nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2015‒07‒25
sixteen papers chosen by

  1. The future of Australia's productivity : Some insights from productivity analysis By Jenny Gordon
  2. The export-productivity link in Brazilian manufacturing firms By Cirera,Xavier; Lederman,Daniel; Máñez,J.A.; Rochina,M.E.; Sanchis,J.A.
  3. Productivity lessons for the Asian region By Jungsoo Park, Lawrence Lau
  4. What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries By Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
  5. Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit By Melitz, Marc J.; Polanec, Sašo
  6. What Drives Productivity Volatility of Chinese Industrial Firms? By Xubei Luo; Nong Zhu
  7. Performance-related Pay and Productivity: Evidence from Japan By KATO Takao; KODAMA Naomi
  8. Is Workforce Diversity Good for Efficiency? By Vincent Vandenberghe
  9. ‘The phenomenal CAT’: firms clawing the goods of others. By Virginia Di Nino
  10. Does Worker Wellbeing Affect Workplace Performance? By Alex Bryson; John Forth; Lucy Stokes
  11. Not Working At Work: Loafing, Unemployment and Labor Productivity By Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
  12. How Do Electricity Shortages Affect Production? Evidence from India By Stephen O'Connell; Allan Collard-Wexler; Hunt Allcott
  13. Was Gerschenkron right? Bulgarian agricultural growth during the Interwar period in light of modern development economics By Michael Kopsidis; Martin Ivanov
  14. Board Size and Firm Value: Evidence from Australia By Pascal Nguyen; Nahid Rahman; Alex Tong; Ruoyun Zhao
  15. Patterns of International Capital Flows and Productivity Growth: New Evidence By Margaux MacDonald
  16. Long Run Effects of Temporary Incentives on Medical Care Productivity By Pablo Celhay; Paul Gertler; Paula Giovagnoli; Christel Vermeersch

  1. By: Jenny Gordon
    Abstract: Australia's recent productivity performance is reviewed and analysed, both in the overall economy and in selected sectors. Future prospects for productivity growth are examined.
    Keywords: Productivity growth, Australian productivity
    JEL: D24 J24 O47
    Date: 2015–04
  2. By: Cirera,Xavier; Lederman,Daniel; Máñez,J.A.; Rochina,M.E.; Sanchis,J.A.
    Abstract: This paper explores the link between exports and total factor productivity in Brazilian manufacturing firms over the period 2000?08. The Brazilian experience is instructive, as it is a case of an economy that expanded aggregate exports significantly, but with stagnant aggregate growth in total factor productivity. The paper first estimates firm-level total factor productivity under alternative assumptions (exogenous and endogenous law of motion for productivity) following a GMM procedure. In turn, the analysis uses stochastic dominance techniques to assess whether the ex ante most productive firms are those that start exporting (self-selection hypothesis). Finally, the paper tests whether exporting boosts firms? total factor productivity growth (learning-by-exporting hypothesis) using matching techniques to control for the possibility that selection into exports may not be a random process. The results confirm the self-selection hypothesis and show that starting to export yields additional growth in total factor productivity that emerges since the firm?s first year of exporting but lasts only one year. Further, this extra total factor productivity growth is much higher under the assumption of an endogenous law of motion for productivity, which reinforces the importance of accounting for firm export status to study the evolution of productivity.
    Keywords: E-Business,Economic Theory&Research,Labor Policies,Industrial Management,Knowledge for Development
    Date: 2015–07–13
  3. By: Jungsoo Park, Lawrence Lau
    Abstract: This study investigates how the patterns of productivity growth have changed over the past few decades for the Asian economies in comparison with the advanced economies. The findings indicate that the Asian economies are in the process of transition in terms of pattern of growth. It seems that the 4 NIEs have already transitioned from input-based growth to productivity-based growth, and the remaining Asian economies are starting to show signs of transition in the past decade. Scrutinizing the recent trends in human capital, R&D, patent statistics, and inward FDIs, they all indicate that the productivity growth will be stronger in the Asian region than before and will constitute the major basis for growth.
    Keywords: total factor productivity, Asian economies, economic growth
    JEL: O47 O57
    Date: 2015–04
  4. By: Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
    Abstract: This paper estimates agglomeration benefits across five OECD countries, and represents the first empirical analysis that combines evidence on agglomeration benefits and the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multi-country setting is supported through the use of a new internationally-harmonised definition of cities based on economic linkages rather than administrative boundaries. In line with the literature, the analysis confirms that city productivity increases with city size but finds that cities with fragmented governance structures tend to have lower levels of productivity. This effect is mitigated by the existence of a metropolitan governance body.
    Keywords: Cities, productivity, governance, agglomeration economies
    JEL: R12 R23 R50 H73
    Date: 2015–07
  5. By: Melitz, Marc J.; Polanec, Sašo
    Abstract: In this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms - following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases of productivity in Slovenian manufacturing during the 1995-2000 period and contrast our results with those of other decompositions. We find that, over a 5-year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes.
    Date: 2015
  6. By: Xubei Luo; Nong Zhu
    Abstract: The Chinese economy has witnessed impressive development since the enterprise reforms in the 1990s.  With the restructuring of the private sector and the development of market economy, the level and volatility of firm level productivity have become increasingly important aspects of the micro performance of the economy.   This paper examines the role of different firm characteristics - such as size, age, ownership, and geographic location - in productivity volatility using a firm-level dataset collected annually by China’s National Bureau of Statistics in 1998-2007. It follows the methodology developed in Comin and Philippon (2005; 2007) to measure firm productivity volatility as the standard deviation of the annual growth rate of output per worker. Its objectives are to investigate the drivers of productivity volatility of Chinese industrial firms, and to shed light on the sources of output volatility and its evolution over time.   The results suggest that in general, firm productivity volatility declined over time. Among firms of different characteristics, larger firms, older firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility – one positively and one negatively. While the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.
    Keywords: Enterprise reform, productivity, volatility, China,
    JEL: C21 D21 E23
    Date: 2015–07–13
  7. By: KATO Takao; KODAMA Naomi
    Abstract: Traditionally, Japanese firms are known for the use of a pay system which rewards their workers for long-term skill development through on-the-job training within the firm. Changing its traditional reward system to performance-related pay (PRP) which ties pay to shorter-term performance is one of the most often-discussed topics concerning Japan's human resource management (HRM) policies/practices in the last two decades or so. Proponents of the change urge Japanese firms to abandon their traditional reward system and adopt PRP in order to boost productivity and maintain/regain global competitiveness. Opponents question their underlying premise that PRP boosts enterprise productivity. The controversy has not been resolved in large part due to the lack of rigorous evidence on the productivity effect of PRP in Japan. In this paper, we provide such evidence by estimating production functions augmented by PRP, using unique firm-level panel data. Unlike prior studies that use cross-sectional data, we are able to estimate fixed effect models and hence identify the productivity effect of PRP separately from that of time-invariant unobserved firm characteristics such as corporate culture, tradition, and inherent managerial quality. Overall, we find no significant productivity effect of PRP, which tends to favor skeptics. However, we also find evidence that PRP does yield significant productivity gains for firms that no longer subscribe to the traditional "lifetime employment" practice; and for firms that use employee involvement and tap into local knowledge of frontline workers. As such, our findings point to the importance of HRM complementarity. Changing the traditional pay system to PRP without changing the rest of the traditional Japanese HRM system such as "lifetime employment" is ineffective. Likewise, it is futile to offer workers incentive (PRP) while neglecting to provide them with an opportunity to share their productivity-enhancing local knowledge (employee involvement).
    Date: 2015–07
  8. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: To answer the question of workforce diversity and efficiency, this paper departs from the approach used in most recent empirical papers exploiting firm-level evidence, where output is regressed on traditional inputs plus an index of diversity (Parrotta et al., 2012). We suggest addressing the question by adopting a more structural framework. The idea is to root the empirical strategy applied to firm-level data in the theoretical literature on population heterogeneity/stratification and growth (Bénabou, 1994). Essentially, what that literature suggests is that diversity is optimal when the technology displays concavity in the share of workers considered (e.g. decreasing marginal contribution of rising shares of more productive/skilled workers). What is also shown in this paper is that a production function à-la-Hellerstein-Neumark — where workforce diversity is captured via an index of labour shares — is suitable for estimating the concavity of the technology, and thus for assessing the case for/against workforce diversity. Finally, the paper contains an application of this Bénabou-Hellerstein-Neumark framework to two panels of Belgian firms covering the 1998-2012 period. The main result is that of an absence of strong evidence that age, gender or educational diversity is good or bad for efficiency.
    Keywords: efficiency, labour diversity, concavity
    JEL: J11 J14 J21
    Date: 2015–07–15
  9. By: Virginia Di Nino (Banca d'Italia)
    Abstract: Using results collected for the first time through interviews with Italian manufacturing firms, this work shows that around a quarter of aggregate manufacturing sales are not sold by the actual producer. This circumstance, known as carry along trade (CAT), means that the comparative advantage of some manufacturing firms lies in activities other than crafting, with important consequences for the interpretation of productivity measures. CAT firms hold a 3% productivity premium compared with the average firm, which does not disappear controlling for size, export and multinational status, geographical location and sector. This premium increases to 10% when CAT involves mainly packaging and to 20% when goods produced by third parties are sold under the brand or associated with the brand of CAT firms. Furthermore, CAT firms specializing in downstream activities earn higher profit margins on sourced than on in-house production. CAT can thus be conceived as an example of functional upgrading of some firms towards more valuable downstream activities. Usual productivity measures disregard the CAT phenomenon and bundle a firm’s ability to combine factors within a physical production process with other sources of profitability, such as proximity to consumers, access to foreign markets through well-established distributional channels, and marketing skills. The existence of CAT calls for a methodological refinement of productivity measurement.
    Keywords: carry along trade, productivity premia, servicification.
    JEL: F12 F14 L11
    Date: 2015–07
  10. By: Alex Bryson; John Forth; Lucy Stokes
    Abstract: This paper uses linked employer-employee data to investigate the relationship between employees' subjective well-being and workplace performance in Britain. The analyses show a clear, positive and statistically-significant relationship between the average level of job satisfaction at the workplace and workplace performance. This finding is present in both cross-sectional and panel analyses and is robust to various estimation methods and model specifications. In contrast, we find no association between levels of job-related affect and workplace performance.
    Keywords: Subjective well being, job satisfaction, job-related affect, workplace performance
    JEL: J28
    Date: 2015–07
  11. By: Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
    Abstract: Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationships of the incidence and conditional amounts of non-work with wage rates and measures of unemployment benefits in state data linked to the ATUS, and it is consistent with observed occupational differences in non-work.
    Keywords: efficiency wage; labor productivity; loafing; non-work; shirking; time use
    JEL: E24 J22
    Date: 2015–07
  12. By: Stephen O'Connell (The Graduate Center, CUNY); Allan Collard-Wexler (Duke University); Hunt Allcott (NYU)
    Abstract: Endemic blackouts are a particularly salient example of how poor infrastructure might reduce growth in developing economies. We study how electricity shortages affect all Indian manufacturers, using an instrument based on hydroelectricity production and a hybrid Leontief/Cobb-Douglas production function model. Shortages reduce average output by about five percent, but because most inputs can be stored during outages, productivity losses are much smaller. Plants without generators have much larger losses, and because of economies of scale in generator capacity, shortages more severely affect small plants.
    Date: 2015
  13. By: Michael Kopsidis (Leibniz Institute of Agricultural Development in Transition Economies (Halle / Germany)); Martin Ivanov (Department of Philosophy, Sofia University)
    Abstract: The classical view of BulgariaÕs failed industrialization prior to the Second World War was established by Alexander Gerschenkron. According to his interpretation, an inherently backward small peasant agriculture and well-organized peasantry not only retarded growth in agriculture but obstructed any possible industrialization strategy. Following Hayami and Ruttan, we utilize the decomposition of farm labor productivity into land productivity, and land-to-man ratio to analyze the sources of growth in BulgariaÕs agriculture 1887-1939. Our results show that BulgariaÕs peasants did cross the threshold to modern growth during the Interwar period. Rich qualitative evidence supports the findings of our quantitative analysis that contrary to GerschenkronÕs view and conventional wisdom, BulgariaÕs peasants substantially contributed to the modernization of BulgariaÕs economy and society. We interpret our results in light of modern development economics, and conclude that agriculture formed no impediment to BulgariaÕs industrialization. The reasons that a Ôlarge industrial spurtÕ did not occur in Bulgaria until 1945 are not to be found in the agricultural sector.
    Keywords: Bulgaria, agricultural productivity, peasant agriculture, industrialization
    JEL: N53 N54 N13 N14 O13
    Date: 2015–07
  14. By: Pascal Nguyen; Nahid Rahman (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Alex Tong; Ruoyun Zhao (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.
    Keywords: board of directors; corporate governance; firm performance; CEO compensation
    JEL: G30 G31 G32 G34
    Date: 2015–07–01
  15. By: Margaux MacDonald (Queen's University)
    Abstract: Recent evidence from developing and emerging economies shows a negative correlation between growth and net capital inflows, a contradiction to neoclassical growth theory. I provide updated and disaggregated evidence on the origins of this puzzle. An analysis of the components of capital flows and of gross portfolio positions shows that foreign direct investment is directed towards countries with the highest growth rates, but that portfolio investment outflows exceed these inflows. Liberalized capital accounts further exacerbate this pattern. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries lies at the heart of the puzzle.
    Keywords: Gross capital flows, Net capital flows, Allocation puzzle, Productivity growth
    JEL: F21 F41 F43
    Date: 2015–07
  16. By: Pablo Celhay; Paul Gertler; Paula Giovagnoli; Christel Vermeersch
    Abstract: The adoption of new clinical practice patterns by medical care providers is often challenging, even when they are believed to be both efficacious and profitable. This paper uses a randomized field experiment to examine the effects of temporary financial incentives paid to medical care clinics for the initiation of prenatal care in the first trimester of pregnancy. The rate of early initiation of prenatal care was 34% higher in the treatment group than in the control group while the incentives were being paid, and this effect persisted at least 24 months or more after the incentives ended. These results are consistent with a model where the incentives enable providers to address the fixed costs of overcoming organizational inertia in innovation, and suggest that temporary incentives may be effective at motivating improvements in long run provider performance at a substantially lower cost than permanent incentives.
    JEL: I11 I13 I15
    Date: 2015–07

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