nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2015‒05‒09
nineteen papers chosen by

  1. Estimating the Technical Efficiency of Mexican States By Antonio Álvarez-Pinilla; Rafael Garduño-Rivera; Héctor M. Núñez
  2. Implications of the 2030 EU Resource Efficiency Target on Sustainable Development By Lorenza Campagnolo; Fabio Eboli
  3. The impact of pollution abatement investments on technology: Porter hypothesis revisited By Jean Pierre Huiban; Camilla Mastromarco; Antonio Musolesi; Michel Simioni
  4. Good Firms, Worker Flows and Local Productivity By Michel Serafinelli
  5. The Conservation versus Production Trade-off: Does Livestock Intensification Increase Deforestation? The Case of the Brazilian Amazon By Petterson Molina Vale
  6. The Great Trade Collapse and the Spanish Export Miracle: Firm-level Evidence from the Crisis By Peter S. Eppinger; Nnicole Meythaler; Marc-Manuel Sindlinger; Marcel Smolka
  7. A Half Century of Trans-Pacific Competition: Price level indices and productivity gaps for Japanese and U.S. industries, 1955-2012 By Dale W. JORGENSON; NOMURA Koji; Jon D. SAMUELS
  8. Zvi Griliches and the Economics of Technology Diffusion: Linking innovation adoption, lagged investments, and productivity growth By Paul A. David
  9. Household level spillover effects from biofuels By Olivia Riera; Johan Swinnen
  10. Vanishing procyclicality of productivity?: industry evidence By Wang, J. Christina
  11. The evolution of comparative advantage: measurement and implications By Andrei A. Levchenko; Jing Zhang
  12. Labour Productivity of Young and Adult Temporary Workers and Youth Unemployment: a Cross-country Analysis By Maria Laura Parisi; Enrico Marelli; Olga Demidova
  13. Internal Trade, Productivity, and Interconnected Industries: A Quantitative Analysis By Trevor Tombe; Lukas Albrecht
  14. How Did Japan Catch-Up On The West? A Sectoral Analysis Of Anglo-Japanese Productivity Differences, 1885-2000 By Broadberry, Stephen N; Fukao, Kyoji; Zammit, Nick
  15. The Market Value of technological innovation; evidence from European patents By Rekik, Sabrine
  16. Productivity, Safety, and Regulation in Coal Mining: Evidence from Disasters and Fatalities By Gautam Gowrisankaran; Charles He; Eric A. Lutz; Jefferey L. Burgess
  17. Water Flows in the Economy. An Input-output Framework to Assess Water Productivity in the Castile and León Region (Spain) By C. Dionisio Pérez Blanco; Thomas Thaler
  18. Investment Efficiency, State-Owned Enterprises and Privatisation: Evidence from Vietnam in Transition By O'Toole, Conor; Morgenroth, Edgar; Ha, Thi Thu Thuy
  19. Revisiting Worst-case DEA for Composite Indicators By Stergios Athanassoglou

  1. By: Antonio Álvarez-Pinilla (Division of Economics, CIDE); Rafael Garduño-Rivera; Héctor M. Núñez (Division of Economics, CIDE)
    Abstract: In this paper we estimate the technical efficiency of Mexican states using several stochastic production frontier models. The empirical section uses panel data over the period 1988-2008. A distinctive feature of the paper is to use socioeconomic and location data in order to control for the heterogeneity of the states. We find that inefficiency explains part of the difference in production across regions, which is not accounted by other explanatory variables. Our results show that infrastructure, education, productive specialization and the presence of oil production shift the production frontier upwards. Additionally, northern states are more efficient than the rest of the country.
    Keywords: Regional efficiency, stochastic frontier, state characteristics, panel data.
    JEL: H55 I38 J26 O40
    Date: 2015–03
  2. By: Lorenza Campagnolo (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici); Fabio Eboli (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici)
    Keywords: Material Productivity, Resource Efficiency, Sustainable Development Indicators, Computable General Equilibrium
    JEL: C68 D58 L61 O13
    Date: 2015–04
  3. By: Jean Pierre Huiban (INRA-ALISS); Camilla Mastromarco (Dipartimento di Scienze dell'Economia, Università del Salento, Italy); Antonio Musolesi (Department of Economics and Management, University of Ferrara, Italy); Michel Simioni (Toulouse School of Economics, INRA-GREMAQ and IDEI, France)
    Abstract: This paper revisits the Porter hypothesis by pursuing two new directions. First, we compare the results obtained with two complementary approaches: parametric stochastic frontier analysis and conditional nonparametric frontier analysis. They presents relative advantages and drawbacks. Secondly, we pay attention not only on the average pollution abatement effort effect but we also focus on its variability across rms and over time. We provide new results suggesting that the traditional view about the effect of environmental regulation on productivity and the Porter hypothesis may coexist. This evidence supports the idea that a well-designed environmental regulation affects positively the rm performances in some instances.
    Keywords: Porter hypothesis, pollution abatement investment, stochastic frontier analysis, time-varying eciency, Vuong test, conditional nonparametric frontier analysis.
    JEL: C14 C23 D24 Q50
    Date: 2015–04
  4. By: Michel Serafinelli
    Abstract: A clear consensus has emerged that agglomeration economies are an important factor explaining why firms cluster next to each other. Yet, because of non-trivial measurement challenges, disagreement remains over the sources of these agglomeration effects. This paper is the first to present direct evidence showing how localized knowledge spillovers arise from workers changing jobs within the same local labor market. Specifically, I assess the extent to which firm-to-firm labor mobility enhances the productivity of firms located near highly productive firms. Using a unique dataset combining Social Security earnings records and balance sheet information for Veneto, a region in Italy with many successful industrial clusters, I first identify a set of highly productive firms, then show that hiring workers with experience at these firms significantly increases the productivity of other firms. To address identification threats arising from both contemporaneous and future unobservable firm-level productivity shocks correlated with hiring, I use control function methods drawn from the productivity literature and a novel instrumental variable strategy, which exploits downsizing events at highly productive firms. My findings imply that worker flows can explain around 10 percent of the productivity gains experienced by incumbent firms when new highly productive firms are added to a local labor market.
    Keywords: productivity, agglomeration economies, local knowledge spillovers, linked employer-employee data, labor mobility, instrumental variable.
    JEL: R10 D24 J31 J60
    Date: 2015–04–29
  5. By: Petterson Molina Vale (London School of Economics and Political Science)
    Abstract: More cattle, less deforestation? Land use intensification in the Amazon is an unexpected phenomenon. Theories of hollow frontier, speculative behaviour and boom-bust all share the prediction that livestock production will remain largely extensive. Yet between 1996 and 2006 productivity of cattle grew by an astounding 57.5% in the average Amazon municipality. Does rising land productivity of cattle increase deforestation? I use secondary data and spatial econometrics to look for evidence of a positive relation between cattle intensification and deforestation (‘rebound effect’). The reduced-form model I employ is based on a spatial econometric specification by Arima et al. (2011) and uses panel data at the municipality-level. I show that mounting productivity in consolidated areas has been associated with lower deforestation both in frontier and consolidated municipalities. This suggests that any process of out-migration spurred by the rising productivity is insufficient to have a positive impact on deforestation.
    Keywords: Amazon, Rebound Effect, Intensification, Deforestation, Land Use, Cattle Ranching
    JEL: Q53 Q15
    Date: 2015–03
  6. By: Peter S. Eppinger (University of Tübingen); Nnicole Meythaler (Institute for Applied Economic Research (IAW) at the University of Tübingen); Marc-Manuel Sindlinger (University of Bonn); Marcel Smolka (Department of Economics and Business, Aarhus University, Denmark and IZA)
    Abstract: We provide novel evidence on the micro-structure of international trade during the 2008 financial crisis and subsequent global recession exploring a rich firm-level data set from Spain. The analysis is motivated by the surprisingly strong export performance of Spain in the aftermath of the great trade collapse (dubbed by some as the “Spanish export miracle”). The focus of our analysis is on changes at the extensive and intensive firm-level margins of trade, as well as on performance differences (jobs, productivity, and firm survival) across firms that differ in their export status. We find no adverse effects of the financial crisis on foreign market entry or exit, but a considerable increase in the export intensity of firms after the financial crisis. Moreover, we find that those firms that entered the crisis as exporters (and continued exporting throughout the crisis years) were more resilient to the crisis than those firms that restricted their sales to the domestic market. Finally, in contrast to exporters, non-exporters experienced a significant deterioration in their total factor productivity, which led to an overall decline in the productivity of a significant number of industries in Spanish manufacturing.
    Keywords: international trade, financial crisis, manufacturing, firm-level data, Spain
    JEL: F10 F14 G01 D24
    Date: 2015–04–29
    Abstract: Trans-Pacific competition between Japanese and U.S. industries has provided powerful incentives for mutually beneficial economic cooperation between Japan and the United States. The benefits would be greatly enhanced by the proposed Trans-Pacific Partnership, an international agreement that would involve Japan, the United States, and 10 additional countries of the Asia-Pacific region. In this paper, we analyze competition between Japanese and U.S. industries in detail over more than a half century. We conclude with a discussion of opportunities for improving productivity performance in both countries.We first present new estimates of price level indices for Japan and the United States over the period 1955-2012. These indices are key indicators of international competitiveness between the two countries, often expressed as over-valuation or under-valuation of the Japanese yen relative to the U.S. dollar. We provide price level indices for outputs and inputs of 36 industries and for the two economies as a whole. The inputs at the industry level include capital, labor, energy, materials, and services (KLEMS). For an economy as a whole, output is gross domestic product (GDP) and the inputs are capital and labor services.We use our price level indices to generate new estimates of productivity gaps for the two countries and for individual industries. The productivity gap is an indicator of the efficiency of production. A wide Japan-U.S. productivity gap that existed in 1955 contracted for more than three decades, and Japan came close to parity with the United States in 1991. After the collapse of the "bubble economy" in Japan, the Japan-U.S. productivity gap widened again and only a few industries in Japan retained a productivity advantage over their U.S. counterparts in 2012. We conclude that industries sheltered from international competition offer the greatest opportunities for improvements in productivity performance.
    Date: 2015–05
  8. By: Paul A. David (Stanford University)
    Abstract: The scientific legacy of Zvi Griliches' contribution to the economic analysis of the diffusion of technological innovations is the subject of this paper. It begins with an examination of the relationship between Griliches' pioneering empirical work on the introduction and adoption of hybrid corn and the subsequent development of theoretical models and econometric research on the microeconomic determinants of diffusion. Next, it formalizes the way that the dynamics of diffusion observed at the aggregate level is shaped by structural conditions at the micro-level – on both the supply and the demand sides of the market for products embodying technological innovations, both of which were addressed by Griliches (1957). It then points out the reflections of those processes in lagged behavior of aggregate investment in durable capital-embodied innovations – often regarded as an independent subject of Griliches' analytical and econometric research. The latter connection, and its link with productivity changes stemming from embodied technical change, are made explicit by the model of micro-to-macro relationships affecting the total factor productivity (TFP) growth rate that is presented in the third major section of the paper (and the Appendix). The three foregoing dynamic phenomena - diffusion, durable investment lags, and TFP growth – were the topics of Griliches' three most widely journal articles, respectively. The connections among them have not been generally noticed by economists, and, indeed they remained implicit his writings until late in his career, when he emphasized the diffusion-productivity nexus as a key proximate determinant of the pace of economic growth – a perception whose importance remains insufficiently appreciated in current policy discussions that focus attention on "innovation" as the driver of intensive growth. Having directed attention to the microeconomics of technology adoption underlying the 'transitions' during which the diffusion of major innovations generate surges in innovation-embodying capital formation, and to the consequent waves in the TFP growth rate at the industry and sectoral levels, should be seen as prominent among the important and enduring contributions that Zvi Griliches made to modern economics.
    Keywords: Ntechnology adoption, innovations, diffusion, investment lags, learning-by-doing, heterogeneous adopters, contagion model, threshold model, micro-macro models, labor productivity and TFP growth-surges.
    JEL: D22 D24 O33 O4
    Date: 2015–04
  9. By: Olivia Riera; Johan Swinnen
    Abstract: The indirect effects of biofuels are mostly considered negative. In this paper, we argue that there may be a positive indirect effect of biofuels on food security and poverty. Our analysis shows that the introduction of castor production for biofuel in a poor country as Ethiopia can significantly improve food productivity of rural households who produce raw material for biofuel production. This spillover seems particularly linked to enhanced access to inputs and technical assistance which were provided as part of biofuel feedstock production contracts. Our results thus help nuancing the view that biofuels necessarily harm smallholders' food security.
    Keywords: biofuels, contract farming, productivity, spillovers, Ethiopia
    Date: 2014
  10. By: Wang, J. Christina (Federal Reserve Bank of Boston)
    Abstract: The robust performance of U.S. labor productivity (LP) early in the recovery from the Great Recession contrasts markedly with the sluggish growth of output, and even more with the lack of recovery in employment. This pattern has renewed interest in understanding why productivity has become much less procyclical in recent decades. This is an important topic because the cyclicality of productivity has implications for how we model business cycles, and our understanding of how they are propagated. The topic also has implications for monetary policy because it affects the trend-cycle decomposition and in turn the projection of trend growth as well as the assessment of the economy's output gap. A number of papers have investigated the aggregate time-series data and proposed mechanisms that may explain the observed changes. Those papers rely entirely on dynamic stochastic general equilibrium models. This study, in contrast, uses the cross-industry dimension as an alternative and complementary method for identifying the mechanisms that have led to the diminished procyclicality of productivity.
    Keywords: productivity; exporters; productivity premium; openness
    JEL: D24 E22 E24 E32
    Date: 2014–12–31
  11. By: Andrei A. Levchenko; Jing Zhang
    Abstract: We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a signicant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specic average rate, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. In this counterfactual scenario, welfare is also 1.6% higher for the median country compared to the baseline. The welfare impact varies greatly across countries, ranging from −1.1% to +4.3% among OECD countries, and from −4.6% to +41.9% among non-OECD countries.
    Keywords: Technological change, sectoral TFP, Ricardian models of trade, welfare
    JEL: F11 F43 O33 O47
    Date: 2015–04
  12. By: Maria Laura Parisi; Enrico Marelli; Olga Demidova (-)
    Abstract: The latest crisis has exacerbated two negative macroeconomic phenomena, particularly in Southern Europe. The size and persistence of youth unemployment has become unacceptable after 2010. Stagnation in labour productivity instead goes back to the ‘90s, but it has not improved since then and even worsen with the crisis. In this paper we analysed these two macroeconomic features, using aggregate data, in relation to labour market characteristics. Reforms of regulation, in many countries over the past twenty years, introduced a set of newly designed job contracts that allowed the use of temporary work. At the same time, Employment Protection Regulation encompassed temporary workers too. The availability of new contracts and EPLT changed the incentives of firms to vary their labour needs, and to invest in new technology. Eventually, this should have an impact on labour productivity and unemployment. We distinguished between temporary young and adult workers and, conditional to the level of employment protection, we estimate their labour productivity and the correlation with the rate of youth unemployment. We use macroeconomic data for countries within groups (former Euro zone countries, Euro-zone plus Russia, OECD, G7, G8). Preliminary evidence shows that the share of adult temporary workers clearly and negatively affects labour productivity, no matter the group of countries.
    Keywords: temporary work, labour productivity, youth unemployment
    JEL: J24 J64 J41
    Date: 2015–03–01
  13. By: Trevor Tombe (University of Calgary); Lukas Albrecht
    Abstract: Does trade within a country affect welfare and productivity? What are the magnitude and consequences of costs to such trade? To answer these questions, we exploit unique Canadian data to measure internal trade costs in a variety of ways – they are large, and vary across sectors and provinces. To quantify their consequences for welfare and productivity, we use a recent multi-sector trade model featuring rich input-output relationships. We find inter-provincial trade is an important contributor to Canada’s GDP and welfare, though there are significant costs to such trade. Reducing inter-provincial trade costs by 10% yields aggregate gains of 0.9%; eliminating our preferred estimates of costs, gains average between 3-7% – equivalent to real GDP gains between $50-$130 billion. Finally, as policy reforms are often sector-specific, we liberalize sectors one at a time and find gains are largest in highly interconnected industries.
    Keywords: Internal trade; gains from trade; input-output linkages
    JEL: F1 F4 R1
    Date: 2015–05–05
  14. By: Broadberry, Stephen N; Fukao, Kyoji; Zammit, Nick
    Abstract: Although Japanese economic growth after the Meiji Restoration is often characterised as a gradual process of trend acceleration, comparison with the United States suggests that catching-up only really started after 1950, due to the unusually dynamic performance of the US economy before 1950. A comparison with the United Kingdom, still the world productivity leader in 1868, reveals an earlier period of Japanese catching up between the 1890s and the 1920s, with a pause between the 1920s and the 1940s. Furthermore, this earlier process of catching up was driven by the dynamic productivity performance of Japanese manufacturing, which is also obscured by a comparison with the United States. Japan overtook the UK as a major exporter of manufactured goods not simply by catching-up in labour productivity terms, but by holding the growth of real wages below the growth of labour productivity so as to enjoy a unit labour cost advantage. Accounting for levels differences in labour productivity between Japan and the United Kingdom reveals an important role for capital in the catching-up process, casting doubt on the characterisation of Japan as following a distinctive Asian path of labour intensive industrialisation.
    Keywords: international comparison; labour productivity; sectoral disaggregation
    JEL: N10 N30 O47 O57
    Date: 2015–05
  15. By: Rekik, Sabrine
    Abstract: This paper contributes to literature by giving more precise measures to technological innovation in order to estimate its economic value and assess its impact on the financial performance of companies in Europe. Focus is given to European patent system which is different from the American one. Financial and innovation data are collected during 1990- 2012, for 599 companies belonging to 15 industries. According to market value approach, the relationship between market-to-book ratio and knowledge assets is proved to be positive and significant. Innovation is more valuable when it contributes to wider knowledge transfer, has larger geographical and technological scopes and radical character.
    Keywords: Technological innovations; Economic value; Financial performance of companies; European patent system; Knowledge transfer;
    JEL: G31 L25 O32 O33
    Date: 2015–06
  16. By: Gautam Gowrisankaran; Charles He; Eric A. Lutz; Jefferey L. Burgess
    Abstract: Coal mining is a dangerous occupation where safety is an important output. Fatalities and disasters may change future accident costs at or near a mine. We use this variation to understand the tradeoffs between mineral output and safety. We find that government inspections and penalties increase after fatalities and less-severe accident rates decrease by 10%. For mines in the state of a disaster, less-severe accident rates decrease by 23%, and fatalities by 68%, representing up to $2 per hour worked, with limited evidence that mineral productivity falls up to $14 per hour worked and that managers employed increases by 11%.
    JEL: D24 I18 J28 L72
    Date: 2015–04
  17. By: C. Dionisio Pérez Blanco (University of Alcalá (UAH) and Madrid Institute for Advanced Studies in Water Technologies (IMDEA-Water), Madrid (Spain)); Thomas Thaler (Flood Hazard Research Center (FHRC), Middlesex University, London (United Kingdom))
    Abstract: Traditionally, water policy has focused on coordinating the public effort required to fuel economic growth by supplying water services demanded as a result of the progress in the many areas of the economy. Under this supply-oriented paradigm, population growth and the improvement of living standards brought about by development have driven water demand up and the pressures over water resources have escalated. The failure to acknowledge the limited availability of water and to decouple economic development from water demand has resulted in a water dependent growth model that in many areas is currently threatened by increasing scarcity and more frequent and intense droughts. Consequently, there is an urgent need to use sparse water resources in a sustainable and efficient way. This demands a comprehensive assessment of water productivity dynamics as well as of the linkages among economic sectors in order to calculate the actual costs of eventual water reallocations to the environment and establish priorities in the design of strategic actions such as river basin or drought management plans. However, available studies only offer static analyses that are insufficient to attain the dual objective of reverting current water scarcity trends without impairing economic growth. This paper develops a methodology based on the Hypothetical Extraction Method to estimate inter-temporal indirect (i.e., including intersectoral linkages) water productivity values. The method is applied in the Spanish region of Castile and León for the period 2000-2006. The intensive use and the low water productivity found for agriculture confirms the intuition that this sector has to play a fundamental role in any water saving policy. However, the relevant linkages between agriculture and the rest of the economy, which acts as an indirect consumer of water for irrigation, may complicate the finding of a Pareto improvement in water allocation. Results also show increasing returns to scale in the manufacturing industry and the service sector, which may be regarded as an evidence of the existence of a Verdoorn’s Law for water.
    Keywords: Environmental Input-output Modeling, Verdoorn’s Law, Water Management, Productivity
    JEL: Q25 Q28
    Date: 2015–02
  18. By: O'Toole, Conor; Morgenroth, Edgar; Ha, Thi Thu Thuy
    Abstract: Our research tests the difference in investment efficiency between state-owned enterprises (SOEs) and private firms and then evaluates the effect of privatisation and equitisation policies on the investment efficiency of former state owned enterprises (SOEs). We use a novel dataset from Viet Nam which covers large and non-listed SMEs across the construction, manufacturing, and services sectors. Our methodology uses a structural model to test the relationship between Tobin's Q and capital spending. We find no evidence of investment spending being linked to marginal returns by SOEs across all sectors and size classes. However, former SOEs which have been privatised and equitized with a minority state shareholding display positive links between Q and investment. In fact, the link is stronger for these firms than for private firms.498
    Keywords: investment/manufacturing/Policy/Services
    Date: 2015–03
  19. By: Stergios Athanassoglou (European Commission Joint Research Center)
    Abstract: Composite indicators are becoming increasingly infuential tools of environmental assessment and advocacy. Nonetheless, their use is controversial as they often rely on ad-hoc and theoretically problematic assumptions regarding normalization, aggregation, and weighting. Nonparametric data envelopment analysis (DEA) methods, originating in the production economics literature, have been proposed as a means of addressing these concerns. These methods dispense with contentious normalization and weighting techniques by focusing on a measure of best-case relative performance. Recently, the standard DEA model for composite indicators was extended to account for worst-case analysis by Zhou, Ang, and Poh [21] (hereafter, ZAP). In this note we argue that, while valid and interesting in its own right, the measure adopted by ZAP may not capture, in a mathematical as well as practical sense, the notion of worst-case relative performance. By contrast, we focus on the strict worst case analogue of standard DEA for composite indicators and show how it leads to tractable optimization problems. Finally, we compare the two methodologies using data from ZAP's Sustainable Energy Index case study, demonstrating that they occasionally lead to divergent results.
    Keywords: Composite Indicator, Sustainability Index, DEA, Worst-case, Convex Optimization
    JEL: C43 C44 Q00
    Date: 2015–02

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