nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2015‒10‒04
fourteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Isoelastic Elasticity of Substitution Production Functions By Jakub Growiec; Jakub Muck
  2. Shadow Prices of Human Capital in Agriculture. Evidence from European FADN Regions By Biagia De Devitiis; Ornella Wanda Maietta
  3. Economic Freedom and Public, Non-Market Institutions: Evidence from Criminal Prosecution By Claudio Detotto; Bryan C. McCannon
  4. Markup and productivity of exporters and importers By Balázs Murakozy; Cecilia Hornok
  5. The impact of infrastructure on productivity: new estimates for Québec By Dorothée Boccanfuso; Marcelin Joanis; Mathieu Paquet; Luc Savard
  6. Productivity Effects of Eco-innovations Using Data on Eco-patents By Francesca Lotti; Giovanni Marin
  7. Does worker wellbeing affect workplace performance? By Alex Bryson; John Forth; Lucy Stokes
  8. The effect of board directors from countries with different genetic diversity levels on corporate performance By Delis, Mantos D.; Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios
  9. New media, competition and growth: European cities after Gutenberg By Jeremiah Dittmar
  10. Object-Oriented Interindustry Systems: Proof of Concept By Péter Járosi; Randall W. Jackson
  11. Environmental Policies, Innovation and Productivity in EU By Roberta De Santis; Cecilia Jona Lasinio
  12. Measuring regional competitiveness: A survey of approaches, measurement and data By Gabor Bekes
  13. Critical Capital Stock in a Continuous-Time Growth Model with a Convex-Concave Production Function By Ken-Ichi Akao; Takashi Kamihigashi; Kazuo Nishimura
  14. What type of finance matters for growth? Bayesian model averaging evidence By Hasan, Iftekhar; Horvath, Roman; Mares , Jan

  1. By: Jakub Growiec (Warsaw School of Economics and Narodowy Bank Polski); Jakub Muck (Warsaw School of Economics and Narodowy Bank Polski)
    Abstract: We generalize the normalized Constant Elasticity of Substitution (CES) production function by allowing the elasticity of substitution to vary isoelastically with (i) relative factor shares, (ii) marginal rates of substitution, (iii) capital–labor ratios, or (iv) capital–output ratios. Ensuing four variants of Isoelastic Elasticity of Substitution (IEES) production functions have a range of intuitively desirable properties and yield empirically testable predictions for the functional relationship between relative factor shares and (raw or technology-adjusted) capital–labor ratios. As an empirical application, the parameters of IEES functions are estimated in a three-equation supply-side system with factor-augmenting technical change, based on data on aggregate production in the post-war US economy. Our estimates consistently imply that the elasticity of substitution between capital and labor has remained relatively stable, at about 0.8–0.9, from 1948 to the 1980s, followed by a period of secular decline.
    Keywords: production function, factor share, elasticity of substitution, marginal rate of substitution, normalization
    JEL: E23 E25 O33 O47
    Date: 2015–09–18
  2. By: Biagia De Devitiis (Università di Foggia); Ornella Wanda Maietta (Università di Napoli Federico II and CSEF)
    Abstract: TThe aim of this paper is to measure the shadow price of human capital in EU agriculture and to determine whether the CAP has affected the productivity of this growth-enhancing factor. For this purpose, we used the balance sheet data for the period 1986-2012, referring to the Standard Results of the EU Farm Accountancy Data Network (FADN) farm, which is representative of commercial agriculture at regional level. Data concerning output and input price indices and education attainment levels were obtained from Eurostat and from national FADNs. DEA-VRS input-oriented annual frontiers were computed to estimate the shadow price of three levels of human capital: low, medium and high. The results show an increasing trend in the shadow prices of human capital and suggest that the shadow price of the high level of human capital has been significantly greater than the shadow price of the medium level of human capital since 1990.
    Keywords: shadow prices, human capital, agriculture, growth, Malmquist index, DEA.
    JEL: D24 E24 C43
    Date: 2015–09–25
  3. By: Claudio Detotto (University of Sassari); Bryan C. McCannon (West Virginia University, Department of Economics)
    Abstract: Economic freedom, which measures the protection of property and freedom to contract, is generally argued to capture the quality of a state’s institutions regarding market activity. As to be expected, numerous studies have found that economic freedom is associated with good economic outcomes. Additionally, much effort in public economics has worked to identify the features of quality non-market public institutions. No effort has been made to connect institutions that influence market activity and institutions that govern non-market activities. We take a first step. We employ a linear programming method for measuring relative efficiencies known as Data Envelopment Analysis. We apply this technique to information on the use of inputs to the production of the prosecution of crime across the thousands of local prosecutor offices in the U.S. We then compare state-level measurements of prosecution productivity with data on state-level economic freedom from the Economic Freedom of North America index. We show that there is a positive and statistically significant relationship between the two. Those states that develop institutions respecting economic freedom also tend to be the states that develop efficient publicly-provided services.
    Keywords: Data Envelopment Analysis, economic freedom, efficiency, prosecution, publicly-provided services
    JEL: H11 C67 D23 D24 D61 K4
    Date: 2015–02
  4. By: Balázs Murakozy (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Cecilia Hornok (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: This paper studies the relationship between firm markups and importing intermediate inputs and exporting using detailed firm-level data from Hungary in 1995-2003. We estimate production functions structurally to obtain firm-year-level productivity and markup estimates. We find that importing intermediate inputs is associated with large markup premium, while the exporter markup premium is nonexistent when we control for the importer status. We interpret our results in a simple theoretical framework, where firms lower their markup when exporting to more competitive foreign markets and where importing intermediate inputs leads to higher-quality products.
    Keywords: markups, exporting, importing, detailed trade data, Hungary
    JEL: D22 D24 F14 L11 L60
    Date: 2015–06
  5. By: Dorothée Boccanfuso (Département d'Économique, Université de Sherbrooke); Marcelin Joanis (Département d'Économique, Université de Sherbrooke); Mathieu Paquet (Département d'Économique, Université de Sherbrooke); Luc Savard (Département d'Économique, Université de Sherbrooke)
    Abstract:  Since the works of Aschauer (1989a) and Munnell (1990), several authors have attempted to establish a relationship between public infrastructure spending and productivity or economic growth. In this paper, we use the dual approach to model the contribution of public spending in infrastructure in the province of Quebec, which is the same approach that was proposed by Harchaoui and Tarkhani (2003) and applied to the Canadian economy. We use Quebec economy data to measure the contribution of public capital to sectoral economic growth for the 1997-2002 period. Our results confirm a positive relationship between public capital and economic growth albeit of smaller magnitude than those estimated in Harchaoui and Tarkhani (2003). 
    Keywords: Infrastructure, investment, growth, productivity.
    JEL: C13 D62 E22 H41 H54
    Date: 2015–09
  6. By: Francesca Lotti (Bank of Italy (Italy)); Giovanni Marin (IRCrES-CNR, Milano (Italy); SEEDS, Ferrara, Italy)
    Abstract: We investigate the productivity effects of eco-innovations at the firm level using a modified version of the CDM model (Crepon et al., 1998). The peculiar nature of environmental innovations, especially as regards the need of government intervention to create market opportunities, is likely to affect the way they are pursued and their effect on productivity.
    Keywords: R&D, innovation, productivity, patents, eco-patents.
    JEL: L60 Q55
    Date: 2015–09
  7. 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 wellbeing; job satisfaction; job-related affect; workplace performance
    JEL: J28
    Date: 2015–07
  8. By: Delis, Mantos D. (University of Surrey); Gaganis, Chrysovalantis (University of Crete); Hasan, Iftekhar (Gabelli School of Business, Fordham University and Bank of Finland); Pasiouras, Fotios (University of Surrey, UK, and University of Crete)
    Abstract: We link genetic diversity in the country of origin of the firms’ board members with corporate performance via board members’ nationality. We hypothesize that our approach captures deep-rooted differences in cultural, institutional, social, psychological, physiological, and other traits that cannot be captured by other recently measured indices of diversity. Using a panel of firms listed in the North American and U.K. stock markets, we find that adding board directors from countries with different levels of genetic diversity (either higher or lower) increases firm performance. This effect prevails when we control for a number of cultural, institutional, firm-level, and board member characteristics, as well as for the nationality of the board of directors. To identify the relationship, we use as instrumental variables for our diversity indices the migratory distance from East Africa and the level of ultraviolet exposure in the directors’ country of nationality.
    Keywords: genetic diversity; corporate performance; nationality of board members
    JEL: G30 M10 M14
    Date: 2015–08–17
  9. By: Jeremiah Dittmar
    Abstract: This research studies how variations in competition and in media content characterized the use and impact of Gutenberg's printing press technology during the European Renaissance. The research constructs annual firm-level panel data on the publications produced by 7,000+ printing firms operating in over 300 European cities 1454- 1600. Evidence on the timing of the premature deaths of firm owner-managers is used to isolate shocks to competition. Firms where owner-managers died experienced large negative shocks to output. However, at the citylevel deaths of incumbent managers were associated with significant increases in entrance and with a positive and persistent impact on competition and city output. Variations in city supply induced by heterogeneous manager deaths are used to study the relationship between the diffusion of ideas in print and city growth. A uniquely strong relationship is observed between the new business education literature and local growth. This is consistent with historical research on the transformative impact business education ideas had on commercial practices and European capitalism.
    Keywords: Information technology; IO; media; growth; history; business education
    JEL: L1 N9 N93 O11 O18 O33
    Date: 2015–08
  10. By: Péter Járosi (Regional Research Institute, West Virginia University); Randall W. Jackson (Regional Research Institute, West Virginia University)
    Abstract: This document provides a proof-of-concept demonstration of an object-oriented approach to modeling an inter-industry system. The example framework uses a small CGE model based on a three-sector social accounting matrix (SAM). The economy is shocked by changing total factor of productivity in the production function, the new equilibrium is determined in classical CGE fashion, and the original SAM is updated to conform to the new equilibrium solution. In this way,the efficiency of the Object-oriented modeling (OOM) approach can be emphasized in the context of the computational simulations of inter-industry systems by a simplified CGE example written in Python. Since this example implemented as only a possible application of the OOM, the proof of the concept should be interpreted as a particular but among the most difficult economic modeling cases.
    Keywords: Object oriented modeling, interindustry
    JEL: C67 C68 C63 R15
    Date: 2015–08
  11. By: Roberta De Santis (ISTAT); Cecilia Jona Lasinio (ISTAT)
    Abstract: In a globalized framework, environmental regulations can have a decisive role in influencing countries’ comparative advantages. The conventional perception about environmental protection is that it imposes additional costs on firms, which may reduce their global competitiveness with negative effects on growth and employment. However, some economists, in particular Porter and Van der Linde (1995), argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over-compensate for the costs of complying with these policies. This is known as the Porter hypothesis and suggests the existence of a “double dividend”, for both economic and environmental aspects, related to environmental regulation. In this paper, we adopt a macroeconomic approach to investigate the impact of different environmental instruments on the economy as a whole. We investigate the environmental policy impacts on a sample of European economies in 1995-2008. Our findings suggest that the “narrow” Porter Hypothesis cannot be rejected and that the choice of the policy instruments is not neutral. In particular, market based environmental stringency measures look as the most effective to stimulate innovations and productivity.
    Keywords: environmental regulation, productivity, innovation, Porter hypothesis.
    JEL: D24 Q50 Q55 O47 O31
    Date: 2015
  12. By: Gabor Bekes (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and CEPR)
    Abstract: This paper reviews a set of issues related to the concept and measurement of regional competitiveness. First, the concept of growth and competitiveness is argued to be different at regional level from the national level. In particular, the relationship between agglomeration and performance, the role of FDI in regions, and the key aspect of local institutions are analyzed. Second, a detailed review is carried out on potential data sources to gauge regional competitiveness using official, private sector as well as academic datasets.
    Keywords: regional competitiveness, data audit
    JEL: R11 R38
    Date: 2015–06
  13. By: Ken-Ichi Akao (School of Social Sciences, Waseda University); Takashi Kamihigashi (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Kazuo Nishimura (Research Institute for Economics & Business Administration (RIEB), Kobe University, and KIER, Kyoto University)
    Abstract: The critical capital stock is a threshold that appears in a nonconcave aggregate growth model such that any optimal capital path from a stock level below the threshold converges to a lower steady state, whereas any optimal capital path from a stock level above the threshold converges to a higher steady state. Unlike a concave model with wealth effect, the threshold is not necessarily an optimal steady state, which makes its characterization difficult. In a continuous-time growth model with a convex-concave production function, we show that: a) the critical capital stock is continuous and strictly increasing in the discount rate; b) as the discount rate increases, it appears at the zero-stock level and disappears at a certain level between the stock levels of the maximum average productivity and the maximum marginal productivity; c) at this upper bound, it merges with the higher steady state; d) once the critical capital stock disappears, the higher steady state is no longer an optimal steady state; and e) the disappearing point can be arbitrarily close to either of the these stock levels, depending on the curvature of the utility function.
    Keywords: Continuous-time growth model, Convex-concave production function, Critical capital stock
    JEL: C61 D90 O41
    Date: 2015
  14. By: Hasan, Iftekhar (Fordham University and Bank of Finland); Horvath, Roman (Charles University, Prague); Mares , Jan (Czech Ministry of Finance and Charles University, Prague)
    Abstract: We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator – the efficiency of financial intermediaries – is robustly related to long-term growth.
    Keywords: finance; growth; Bayesian model averaging
    JEL: C11 G10 O40
    Date: 2015–06–08

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