nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2015‒09‒18
nineteen papers chosen by

  1. Efficiency measurement of Swiss shopping centers using Data Envelopment Analysis (DEA) By A. Bay
  2. Production function estimation using New Zealand’s Longitudinal Business Database By Richard Fabling; David C Maré
  3. Agricultural productivity in New Zealand: First estimates from the Longitudinal Business Database By Eyal Apatov; Richard Fabling; Adam B Jaffe; Michele Morris; Matt Thirkettle
  4. Firm Dynamics and Regional Inequality of Productivity in China By Canfei He; Yi Zhou
  5. Technology invention and diffusion in residential energy consumption. A stochastic frontier approach By Giovanni Marin; Alessandro Palma
  6. Transient and Persistent Energy Efficiency in the US Residential Sector: Evidence from Household-level Data By Massimo Anna Alberini; Massimo Filippini
  7. Does the US Current Account Show a Symmetric Behavior over the Business Cycle? By Roberto Duncan
  8. Financial constraints and productivity: evidence from euro area companies By Ferrando, Annalisa; Ruggieri, Alessandro
  9. Technological Relatedness and Firm Productivity: Do low and high performing firms benefit equally from agglomeration economies in China? By Anthony J. Howell, Canfei He, Rudai Yang, Cindy Fan; Canfei He; Rudai Yang; Cindy Fan
  10. Production Function of the Mining Sector of Iran By Seyyed Ali Zeytoon Nejad Moosavian
  11. The Global Productivity Slump: Common and Country-Specific Factors By Barry Eichengreen; Donghyun Park; Kwanho Shin
  12. Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match? By Moser, Stefan; Mußhoff, Oliver
  13. Does Foreign Entry Spur Innovation? By Yuriy Gorodnichenko; Jan Svejnar; Katherine Terrell
  14. Misallocation, Productivity, and Trade Liberalization: The Case of Vietnamese Manufacturing@ By Doan Thi Thanh Ha; Kozo Kiyota
  15. European Universities during the Crisis: A Public Policy Perspective, with a Brief Excursion to the US By Ritzen, Jo
  17. Assessing the financial and financing conditions of firms in Europe: the financial module in CompNet By Ferrando, Annalisa; Altomonte, Carlo; Blank, Sven; Meinen, Philipp; Iudice, Matteo; Felt, Marie-Hélène; Neugebauer, Katja; Siedschlag, Iulia
  18. Energy Efficiency and EU Industrial Competitiveness: Energy Costs and their Impact on Manufacturing Activity By Vasily Astrov; Doris Hanzl-Weiss; Sandra M. Leitner; Olga Pindyuk; Johannes Pöschl; Robert Stehrer
  19. Is Growth Declining in the Service Economy? By SASAKI, Hiroaki

  1. By: A. Bay
    Abstract: DEA as an Operations Research based linear programming approach for evaluating the relative performance of homogenous Decision Making Units (DMUs) is applied to Swiss shopping centers. Output-to-input efficiency ratios – as for example the sales productivity – incorporate one output (sales) and one input (sales area). Peer group comparisons (efficiency rankings) are difficult if multiple inputs and / or multiple outputs of different kind of data (quantitative, qualitative, categorical etc.) or measuring units (CHF, m2, %) are to be considered. That is where DEA shows its advantages: DEA simultaneously handles multiple input factors (e.g. sales area, parking lots, OCR) and multiple output factors (e.g. sales, sales productivity, customer satisfaction) in a single efficiency measure – without prior fixing the factor weights. Furthermore, DEA helps in evaluating the DMUs (reference DMUs or benchmarks) that inefficient DMUs could refer to in order to improve efficiency (input reduction and / or output increase). The literature review focuses on real estate DEA applications and emphasises property types whose efficient operation is crucial for valuation – as for retail properties or for properties run by operating companies (hospitals, hotels, shopping centers etc.). The empirical analysis implements the Charnes-Cooper-Rhodes-Model (CCR model), the Banker-Charnes-Cooper-Model (BCC model) and the Additive model, and combines different shopping center performance drivers. Sales area and sales are strong performance drivers. Ratios as factors show new insights, and a DEA model including ratios could be an alternative to the widely used sales productivity. By differentiating the factors between food and retail sales and food and retail sales area, respectively, the efficiency of the shopping center sector mix is assessed. Practical implications using DEA as a benchmarking or rating tool – for example in a Management Information System (MIS) – are given.
    Keywords: Data Envelopment Analysis (DEA); Efficiency / Performance Evaluation; Operations Research; Shopping Centers; Switzerland
    JEL: R3
    Date: 2015–07–01
  2. By: Richard Fabling (Motu Economic and Public Policy Research); David C Maré (Motu Economic and Public Policy Research)
    Abstract: This paper is intended as a resource for researchers using the New Zealand Longitudinal Business Database (LBD) to study the productivity of New Zealand firms. First, it documents the methods used for creating a consistent dataset of production data, combining survey and administrative data sources. Second, it discusses a range of identification and estimation issues that arise when using the data for the estimation of multi-factor productivity. Finally, it demonstrates the value and usefulness of the data by presenting and comparing a range of productivity estimates for a single industry.
    Keywords: Statistics New Zealand Longitudinal Business Database; Production function; multi-factor productivity
    JEL: C10 D24
    Date: 2015–09
  3. By: Eyal Apatov (Motu Economic and Public Policy Research); Richard Fabling (Motu Economic and Public Policy Research); Adam B Jaffe (Motu Economic and Public Policy Research); Michele Morris; Matt Thirkettle (Cornell University)
    Abstract: Exports of dairy and sheep/beef products account for over 40% of New Zealand's aggregate merchandise exports. As a consequence, the performance of farms in these industries has a significant impact on the New Zealand economy. In this study, we link financial and agricultural data from the New Zealand Longitudinal Business Database (LBD) to estimate production functions of dairy and sheep/beef firms in New Zealand. Overall, we find that the data enables us to explain much of the industry-level variation in productivity and output, offering greater flexibility and insight than simply examining the official (aggregated) statistics. We find that variation in output can be largely explained by variation in capital, labour, intermediate expenditure, and productive land. We also find differences across industries in the way various farm practices (e.g. stocking rates, fertilizer use, supplementary activities, etc.) and area characteristics (including weather) relate to output. Finally, we find that estimating firm productivity at the industry level is less likely to accurately model the relationships for some sub-groups of firms (e.g. firms with different land size). We believe that our methodology could be useful for future studies addressing research questions relevant to this sector.
    Keywords: Firm-level productivity; dairying; sheep-beef farming; Translog; fixed effects
    JEL: D22 Q12 R30
    Date: 2015–09
  4. By: Canfei He; Yi Zhou
    Abstract: Industrial change processes are underlying forces that determine the change of regional productivity. In developed market economies, less productive firms are more likely to exit while productive firms have more chance to enter and to survive. As a result, spatial inequality of firm dynamics will directly influence the inequality of regional productivity. This study investigates how firm dynamics would affect regional productivity using firm level data during 1998-2007 in China. We first estimate total factor productivity (TFP) for each firm based on the semi-parametric method proposed by Olley and Pakes (1996). Regional productivity is derived by weighing the firm TFP using gross industrial output. There is considerable spatial inequality of TFP paired with a trend of convergence over the time period of 1999-2007. Decomposition of TFP growth shows that firm entry, exit and survival do contribute to TFP change and their contributions vary across prefectures substantially. The between share holds the largest regional difference, as the most important factor contributing to the spatial inequality of regional TFP. The restructuring of SOEs has critically contributed to the spatial inequality of TFP by raising TFP in the traditional industrial bases and by facilitating the development of productive private and foreign sectors particularly in the coastal region. The finding indicates that resource reallocation across firms with different ownerships is the key mechanism to improve regional productivity.
    Keywords: Firm Dynamics, Regional Inequality, TFP, Decomposition Method, China
    Date: 2015–09
  5. By: Giovanni Marin (IRCrES-CNR, Milano (Italy)); Alessandro Palma (IEFE-Bocconi, Milano (Italy))
    Abstract: Traditional large appliances absorb a large share of residential electricity consumption and represent important targets of energy policy strategies aimed at achieving energy security. Despite being characterized by rather mature technologies, this group of appliances still offers large potential in terms of efficiency gains due to their pervasive diffusion. In this paper we analyse the electricity consumption of a set of four traditional ‘white goods’ in a panel of ten EU countries observed over 21 years (1990-2010), with the aim of disentangling the amount of technical efficiency from the overall energy saving. The technical efficiency trend is modelled through a set of technology components representing both the invention and adoption process by the means of specific patents weighted by production and bilateral import flows, which allows to overcome the rigid Stochastic Frontier framework in modelling the effect of technical change. Our results show that the derived energy demand and inefficiency trends are both related to changes in the amount of available technology embodied in energy efficient appliances. The effect is significant both in its domestic and international components and suggests an active role of innovation and trade policies for achieving efficiency targets which directly impact the amount of electricity consumed by households.
    Keywords: energy efficiency, technological diffusion, electrical appliances, stochastic frontier analysis, residential sector
    JEL: O33 Q55 Q41
    Date: 2015–09
  6. By: Massimo Anna Alberini (University of Maryland,USA); Massimo Filippini (ETH Zurich, Switzerland)
    Abstract: In this paper, we measure the energy efficiency in residential energy consumption using a panel dataset comprised of 40,246 observations from US households observed over 1997-2009. We fit a stochastic frontier model of the minimum input of energy needed to meet the level of energy services demanded by the household. This benchmarking exercise produces a transient and a persistent efficiency index for each household and each time period. We estimate that the US residential sector could save approximately 10% of its total energy consumption if it reduced persistent inefficiencies and 17% if it was able to eliminate transient inefficiencies. These figures are in line with the assessment by McKinsey (2008, 2009, 2013) and greater than those indicated by the Electric Power Research Institute (2009). They suggest that savings in energy use and associated emissions of greenhouse gases (and other pollutants) may benefit from both policy measures that attain short-run behavioral changes (e.g., nudges, social norms, display of real-time information about usage, and real-time pricing) as well measures aimed at the long run, such as energy-efficiency regulations, incentives on the purchase of high-efficiency equipment and incentives towards a change of habits in the use of the equipment.
    Keywords: US residential energy demand; efficiency and frontier analysis; Household data; CO2 emissions reductions
    JEL: D D2 Q Q4 Q5
    Date: 2015–09
  7. By: Roberto Duncan (Ohio University)
    Abstract: Traditionally, the literature that attempts to explain the link between the current account and output finds a linear negative relationship (e.g., Backus et al., 1995). Using nonparametric regressions, we find a robust U-shaped relationship between the U.S. current account and the GDP cycle. When output is above (below) its trend the current account and detrended output are positively (negatively) correlated. We argue that this nonlinearity might be caused by persistent productivity shocks coupled with uncertainty shocks about future productivity.
    Keywords: U.S. current account, uncertainty shocks, business cycles, nonparametric regression
    JEL: E3 F3 F4
    Date: 2015–09
  8. By: Ferrando, Annalisa; Ruggieri, Alessandro
    Abstract: In this paper we consider the relation between firms’ financial structure, access to external finance and labor productivity using a large dataset of firm-level data for Euro-area countries during the period 1995-2011. Our empirical strategy is twofold. First we develop an indicator of financial constraints at firm level using a classification based on specific firm characteristics and various measures of financial pressure and liquidity. Second we apply this indicator to a firm-level production equation to assess the direct impact of access to finance to firm-level productivity. We estimate the impact of financial constraints on a measure of labor productivity and we find significant and negative effects in the majority of sectors across countries. The impact appears to be significantly higher in sectors like Energy, Gas and Water Supply and R&D, Communication and Information, for small and micro firms, while it is slightly smaller for firms with positive investment rates. From a cross-country perspective, while Germany and Netherlands are the least one, Italy, France, Spain and Portugal are the most affected by financial constraints, with an estimated loss of around 10% of their average real value added due to limited access to finance. JEL Classification: D24, G32, O16
    Keywords: cross-country, financial constraints, productivity, sectoral analysis, SMEs
    Date: 2015–07
  9. By: Anthony J. Howell, Canfei He, Rudai Yang, Cindy Fan; Canfei He; Rudai Yang; Cindy Fan
    Abstract: Building on the evolutionary economic geography literature, we employ the density measure introduced by ? to dynamically track the impact of technological relatedness on firm productivity. We rely on advanced quantile regression techniques to determine whether technological relatedness stimulates productivity and whether the size of the effect varies for low and high performing firms. Lastly, taking China’s economic transition into account, we test whether changes in the local industrial mix brought about by China’s market reforms enable or inhibit performance-enhancing spillovers. We show that a dynamic tradeoff exists between agglomeration costs and benefits that depends, in part, on the firm’s placement along the productivity distribution: the effect of technological relatedness reduces productivity for the least performing firms, but enhances it for better performing firms. As a result, spillovers via technological relatedness lead to improvements in the geographical welfare by intensifying the learning effect for the vast majority of co-located firms, in spite of increasing productivity disparities between the bottom and top performing firms.
    Keywords: Firm Productivity, Relatedness, Agglomeration Economies, Firm Heterogeneity
    Date: 2015–09
  10. By: Seyyed Ali Zeytoon Nejad Moosavian
    Abstract: The purpose of this study is to estimate the production function and examine the structure of production in the mining sector of Iran. Several studies have already been conducted in estimating production functions of various economic sectors; however, less attention has been paid to mining sectors. After examining the stationarity of variables using augmented Dickey-Fuller and Phillips-Perron tests, this study estimated the production function of the mining sector of Iran under different scenarios using the co-integration method and time-series data for 1976-2006. The unconstrained Cobb-Douglas production function in Tinbergen form provided better results in terms of theoretical foundations of economics, statistics, and econometrics. These results show that the structure of the mining sector of Iran is both capital-intensive and labour-intensive. Based on the findings of this study, the elasticity of production with respect to capital and labour have been 0.44 and 0.41, respectively. In addition, the coefficient of time variable, as an indicator of technological progress in the production process, is statistically significant representing a positive effect of technological changes on the output of Iran's mining sector.
    Date: 2015–09
  11. By: Barry Eichengreen; Donghyun Park; Kwanho Shin
    Abstract: Productivity growth is slowing around the world. In 2014, according to the Conference Board’s Total Economy Data Base, the growth of total factor productivity (TFP) hovered around zero for the third straight year, down from 1 per cent in 1996-2006 and ½ per cent in 2007-12. In this paper we identify previous episodes of sharp and sustained decelerations in TFP growth using data for a large sample of countries and years. TFP slumps are ubiquitous: we find as many as 77 such episodes, depending on definition, in low-, middle- and high-income countries. Low levels of educational attainment, unusually high investment rates and weak political systems are among the significant country-specific correlates of TFP slumps, while increases in risk (higher TED spreads) and energy-price shocks are among the significant global factors.
    JEL: E0 E1 O3
    Date: 2015–09
  12. By: Moser, Stefan; Mußhoff, Oliver
    Abstract: This article compares the use of risk-increasing and risk-reducing production inputs with the experimentally measured risk attitudes of farmers. For this purpose, the Just-Pope production function indicates production inputs' influence on output risk and a Holt-Laury lottery is used to measure the producer´s risk attitude. We test whether more risk averse farmers use more risk-reducing and less risk-increasing production inputs. Therefore, we apply a unique data set which includes 185 small-scale farmers which are producing rubber on 260 plots on the island of Sumatra, Indonesia. The Just-Pope production function indicates that fertiliser usage has a risk-reducing effect, whereas herbicide usage and plot size have risk-increasing effects. For labour and plantation age, the influence on output risk is ambiguous. By including the outcome of a Holt-Laury lottery into the analysis, we found the expected result that more risk averse farmers use more (risk-reducing) fertiliser and less (risk-increasing) herbicides. These consistent results provide an example for the external validity of measuring risk attitude with the Holt-Laury lottery.
    Keywords: Holt-Laury lottery,Just-Pope production function,output risk,rubber,Indonesia
    JEL: C91 C93 Q12
    Date: 2015
  13. By: Yuriy Gorodnichenko; Jan Svejnar; Katherine Terrell
    Abstract: Our estimates, based on large firm-level and industry-level data sets from eighteen countries, suggest that FDI and trade have strong positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. Moreover, our results indicate that the spillover effects can be detected with micro data at the firm-level, but that using linkage variables computed from input-output tables at the industry level yields much weaker, and usually insignificant, estimated effects. These patterns are consistent with spillover effects being rather proximate and localized.
    JEL: F2 M16 O16 P23
    Date: 2015–09
  14. By: Doan Thi Thanh Ha (Graduate School of International Social Sciences, Yokohama National University); Kozo Kiyota (Keio Economic Observatory, Keio University)
    Abstract: This paper attempts to measure the contribution of resource misallocation to aggregate manufacturing TFP, focusing on Vietnamese manufacturing firms for the period 2000-09. Our research questions are threefold. 1) To what extent are resources misallocated in Vietnam? 2) How large would the productivity gains have been in the absence of distortions? 3) Did the degree of misallocation decline after entry into the World Trade Organization (WTO)? The answers to these questions are as follows. First, misallocation in Vietnam is comparable to that in China and India. Second, there would have been substantial improvement in aggregate TFP in the absence of distortions. Finally, the accession to the WTO contributed to reducing the distortions in output markets. However, this positive effect was offset by increasing distortions in capital markets. These results together suggest that further reforms in capital markets could improve aggregate TFP in Vietnam through reduced misallocation.
    Keywords: Local Misallocation, Total factor productivity, Trade liberalization, WTO, Vietnam
    JEL: O47 F14 D22
    Date: 2015–05–29
  15. By: Ritzen, Jo (IZA and Maastricht University)
    Abstract: The crisis slowed down the implementation of the Lisbon Strategy (for the EU to become the most competitive region in the world). The crisis has aggravated the divergence between the North West of Europe and Southern Europe in labor productivity imparted by the knowledge economy. At the same time, equality of opportunity for participation in higher education seems to have been well-preserved in the EU Member States. This is in contrast to the US with its substantial higher private costs for university education. The relative stagnations in university education and research during the crisis is similar in Europe as in the US. Asian countries may – as a result – have improved their position in innovation. The room for maneuver of Governments of EU Member States to deal with universities (as with other public expenditures) was severely limited by the agreed upon maximum levels of the budget deficit and Government debt. Political institutions appear to determine the "code" for higher education expenditures. The quality of the minister responsible for higher education and the level of "trust" in the country may also the room for maneuver in setting university policy.
    Keywords: economic crisis, university policy, university funding, equity, innovation, labor productivity, trust
    JEL: H2 H6 I22 I23 I24 I28 O31 O38 O43 O51 O52
    Date: 2015–09
  16. By: Tomer Blumkin (BGU); Leif Danziger (BGU); Eran Yashiv (The Eitan Berglas School of Economics, Tel-Aviv University, Israel)
    Keywords: Unemployment benefit policy, declining unemployment benefits, productivity distribution, skewness, dispersion
    JEL: J64 J65
    Date: 2015
  17. By: Ferrando, Annalisa; Altomonte, Carlo; Blank, Sven; Meinen, Philipp; Iudice, Matteo; Felt, Marie-Hélène; Neugebauer, Katja; Siedschlag, Iulia
    Abstract: This paper provides an encompassing description of the various indicators compiled in the financial module of CompNet using balance sheet information of European firms. We investigate whether and to which extent the heterogeneous financial positions of firms have affected firms’ investment decisions, especially during the recent crisis. Our results confirm the relevance of leverage for investment, in addition to other common determinants, such as cash flow or sales growth. In particular, we find evidence that higher levels of indebtedness act as a drag on investment. We investigate cash holding policies and find significant differences across firm sizes and degrees of financial constraints. Furthermore, our data confirm the pro-cyclicality of firm profitability and its negative association with financial constraints. Finally, we exploit the richness of this new dataset to document the relationships between firms’ financial and financing conditions and their productivity. JEL Classification: D22, D24, D92, G32
    Keywords: firm financing conditions and constraints, firm heterogeneity, productivity
    Date: 2015–08
  18. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary Environmental objectives of the EU and the widened energy price gap between the EU and the United States have recently given rise to concerns about the competitiveness of European manufacturing industries, particularly their energy-intensive branches. The study demonstrates that industrial end-user prices for gas and electricity in the EU have indeed gone up strongly relative to some of its main competitors, largely on account of the network costs component. At the same time, over the past two decades there have been marked advances in energy efficiency in response to energy price shocks. These advances have been driven primarily by technological improvements (although in the NMS a structural shift has also played a role), particularly in the case of electricity and in the long run. However, these did not fully offset the energy price increase, so that the energy cost shares have generally gone up. The study empirically demonstrates that this has had some detrimental effect on industrial competitiveness, although the latter has been generally overshadowed by the impact of other cost components such as labour costs.
    Keywords: energy sector, energy prices, energy costs, energy intensity, industrial competitiveness
    JEL: Q40 Q41 Q4
    Date: 2015–08
  19. By: SASAKI, Hiroaki
    Abstract: This study extends Baumol's (1967) two-sector (manufacturing and services) unbalanced growth model to analyze a situation in which, first, services are used for both final consumption and intermediate inputs in manufacturing production, and second, the productivity of the manufacturing and services sectors endogenously evolves. Using this model, we investigate how the employment share of services and economic growth rate evolve through time. Our results are summarized as follows. First, if the human capital accumulation function exhibits constant returns to scale with respect to per capita consumption of services, then we obtain a U-shaped relationship between the employment share of services and the economic growth rate. Second, if the human capital accumulation function exhibits decreasing returns to scale with respect to per capita consumption of services, the economic growth rate decreases at first, begins to increase after some time, decreases again, and finally, approaches zero.
    Keywords: service economy, economic growth, endogenous productivity growth, business services
    JEL: J21 J24 O11 O14 O30 O41
    Date: 2015–09

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