude that there are substantial inter-firm differences in technical efficiency and they are systematically different based on firm age, firm size, debt capital, MNE affiliation, and ISO certification. ISO certification, especially maintaining the standards associated with it, turned out to be an important factor in making the firms achieve higher technical efficiency. In addition, the results of this study also confirms that firms that are ISO certified and doing R&D are better off in technical efficiency as compared to the others.
    Keywords: ISO certification, R&D, Efficiency, Manufacturing Firms, India
    JEL: L11 L22 Q57
    Date: 2014–10–13
  10. By: Bent Christensen (University of Aarhus); Jesper Bagger (Royal Holloway, University of London)
    Abstract: Firm labor productivity and average wages paid by firms vary considerably and are positively correlated. These observations can be rationalized either by exogenous TFP heterogeneity in firm productivity coupled with rent sharing or by differences in capital intensity and in the quality of labor inputs. This paper ascertains the extent to which these factors provide an explanation of the observations using Danish matched employer-employee data. Using the worker fixed effect in a wage equation as a measure of worker ability, and a combination of ability and occupational composition for labor force quality, we find that TFP heterogeneity explains more of the observed labor productivity dispersion than differences in capital intensity and labor force quality in each of the industries considered, and that variation in labor force composition explains more than ability differences. Both differences in labor force quality and rent sharing are important in explaining firm level wage dispersion, whereas rent sharing is most important for the positive correlation between average firm wage and labor productivity.
    Date: 2014
  11. By: Asandului, Laura; Roman, Monica; Fatulescu, Puiu
    Abstract: This paper aims at evaluating the efficiency of public healthcare systems in Europe by applying a nonparametric method such is Data Envelopment Analysis. For this purpose, statistical data for 30 European states for 2010 have been used. We have selected three output variables: life expectancy at birth, health adjusted life expectancy and infant mortality rate and three input variables: number of doctors, number of hospital beds and public health expenditures as percentage of GDP. Findings reveal that there are a number of both developed and developing countries on the efficiency frontier, while the great majority of the countries in the sample are inefficient.
    Keywords: healthcare system, efficiency, data envelopment analysis, Europe
    JEL: I15 R11
    Date: 2013–10
  12. By: Patrick Van Cayseele; Jozef Konings; Ilona Sergant
    Abstract: This paper analyzes the relationship between state aid and ?rm performance in terms of productivity growth. To this end, we use all European state aid cases that were granted (either to an individual ?rm or a group of ?rms under the form of a scheme) in manufacturing between 2003 and 2011. Our ?ndings show that state aid measures are able to enhance productivity growth when ?rms are constraint due to a lack of cash availability. Since laggard ?rms are more likely to be ?nancially constraint, they experience more TFP growth than ?close-to-frontier??rms when receiving state aid. This bene?cial e¤ect of state aid is mainly driven by the post-crisis years in the sample. Our results are consistent with optimal development planning by pro?t maximizing ?rms.
    Date: 2014–10
  13. By: Pajarinen, Mika; Rouvinen, Petri
    Abstract: We summarize and compare previous studies considering the impact of R&D subsidies on firm-level labor productivity. These studies conclude quite consistently that the subsidies provided by Tekes do not have statistically significant impact on its client firms’ labor productivity. These studies go astray from the outset, however, as they neither measure what Tekes is set out to do nor correspond to its stated missions. Furthermore, serious methodological issues remain unaddressed both by these studies and by the literature at large. Our findings call for extensive effort in developing a more appropriate tool box for evaluating the impacts of innovation policy.
    Keywords: Tekes, t&k-tuet, tuottavuus, vaikuttavuus
    JEL: L52 L53 O25
    Date: 2014–10–23
  14. By: Eva Hagsten (Statistics Sweden); Anna Sabadash (European Commission – Eurostat)
    Abstract: While unemployment in the EU is above 10%, the job vacancy rate also remains high around 1.5%. This suggests considerable unmet demand for skills, which is in the focus of the EU employment promotion policies. This paper studies the special role that schooled ICT experts in firms - an intangible input often neglected and difficult to measure – play for productivity. The effects are investigated both in isolation and in conjunction with the impact of ICT maturity on microdata in six European countries (UK, France, Sweden, Norway, Denmark and Finland) for the period 2001-2009. We find that increases in the proportion of ICT-intensive human capital boosts productivity. This seems to confirm the case in favour of recruitment of highly skilled ICT employees. However, the gains vary across countries and industries, suggesting that the channels through which the effects operate are narrower for ICT-intensive human capital than for skilled human capital in general. Our findings provide an important message to the EU employment policy debate that currently revolves around the skill mismatch in general and the unmet demand for ICT skills in particular.
    Keywords: Employment, productivity, ICT skills
    JEL: J24
    Date: 2014–10
  15. By: Roberto Gómez-Calvet (Business Department, European University of Valencia, Valencia, Spain); David Conesa (Statistics and Operational Research Department, Universitat de València, Valencia, Spain); Ana Rosa Gómez-Calvet (Business Finance Department, Universitat de València, Valencia, Spain); Emili Tortosa-Ausina (IVIE, Valencia and Department of Economics, Universidad Jaume I, Castellón, Spain)
    Abstract: This article evaluates the evolution of environmental performance in the context of the European Union (EU), over the period 1993–2010. The context is particularly relevant, due to the traditionally high concerns of the EU about these issues, which has triggered off several initiatives and regulations on environmental protection. In this setting, we conduct a two-stage analysis which develops environmental performance indicators in the first stage for each pair country-year, and evaluates its evolution in the second. More specifically, in the first stage we estimate specific efficiencies for three air-pollutants (CO2e, SO2, NOx), along with an eco-efficiency indicator, for which we use the slack-free directional distance functions in the Data Envelopment Analysis framework (as opposed to the more extended intensity ratios), whereas in the second stage we propose using a model of explicit distribution dynamics which takes into account how the entire distributions of these indicators evolve. Our results indicate that the dynamics underlying the evolution of the indicators analyzed are indeed remarkable. Although the eco-efficiency indicator has improved over the last two decades, it has been during the last decade when performance has shown a more convergent path. However, in the case of the more traditional indicators (CO2e, SO2, NOx) the abatement opportunities are still remarkable, especially in the case of SO2e.
    Keywords: distribution dynamics, efficiency, energy, environmental performance, European Union
    JEL: Q4 Q43
    Date: 2014
  16. By: Enrique Lopez Bazo (European Commission – JRC - IPTS); Fabio Manca (European Commission – JRC - IPTS)
    Abstract: This paper describes the semi-endogenous growth approach used in the dynamic spatial general equilibrium model RHOMOLO. We illustrate here how regional R&D expenditures can be used to explain Total Factor Productivity differentials across regions and how shocks to the former end up affecting regional economic performances and economic convergence. As to do so, the current contribution provides econometric estimates of the relationship between regional productivity and R&D intensity by applying the technology catch-up model proposed by Benhabib and Spiegel (2005) to the EU-regional context. We then use the estimated elasticities within the DSCGE framework while also building a simple simulation example to illustrate the potential of the model in capturing the heterogeneous income effects produced a shock to regional R&D expenditures.
    Keywords: TFP, R&D, CGE model, regional policy
    JEL: C51 C68 O47 R12
    Date: 2014–10
  17. By: Mohamed Ali Marouani (UMR « Développement et Société », IEDES / Université Paris1-Panthéon-Sorbonne, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL); Rim Mouelhi (Université La Manouba, LEFA IHEC Carthage et ERF)
    Abstract: Using a micro database of Tunisian firms, the paper investigates the dynamics of productivity growth, employment and jobs reallocation. The methodology is based on data analysis and regressions. The main findings are that there is a trade-off between employment growth and productivity as it appears that the sectors (services) and firms (the biggest) that create the most jobs are not those characterized by the highest productivity growth. Moreover, we find evidence of a week contribution of structural change to productivity growth. We also show that trade liberalization did not have an impact on jobs reallocation or employment growth. _________________________________ En utilisant une base de données issue d’enquêtes entreprises, le papier analyse la dynamique de croissance de la productivité, de l'emploi et de la réallocation en Tunisie. La méthodologie est basée sur l'analyse de données et des régressions. Les principales conclusions sont qu'il y a un trade-off entre la création d’emplois et la productivité car les secteurs (services) et les entreprises (les plus grandes) qui créent le plus d'emplois ne sont pas ceux qui sont caractérisés par la croissance de la productivité la plus élevée. En outre, nous mettons en évidence la faible contribution du changement structurel à la croissance de la productivité. Nous montrons également que la libéralisation du commerce n'a pas eu d'impact sur la réallocation ou la croissance de l'emploi.
    Keywords: Productivity; employment; jobs reallocations; structural change; Tunisia; Productivité; emploi; réallocation; changement structurel; Tunisie.
    JEL: C12 D22 D24 F16 J23 L16
    Date: 2014–10
  18. By: Jan De Loecker (Princeton University, NBER and CEPR); Catherine Fuss (National Bank of Belgium and Université Libre de Bruxelles); Johannes Van Biesebroeck (University of Leuven and CEPR)
    Abstract: We evaluate the impact of international competition on firm-level perfor- mance in Belgium. In the manufacturing sector we consider both the impact of global competition through measures of import penetration and the impact of within-EU competitiveness using measures of relative labor cost. In selected manufacturing sectors we identify the strength of international competition through a firm's proximity to the border. In both instances, we consider the impact on a variety of performance dimensions to learn about the mechanisms and about firms' adjustment to these competitive pressures
    Keywords: Efficiency; Markup; Competition, Import penetration
    Date: 2014–10
  19. By: Drago, Carlo; Millo, Francesco; Ricciuti, Roberto; Santella, Paolo
    Abstract: We analyze the effects of corporate governance reforms on interlocking directorship (ID), and we assess the relationship between interlocking directorships and company performance for the main Italian firms listed on the Italian stock exchange over 1998-2007. We use a unique dataset that includes corporate governance variables related to the board size, interlocking directorships and variables related to companies’ performances. The network analysis showed only some effectiveness of these reforms in slightly dispersing the web of companies. Using a diff-in-diff approach, we then find in the period considered a slight reduction in the returns of those companies where interlocking directorships were used the most, which confirms our assumption on the perverse effect of ID on company performance in a context prone to shareholder expropriation such as the Italian one
    Keywords: Corporate Governance, Interlocking Directorships, Social Network Analysis, Empirical Corporate Finance
    JEL: C33 G34 G38 L14
    Date: 2014–10–10
  20. By: vithyea, You
    Abstract: This research paper studies the relationship between bank net interest margin (NIM) and non-interest income (NII) using Cambodian banking data. The research focuses on the contribution of the NII, which is the non-traditional banking activity, to the banking profitability. The analysis runs a three-stage least square system to handle the NIM and NII employing 28 banks data from 2004-2010. For the growing period, there is a trade-off between interest margin and non-interest income. It is argued that banks increase non-traditional activities associates with the reduction in net interest margin and vice-versa. This paper also finds that the non-traditional activities have positive causal effect on net interest margin in the post financial crisis period.
    Keywords: Bank interest margin, non-interest income, Cambodian banking, bank risk
    JEL: G2 G21
    Date: 2014–06
  21. By: Randolph Sloof (University of Amsterdam); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based performance measures —such as Economic Value Added (EVA)— is distorted, leading to unintended agent behavior. The paper uses a difference-in-differences approach to account for changes in economic circumstances and the self-selection of firms using EVA. Our findings indicate that EVA is a distorted performance measure that elicits the gaming response.
    Keywords: Residual Income, Economic Value Added, distortion, performance measurement, incentive compensation
    JEL: D21 G35 J33 L21 M12 M40 M52
    Date: 2014–05–09
  22. By: Nakano, Yuko; Kajisa, Kei
    Abstract: Although high-yielding modern rice varieties (MVs) have been gradually disseminating over Sub-Saharan Africa, little is known about how their adoption influences agriculture productivity and household income. To fill this research gap, we analyzed two kinds of data sets in Tanzania: a national representative cross-sectional data and a two-year panel data of irrigated farmers in one district. The most important finding is a strong complementary relationship between MVs and water control; high yield is achieved when MVs are grown with improved bunds in paddy fields of irrigated areas. We also find that the use of chemical fertilizer and the practice of transplanting in rows increase yield and income of both the adopters and nonadopters of MVs in the irrigated areas. In rain-fed areas, we observe a limited impact of MVs. These findings suggest that introducing MVs as a package of technologies with agronomic practices is effective to fully achieve their potential. In the long run, development of irrigation would be important to realize a rice Green Revolution in Sub-Saharan Africa.
    Keywords: Modern Variety , Technology Adoption , Green Revolution , Sub-Saharan Africa , Tanzania
    Date: 2014–03–20

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