nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2015‒12‒12
thirteen papers chosen by

  1. Productivity and the Performance of Agriculture in Latin America and the Caribbean: From the Lost Decade to the Commodity Boom By Pedro Martel; Carlos E. Ludeña; Alejandro Nin Pratt; César Falconi
  2. The Spanish Productivity Puzzle in the Great Recession By Hospido, Laura; Moreno-Galbis, Eva
  3. The UK's Productivity Puzzle By Bryson, Alex; Forth, John
  4. The influence of risk-taking on bank efficiency: evidence from Colombia By Miguel Sarmiento; Jorge E. Galán
  5. Total Factor Productivity and the Institutional Possibility Frontier: An Outline of a Link between Two Theoretical Perspectives on Institutions, Culture and Long Run Growth By Ilya Lokshin
  6. Competitiveness of EU vs. US By Karl Aiginger; Susanne Bärenthaler-Sieber; Johanna Vogel
  7. 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
  8. The French Productivity Puzzle By Askenazy, Philippe; Erhel, Christine
  9. Evaluating policies to improve total factor productivity in four large Latin American countries By Aravena, Claudio; Hofman, André A.; Fernández de Guevara, Juan; Mas, Matilde
  10. Banking Crises in Emerging Economies: Can Credit Variables Work as Early Warnings? By Martina Jasova
  11. Spillovers from immigrant diversity in cities By Thomas Kemeny; Abigail Cooke
  12. Is potential output growth falling? By Mendieta-Muñoz, Ivan
  13. Information Asymmetry and Financial Development Dynamics in Africa By Asongu, Simplice; Nwachukwu, Jacinta; Tchamyou, Vanessa

  1. By: Pedro Martel; Carlos E. Ludeña; Alejandro Nin Pratt; César Falconi
    Abstract: This study analyzes the performance of Latin America and the Caribbean's agriculture between 1980 and 2012 looking at the contribution of inputs, and total factor productivity (TFP) to growth in output per worker. A growth accounting approach that goes along the lines of neoclassical growth accounting combined with Data Envelopment Analysis, allows us to measure TFP growth using output and input indices and also to decompose this growth into contributions of technical change and changes in technical efficiency. Our findings show that between 1980 and 2012, regional agricultural output per worker and TFP increased 82 and 45 percent, respectively, reducing the difference between TFP in LAC and in OECD countries. This improved performance of agriculture was the result of fast growth in the use of fertilizer, increases in land productivity, and growth in the use of capital that expanded cultivated area per worker. Higher productivity of the animal stock, fast growth in the use of feed and in the number of animals per worker, have increased the share of livestock in total output and also contributed significantly to the improved performance of agriculture. Observed growth patterns at the country level suggest that countries that increased input per worker have increased TFP at a higher rate than countries with limited access to capital and land. As a result of these growth patterns, the improved performance in the region has amplified differences in labor productivity between countries. Growing differences in labor productivity and the fact that the favorable shock in commodity prices that benefited LAC's agriculture in recent years has apparently ran its course, raise concerns for the future.
    Keywords: Economic Development & Growth, Productivity, Agricultural productivity, Agricultural Policy, Caribbean, Latin America, Agriculture
    Date: 2015–11
  2. By: Hospido, Laura; Moreno-Galbis, Eva
    Abstract: While Spain has traditionally underperformed its European neighbors in terms of labor productivity, this trend reverses after 2007. Part of the explanation for this reversal is likely to be the direct impact of decreasing labor inputs relative to capital. Using a longitudinal sample of Spanish manufacturing and services companies between 1995 and 2012, we show that the recent increase in Spanish aggregate productivity is also driven by the behavior of firm-level total factor productivity (TFP), and by composition effects. By combining firm-level information on balance sheet items, collective agreements and imports/exports, we document that firm TFP is positively correlated to firm-specific collective agreements and access to external markets during the whole period. In addition, our estimates indicate that firm TFP was negatively correlated to the proportion of temporary workers during the expansionary period (1995-2007), but positively correlated during the crisis (2008-2012).
    Keywords: labor productivity, TFP, temporary workers, collective agreements, exporting firms
    Date: 2015–06
  3. By: Bryson, Alex; Forth, John
    Abstract: The 2008 Great Recession was notable in the UK for three things: the enormity of the output shock; the muted unemployment response; and the very slow rate of recovery. We review the literature which finds most of the decline in productivity is within sector and within firm before presenting new micro-analysis of workplace-level behaviour between 2004 and 2011 to gain insights into the processes that may have contributed to this aggregate picture. We find clear evidence of labour intensification but employers appeared incapable of turning this effort into improved workplace level productivity. Widespread pay freezes and cuts were often initiated in direct response to the recession. Workplace closure rates were little different to those experienced prior to the recession, but there is some evidence of a "cleansing" effect with poorer performing workplaces being more likely to close. There is some evidence of labour "hoarding", especially hoarding of high skilled labour: this has had no discernible impact on the rate of innovation. There is no impact of recession on either the number of HRM practices workplaces invested in, nor their returns on those investments. There is no evidence that workplaces have benefitted from Britain's "flexible" labour market as indicated by using recruitment channels used by welfare recipients or the use of numerically flexible workers. On the contrary, workplaces with increasing unionisation appeared to benefit in terms of improved workplace performance.
    Keywords: productivity, recession
    Date: 2015–06
  4. By: Miguel Sarmiento (Banco de la República, Colombia and Tilburg University); Jorge E. Galán (Banco de España)
    Abstract: This paper presents a stochastic frontier model with random inefficiency parameters which captures the influence of risk-taking on bank efficiency and distinguishes the effects among banks with different characteristics. The model is fitted to a 10-year sample of Colombian banks. Cost and profit efficiency are found to be over and underestimated, respectively, when risk measures are omitted or are not accurately modelled. Moreover, the magnitudes at which similar levels of risk affect bank efficiency vary with size and affiliation. In particular, domestic and small Colombian banks benefit more from being highly capitalised, while large and foreign banks benefit from higher exposure to credit and market risk. Holding more liquid assets is found to affect efficiency only at domestic banks. Lastly, we identify some channels that can explain these differences and provide insights for prudential regulation.
    Keywords: bank efficiency, Bayesian inference, heterogeneity, random parameters, risktaking, stochastic frontier models
    JEL: C11 C23 C51 D24 G21 G32
    Date: 2015–12
  5. By: Ilya Lokshin (National Research University Higher School of Economics)
    Abstract: The paper proposes an outline for the link between two theoretical perspectives on the prerequisites of high institutional quality and long run growth. One framework is based on the tradeoff between disorder and dictatorship and introduces the notion of the institutional possibility frontier, another perspective focuses upon the role of total factor productivity as a parameter underlying long run growth. The connection between these frameworks is proposed and elaborated. The paper sheds some light on the nature of total factor productivity and designates the directions for further research on fundamental conditions of high-quality development
    Keywords: total factor productivity, institutional possibility frontier, social capital
    JEL: E02 Y90
    Date: 2015
  6. By: Karl Aiginger; Susanne Bärenthaler-Sieber; Johanna Vogel
    Abstract: This paper aims to redefine the term competitiveness to enhance its usefulness for the evaluation of country performance and for policy conclusions. We attempt to establish a definition that is adequate if economic policy strives for a new growth path that is more dynamic, socially inclusive and ecologically sustainable. We tentatively apply the proposed definition to evaluate the "competitiveness" of EU member states as well as to compare Europe's "competitiveness" with that of the US (and, where possible, with Switzerland, Japan and China). In the first part of the paper, we examine the evolution of the concept from a focus on "inputs" at the firm level (price or cost competitiveness) to economic structure and capabilities at the country level and finally to "outcome" competitiveness, where outcomes are defined in a broad sense and in the context of the WWWforEurope project. We propose to define competitiveness as the "ability of a country (region, location) to deliver the beyond-GDP goals for its citizens". In the second part of the paper, the performance of the EU-27 countries is assessed along the dimensions described above. We begin with price competitiveness and then proceed to economic structure and countries’ capabilities regarding innovation, education, the social system, institutions and environmental ambition. We conclude with outcome competitiveness in terms of economic, social and ecological outcomes. Overall, we compile a database of 68 indicators that describe these different aspects of competitiveness. In the third part of the paper, we investigate empirically the relationship between "outcome" and "input" competitiveness for the EU-27 using panel data analysis for the period from 2000 to 2010. We construct a composite indicator for outcome competitiveness consisting of income, social and ecological pillars, following the beyond-GDP literature. This measure is then econometrically related to composite indicators of the three groups of input indicators: price competitiveness, economic structure, and capabilities. The results of panel OLS regressions suggest that both economic structure and capabilities on aggregate are positively related to our measure of outcome competitiveness, while a negative relationship is found for the wage component of price competitiveness. Among the different dimensions of capabilities, ecological preferences and – less robustly – institutions appear to be positively associated with outcome competitiveness.
    Keywords: Competitiveness, economic growth path, industrial policy, social capital as growth driver, sustainable growth
    JEL: O25 L16
    Date: 2015–12
  7. 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: H23 R12 R23 R50
    Date: 2015–07
  8. By: Askenazy, Philippe; Erhel, Christine
    Abstract: Since 2008, France experiences a sharp productivity slowdown. Both output per hour and total factor productivity are particularly deceptive in the market economy. This recent trend contrasts with the acceleration of productivity during the previous crisis in the 1990’s and the continuous increase during the following decade. This text provides the first comprehensive exploration of this puzzling break. The direct impacts of the Great Recession on industry composition or reallocation of capital are not significant suspects for a slowdown occurring across business activities. Labour market mechanisms are better candidates. On the one hand, the French labour market policy has massively boosted the creation of low-productive jobs including very-short term employees and self-employed workers. On the other hand, firms, which benefit from massive tax cuts, have hoarded their high-skilled workforce. In addition, the spread of innovative HRM incentives, e.g. employee shareholding, seems to have turned productivity more sensitive to the business cycle (and especially to the fall of stock markets).
    Keywords: productivity puzzle, France, labour market policies, great recession
    Date: 2015–06
  9. By: Aravena, Claudio; Hofman, André A.; Fernández de Guevara, Juan; Mas, Matilde (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: This paper develops a framework to analyze the potential of different variables to increase total factor productivity (TFP) growth in countries with poor productivity performance. It takes an industry level approach for a set of countries used as a benchmark. The information comes from the EU KLEMS and LA KLEMS databases. Once this influence is measured, the difference in the scores of each variable in four Latin American countries (Argentina, Brazil, Chile and Mexico) with respect to the benchmark is used to test their potential for increasing productivity growth. Results show that, the top priorities for these four countries are to improve the labour market, to reduce the share of self-employed people and to modernize the functioning of their economic systems. Our results also indicate that the intensification of investment in ICT and R&D activities is a key instrument for promoting growth. Public policies should also aim to encourage a higher endowment of Internet infrastructures and their use.
    Date: 2014–06
  10. By: Martina Jasova (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper explores the role of private credit variables as early warning indicators (EWIs) of banking crises in context of emerging economies. The performance is evaluated by using receiver operating characteristics (ROC) curve and area under the curve (AUC) on long series on credit to the private non-financial sector. The results suggest that credit-to-GDP gap as proposed by Basel III may not be the best performing indicator to signal future banking distress in case of emerging economies. Credit growth outperforms credit-to-GDP gap in all time horizon. These findings are particularly important as they challenge the literature published on EWIs in emerged economies and highlight the need to use complementary indicators and multivariate analysis especially in the environment of emerging economies.
    Keywords: Early warning indicators, credit-to-GDP, countercyclical capital buffer, emerging markets, ROC, area under the curve
    JEL: C33 G01 G28
    Date: 2015–11
  11. By: Thomas Kemeny; Abigail Cooke
    Abstract: Using comprehensive longitudinal matched employer-employee data for the U.S., this paper provides new evidence on the relationship between productivity and immigration-spawned urban diversity. Existing empirical work has uncovered a robust positive correlation between productivity and immigrant diversity, supporting theory suggesting that diversity acts as a local public good that makes workers more productive by enlarging the pool of knowledge available to them, as well as by fostering opportunities for them to recombine ideas to generate novelty. This paper makes several empirical and conceptual contributions. First, it improves on existing empirical work by addressing various sources of potential bias, especially from unobserved heterogeneity among individuals, work establishments, and cities. Second, it augments identification by using longitudinal data that permits examination of how diversity and productivity co-move. Third, the paper seeks to reveal whether diversity acts upon productivity chiefly at the scale of the city or the workplace. Findings confirm that urban immigrant diversity produces positive and nontrivial spillovers for U.S. workers. This social return represents a distinct channel through which immigration generates broad-based economic benefits.
    Keywords: immigrants; diversity; productivity; spillovers; cities
    JEL: F22 J61 O18 O4
    Date: 2015–06
  12. By: Mendieta-Muñoz, Ivan
    Abstract: We estimate the rate of growth consistent with a stable unemployment rate for four advanced economies (Canada, Germany, the United Kingdom and the United States) using a Heckman-type two step estimation procedure that deals with the issue of endogenous regressors in a time-varying parameter model. The results show that this rate of growth of potential output has been falling in the four countries of study, so that these countries have been systematically loosing capacity to grow during the postwar era.
    Keywords: potential output growth rate, constant unemployment rate, time-varying parameter models
    JEL: C50 O40 O49
    Date: 2015–12–09
  13. By: Asongu, Simplice; Nwachukwu, Jacinta; Tchamyou, Vanessa
    Abstract: We examine policy thresholds of information sharing for financial development in 53 African countries for the period 2004-2011. Public credit registries (PCR) and private credit bureaus (PCB) are used as proxies for reducing information asymmetry whereas financial development includes all financial dimensions identified by the Financial Development and Structure Database (FDSD) of the World Bank, namely: depth, efficiency, activity and size. The empirical evidence is based on interactive Generalised Methods of Moments with forward orthogonal deviations. The following findings are established. First, PCR and PCB have negative effects on financial depth, with the magnitude of the former higher. Second, contrary to PCR which have insignificant effects, PCB has a negative impact on banking system efficiency. Third, PCR and PCB have negative impacts on financial activity, with the magnitude of the latter higher. Moreover, their marginal effects are negative. Fourth, PCR and PCB have positive effects on financial size, with the effect of the former higher. While marginal effects are positive, corresponding thresholds are not within range. Policy implications are discussed.
    Keywords: Information Asymmetry; Financial Development
    JEL: G20 G29 O16 O55
    Date: 2015–06

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