nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒12‒19
23 papers chosen by

  1. Evaluating Profit Efficiency of the South Australian Rock Lobster Fishery: Nerlovian and Directional Distance Function Approach By Stephanie McWhinnie
  2. Technical Change, Efficiency, and Total Factor Productivity in U.S. Agriculture By Sabasi, Darlington; Shumway, C. Richard
  3. Decomposing the inverse land size-yield relationship By Pieralli, Simone
  4. Impacts of Climate Change and Extreme Weather on U.S. Agricultural Productivity Growth By Wang, Sun Ling; Ball, Eldon; Nehring, Richard; Williams, Ryan; Chau, Truong
  5. Cost efficiency of cocoa farmers in Twifo Hemang Lower Denkyira Area in Central Region of Ghana By Obeng, Isaac Antwarko; Adu, Kofi Osei
  6. Structural Changes in Farmer Cooperatives By Ariyaratne, Chatura; Briggeman, Brian
  8. European competitiveness - A semiparametric stochastic metafrontier analysis at the firm level By Verschelde, Marijn; Dumont, Michel; Rayp, Glenn; Merlevede, Bruno
  9. Productivity in services in Latin America and the Caribbean By Arias Ortiz E.; Crespi G.A.; Rasteletti A.; Vargas F.
  10. Are intangibles more productive in ICT-intensive industries? Evidence from EU countries By Chen, Wen; Niebel, Thomas; Saam, Marianne
  11. Innovation and productivity in services: Empirical evidence from Latin America By Crespi G.A.; Tacsir E.; Vargas F.
  12. Gains from Offshoring? Evidence from U.S. Microdata By Monarch, Ryan; Park, Jooyoun; Sivadasan, Jagadeesh
  13. The intensification of the NZ Dairy Industry – Ferrari cows being run on two-stroke fuel on a road to nowhere? By Fraser, PJ; Ridler, BJ; Anderson, WJ
  14. Adjusting Productivity for Pollution in Selected Asian Economies By Thai-Thanh Dang; Annabelle Mourougane
  15. A consistent set of multilateral productivity approach-based indicators of price competitiveness By Fischer, Christoph; Hossfeld, Oliver
  17. Combining technology and work organization: An analysis of complementarity between IT and decentralization across firms of different size By Rasel, Fabienne
  19. The Productivity Consequences of Political Turnover: Firm-Level Evidence from Ukraine's Orange Revolution By Earle, John S.; Gehlbach, Scott
  20. Migration and Agricultural Efficiency By Sauer, Johannes; Gorton, Matthew; Davidova, Sophia
  21. Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage By Böckerman, Petri; Ilmakunnas, Pekka; Vainiomäki, Jari
  22. The Relative (in)Efficiency of South African Municipalities in Providing Public Health Care By Josue Mbonigaba and Saidou Baba Oumar
  23. Trade Costs, Financial Constraints, and Firm Performance in Developing Countries By TSENG, ERIC

  1. By: Stephanie McWhinnie (School of Economics, University of Adelaide)
    Abstract: Efficiency analysis in fisheries is not uncommon. In the past, efficiency analysis has mainly focused on productivity, cost and revenue, with relatively few investigating profit efficiency. Negative profits and small sample sizes in fisheries have been some of the obstacles diverting attention from this direction. We consider a new approach in the context of fisheries to overcome these challenges and examine profit efficiency in the rock lobster fisheries of South Australia. Specifically, we apply Nerlovian and Directional Distance Function methods to decompose profit efficiency of the rock lobster fishery into technical and allocative efficiencies. We use meta-frontier efficiency techniques to compare the Northern and Southern zone rock lobster fisheries. Results show that profit inefficiency in the South Australian rock lobster fishery can be largely attributed to allocative inefficiency. Results also show significant variability between efficiency levels in the Northern and Southern zones.
    Keywords: fisheries, profit efficiency, nerlovian, directional distance functions, meta-frontier analysis, bootstrapping
    JEL: Q2 Q22
    Date: 2013–11
  2. By: Sabasi, Darlington; Shumway, C. Richard
    Abstract: This article examines factors driving technical change, technical efficiency, and scale and mix efficiency – all components of total factor productivity – in U.S. agriculture. We use economic theory and previous literature to identify explanatory variables affecting each component and examine some potentially important factors which have received less attention in the literature. Results show that technical change comes primarily from increased innovation through public research and from improvements in human capital. Technical efficiency is driven by farm size and the ratio of family to total labor, while scale and mix efficiency is driven mainly by agro-climatic conditions, weather, and farm size.
    Keywords: Agricultural and Food Policy, Production Economics, Productivity Analysis,
    Date: 2014
  3. By: Pieralli, Simone
    Abstract: Faster agricultural development requires understanding whether the inverse land size-yield relationship exists or not. To verify the presence of this relationship, this study decomposes a yield index into separate components attributable to (1) efficiency, (2) soil quality, (3) land size, (4) variable inputs, (5) capital inputs, and (6) outputs. Nonparametric productivity accounting methods are used to decompose the inverse land size-yield relationship in a multi-output representation of the technology without specific assumptions on returns to scale. A strongly significant inverse (positively convex) land size-yield relationship is present in the Kenyan data, but vanishes in favor of a linear inverse relationship when accounting for the effect of outputs' diversification.
    Keywords: inverse land size-yield relationship, productivity decomposition, efficiency, yield, Kenya, Consumer/Household Economics, Farm Management, Food Security and Poverty, International Development, Land Economics/Use, Production Economics, Productivity Analysis, Research Methods/ Statistical Methods, D20, C14, C43,
    Date: 2014
  4. By: Wang, Sun Ling; Ball, Eldon; Nehring, Richard; Williams, Ryan; Chau, Truong
    Abstract: We employ state panel data for the period 1961-2004 to identify the role of climate change on U.S. agricultural productivity growth using a stochastic production frontier method. We examine the patterns of productivity changes and weather variations across regions and over time. Climate variables are measured using temperature humidity index (THI) load and Oury index at both their means and the degree of deviation from their historical norm (shocks). We also incorporate irrigation ratio and local public goods—R&D, extension, and road infrastructure—to capture the effects of specific state characteristics and to check for the robustness of the estimates of climate variables’ impacts. Results indicate that higher THI load can drive farm production from its best performance using given inputs and best technology. On the other hand, a higher Oury index, irrigation ratio, local R&D, Extension, and road density can drive state overall farm production closer to the production frontier. In addition, weather “shock” variables seem to have more consistent and robust impacts in explaining technical inefficiency than do level variables.
    Keywords: U.S. agricultural productivity, technical inefficiency, stochastic frontier, climate change, THI load, Oury index, Environmental Economics and Policy, Productivity Analysis,
    Date: 2014–07
  5. By: Obeng, Isaac Antwarko; Adu, Kofi Osei
    Abstract: This study empirically examined cost efficiency of cocoa production in Twifo Hemang Lower Denkyira area in Central region of Ghana. Primary data was collected from 400 cocoa farmers in twenty (20) communities using interview guide and the cost efficiency of inputs in cocoa production was estimated using stochastic frontier production function. The empirical result of summation of the partial elasticities exhibited positive increasing returns to scale in the inputs use and the mean cost efficiency was 1.10 indicating that an average cocoa farms in the study area incurred costs that were about 10% above the minimum cost defined by the frontier .The findings show that cost efficiency of inputs use was fairly high. Hybrid varieties, level of education and age of tree, Farmer-based organization and extension contacts were found to be the main determinants of cost efficiency. This study recommends that Farmers should be encouraged to join farmer-based organization.
    Keywords: stochastic frontier model, cost efficiency and cocoa production.
    JEL: Q1 Q12
    Date: 2014–11–01
  6. By: Ariyaratne, Chatura; Briggeman, Brian
    Abstract: Since 1990, the farmer cooperative landscape has experienced a significant structural shift. Steep consolidation, elevated competition, and surging commodity prices have elevated the need for co-ops to be mindful of their cost structure and efficiencies. To test for this structural shift, this study estimated technical, allocative, scale, economic, and overall efficiencies for a set of grain marketing and farm supply cooperatives using a unique financial database. Chow test statistics for overall efficiency model show one structural shift in 2002 and 2003. Cooperatives are more likely to reduce costs by focusing on technical efficiency rather than adjusting the scale of operation. Nearly all efficiency trend lines, except for allocative, follows the business cycle patterns of the 1990s and 2000s. Our regression results shows capital constraint was one reason an average cooperative was off the technical frontier.
    Keywords: Cooperatives, Consolidation, Structural Change, Cost Efficiencies, Productivity, Agribusiness, Agricultural Finance, Productivity Analysis,
    Date: 2014–07
  7. By: Qi, Lingqiao; Bravo-Ureta, Boris E.; Cabrera, Victor E.
    Abstract: This study examines the effect of climatic variables on dairy farm productivity using panel data for the state of Wisconsin along with alternative stochastic frontier models. A noteworthy feature of this analysis is that Wisconsin is a major dairy producing area where winters are typically very cold and snowy, and summers hot and humid. Thus, it is an ideal geographical region for examining the effects of a range of climatic factors on dairy production. This paper presents a preliminary analysis of the climatic effect on the productivity of Wisconsin farms. We identify the effect of temperature and precipitation, both jointly and separately, on milk output. The analysis shows that increasing temperature in summer or in autumn is harmful for dairy production, while warmer winters and warmer springs are beneficial. By contrast, more precipitation has a consistent adverse effect on dairy productivity. Overall, in the past 17 years, climatic conditions have had a negative impact on the dairy farms in Wisconsin and the data reveals a mild negative trend.
    Keywords: climatic effect, dairy production, stochastic production frontiers, Wisconsin, Agricultural and Food Policy, Livestock Production/Industries, Production Economics, Q12, D24,
    Date: 2014
  8. By: Verschelde, Marijn; Dumont, Michel; Rayp, Glenn; Merlevede, Bruno
    Abstract: In this paper a semiparametric stochastic metafrontier approach is used to obtain insight into firm-level competitiveness in Europe. We differ from standard TFP studies at the firm level as we simultaneously allow for inefficiency, noise and do not impose a functional form on the input-output relation. Using AMADEUS firm-level data covering 10 manufacturing sectors from seven EU15 countries, (i) we document substantial, persistent differences in competitiveness (with Belgium and Germany as benchmark countries and Spain lagging behind) and a wide technology gap, (ii) we confirm the absence of convergence in TFP between the seven selected countries, (iii) we confirm that the technology gap is more pronounced for smaller firms, (iv) we highlight the role of post-entry growth for competitiveness. JEL Classification: C14, D24, L25, M13, O33
    Keywords: competitiveness, cross-country analysis, firm heterogeneity, post-entry growth, total factor productivity
    Date: 2014–07
  9. By: Arias Ortiz E.; Crespi G.A.; Rasteletti A.; Vargas F. (UNU-MERIT)
    Abstract: This paper studies productivity in Latin America and the Caribbean, with an emphasis on the service sector. It shows that the low levels of productivity observed in the region are not only a consequence of low productivity at the firm level, but also of misallocation of workers across firms. These problems are more severe in services than in manufacturing. We also found that the determinants of productivity and employment growth at the firm level are different in manufacturing and services. Furthermore, results suggest that institutional factors might be important for determining productivity growth and resource allocation, as there are large differences across countries in the region in the effect of productivity on employment growth as well as on the speed at which less productive firms can close their productivity gaps.
    Keywords: Economic Growth and Aggregate Productivity: General; Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; Economywide Country Studies: Latin America; Caribbean;
    JEL: O40 O47 O54
    Date: 2014
  10. By: Chen, Wen; Niebel, Thomas; Saam, Marianne
    Abstract: Using sectoral intangible investment data we confirm that intangible capital is a significant determinant of labour productivity growth. The sectoral setting further allows us to identify the differential impacts of intangible capital across industries with varying degrees of ICT intensity. Intangible capital appears to be significantly more productive in ICT-intensive sectors than in those that use little ICT. This finding remains robust across various alternative industry ICT intensity measures and aligns with the prior firm-level studies that place emphasis on the complementary role of intangible assets in ICT investment.
    Keywords: Intangible capital,ICT,economic growth,labour productivity
    JEL: E22 J24 O47
    Date: 2014
  11. By: Crespi G.A.; Tacsir E.; Vargas F. (UNU-MERIT)
    Abstract: This paper analyses and compares the determinants of innovation in the service industry and its impact on labour productivity at the firm level in three countries of Latin America Chile, Colombia, and Uruguay. The main findings show that, similar to what is observed in the manufacturing industry, service firms that invest the most in innovation activities are more likely to introduce changes or improvements in their production process and/or product mix, and those firms that innovate have higher labour productivity than non-innovative firms. Size was found to be a less relevant determinant of innovation in services than in manufacturing, suggesting that the need for infrastructure and associated sunk costs are lower in services. Conversely, cooperation was found to be far more important for innovation in services than in manufacturing, in line with the more interactive nature of innovation in services. Yet, large differences in statistical significance and size of the coefficients of explanatory variables among the countries studied suggest that the framework conditions where a firm operates have an important role in innovation decisions.
    Keywords: Microeconomic Analyses of Economic Development; Industrialization; Manufacturing and Service Industries; Choice of Technology; Innovation and Invention: Processes and Incentives; Technological Change: Choices and Consequences; Diffusion Processes; Economic Growth and Aggregate Productivity: General; Economywide Country Studies: Latin America; Caribbean;
    JEL: O12 O14 O31 O33 O40 O54
    Date: 2014
  12. By: Monarch, Ryan (Board of Governors of the Federal Reserve System (U.S.)); Park, Jooyoun (Kent State University); Sivadasan, Jagadeesh (University of Michigan)
    Abstract: We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output (38.5 per cent) and capital (28.8 per cent) relative to their industry peers. We find no significant change in average wages or in total factor productivity measures for offshoring firms. These results are consistent across two separate difference-in-differences (DID) approaches, an instrumental variables approach, and a number of robustness checks. Thus, we find offshoring to be a strong substitute for domestic activity in this large sample of offshoring events.
    Keywords: Outsourcing; manufacturing; employment; trade; productivity; firm performance
    JEL: F14 F16 F23
    Date: 2014–11–11
  13. By: Fraser, PJ; Ridler, BJ; Anderson, WJ
    Abstract: This paper applies an economic lens to the argument that dairy farmers should increase production via supplements, which has led to concerns regarding the environmental impact of intensification. This paper finds: 1. Intensification has led to farms producing at levels incompatible with profit maximisation 2. Claims that de-intensification will result in lower farm profitability are unconvincing 3. The current suite of assessment and planning tools are likely to be causing systemic overstocking 4. Failing to recognise the difference between marginal and average costs is likely to be leading to expensive mitigation measures that treat symptoms rather than address causes.
    Keywords: Average cost, Average revenue, Constant returns to scale, Diseconomies of scale, Economic loss, Economic profit, Economies of scale, Intensification, Lincoln University Dairy Farm (LUDF), Marginal cost, Marginal revenue, Subnormal/supernormal profit Theory of the Firm, Perfect competition, Agribusiness, Land Economics/Use, Productivity Analysis,
    Date: 2014
  14. By: Thai-Thanh Dang; Annabelle Mourougane
    Abstract: Multifactor productivity (MFP) is increasingly used in economic policy, not least to compute potential output. Most measures are based on a standard production function combining labour and capital, but do not incorporate the negative by-products of the production process such as air pollution that could have deleterious effect on health and productivity in the medium to long term (see for instance OECD (2014)). The failure to account for the costs of environmental damages and the benefits associated with emission reduction impart a bias to standard measures of MFP. Ignoring these dimensions can give a misleading idea of growth prospects over the medium to long term...
    Date: 2014–08–21
  15. By: Fischer, Christoph; Hossfeld, Oliver
    Abstract: We propose a novel, multilaterally consistent productivity approach-based indicator to assess the international price competitiveness of 57 industrialized and emerging economies. It is designed to be a useful assessment tool for monetary policy authorities and, thereby, differs from previously proposed indicators, which are hardly applicable on a day-to-day basis. Special attention has been paid to an appropriate selection of price and productivity data in levels as opposed to indices, and to the treatment of country fixed effects when interpreting currency misalignments. The discussion of the results focuses on the larger economies of the sample. At the current juncture, and in contrast to the prevailing view, we find US price competitiveness to be above and China’s price competitiveness to be below its derived benchmark. JEL Classification: F31, C23
    Keywords: equilibrium exchange rates, panel cointegration, price competitiveness, productivity approach
    Date: 2014–08
  16. By: Juana Sanchez
    Abstract: This paper uses new business micro data from the Business Research and Development and Innovation Survey (BRDIS) for the years 2008-2011 to relate the discrete innovation choices made by U.S. companies to features of the company that have long been considered to be important correlates of innovation. We use multinomial logit to model those choices. Bloch and Lopez-Bassols (2009) used the Community Innovation Surveys (CIS) to classify companies according dual, technological or output-based innovation constructs. We found that for each of those constructs of innovation combinations considered, manufacturing and engaging in intellectual property transfer increase the odds of choosing innovation strategies that involve more than one type of categories (for example, both goods and services, or both tech and non-tech) and radical innovations, controlling form size, productivity, time and type of R&D. Company size and company productivity as well as time do not lean the choices in any particular direction. These associations are robust across the three multinomial choice models that we have considered. In contrast with other studies, we have been able to use companies that do and companies that do not innovate, and this has allowed to rule out to some extent selectivity bias.
    Keywords: Innovation, R&D, productivity, intellectual property, generalized logistic regression, choice models
    Date: 2014–10
  17. By: Rasel, Fabienne
    Abstract: This paper examines whether information technology (IT) and decentralized work organization are complementary only for large firms or also for smaller firms. Empirical evidence, which suggests complementarity between IT and decentralization, is mainly based on large firms. Using data from a sample of 3292 SMEs and of 598 larger firms from the manufacturing and service sector in Germany, I can observe firms' IT intensity in terms of enterprise software and computer use and whether firms have a decentralized work organization. I find that SMEs with decentralized work practices tend to use IT more intensively. Moreover, for the sample of SMEs, IT and decentralized work organization are individually associated with higher productivity but the combination of IT and decentralization does not yield a productivity premium. Contrarily, for the sample of larger firms, the results show that the productivity of IT depends positively on decentralization. The findings suggest that combining IT and decentralized work organization seems to be a successful strategy only for larger firms.
    Keywords: information technology,decentralized work organization,complementarity,productivity,enterprise software,firm-level data
    JEL: D22 D24 L20 O33
    Date: 2014
  18. By: PENA LEVANO, LUIS; Ramirez, Octavio A.
    Keywords: Agribusiness, Agricultural Finance, Research Methods/ Statistical Methods,
    Date: 2014
  19. By: Earle, John S. (George Mason University); Gehlbach, Scott (University of Wisconsin-Madison)
    Abstract: We examine the impact of political turnover on economic performance in a setting of largely unanticipated political change and profoundly weak institutions: the 2004 Orange Revolution in Ukraine. Exploiting census-type panel data on over 7,000 manufacturing enterprises, we find that the productivity of firms in the regions most supportive of Viktor Yushchenko increased by more than 15 percentage points in the three years following his election, relative to that in the most anti-Yushchenko regions. We conclude that this effect is driven primarily by particularistic rather than general economic policies that disproportionately increased output among large enterprises, government suppliers, and private enterprises – three types of firms that had much to gain or lose from turnover at the national level. Our results demonstrate that political turnover in the context of weak institutions can have substantial distributional effects that are reflected in economic productivity.
    Keywords: political connections, firm behavior, voting, transition
    JEL: H32 D72 P26
    Date: 2014–09
  20. By: Sauer, Johannes; Gorton, Matthew; Davidova, Sophia
    Keywords: International Development, Production Economics,
    Date: 2014
  21. By: Böckerman, Petri (Labour Institute for Economic Research); Ilmakunnas, Pekka (Aalto University); Vainiomäki, Jari (University of Tampere)
    Abstract: We use data on twins matched to register-based information on earnings to examine the long-standing puzzle of non-existent compensating wage differentials. The use of twin data allows us to remove otherwise unobserved productivity differences that were the prominent reason for estimation bias in the earlier studies. Using twin differences we find evidence for positive compensation of adverse working conditions in the labor market.
    Keywords: compensating differentials, earnings, unobserved ability, productivity
    JEL: J28 J31
    Date: 2014–10
  22. By: Josue Mbonigaba and Saidou Baba Oumar
    Abstract: Previous studies in South Africa have not dis-aggregated efficiency analysis across municipalities which are health system components of the broader national health system. The purpose of this paper is therefore to assess whether the relative efficiency of South African municipalities in primary health care and hospital care is different and whether South African municipalities can learn from each other to improve on their efficiency. The paper employs efficiency scores, estimated with Data Envelopment Analysis (DEA) using data from the District Health Barometer of the Health Systems Trust to rank South African municipalities across primary health care and hospital health care. The finding is that that the ranking of municipalities is not the same across both types of health care when efficiency scores and efficiency score growth are contemplated. These results imply that municipalities in South Africa are generally inefficient, but with the possibility of learning from each other’s practice in order to increase their technical efficiency. The health system authority should monitor service-specific best practices among municipalities so that they can use them as practice guidelines for other municipalities.
    Keywords: Municipalities, DEA, public, health care, technical efficiency, South Africa
    JEL: I12
    Date: 2014
  23. By: TSENG, ERIC
    Abstract: This paper extends on work done in the heterogenous-firms trade literature by addressing both heterogeneity in trade costs at the firm level as well as the existence of financial constraints. These extensions to the heterogenous-firms models are also applied in the context of a developing country. Utilizing a framework that endogenizes technological choice, the analysis shows that falling trade costs and improving credit markets (or less financial constraints) improve firm performance. Also, firm-level trade costs are shown to impact a firm’s ability to enter the export market, implying heterogeneity in trade costs at the firm level. The current results show inconclusive evidence for the effect of industry-level trade costs and financial constraints on the ability to enter the export market, but future additions to the robustness of the data in this working paper will address this issue.
    Keywords: International Trade Financial Constraints Firm Performance Trade Costs Heterogenous Firms, Financial Economics, International Development, International Relations/Trade, Productivity Analysis,
    Date: 2014

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