nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒02‒17
fourteen papers chosen by

  1. The wrong skewness problem in stochastic frontier models: A new approach By Manner, Hans; Hafner, Christian; Simar, Leopold
  2. Productivity Growth and its Sources - A StoNED Metafrontier Analyis of the German Electricity Generating Sector By Seifert, Stefan
  3. Productivity in the Electricity Retail Market: Does Ownership Matter? A Structural Production Function Approach for Germany By Stiel, Caroline; Cullmann, Astrid; Nieswand, Maria
  4. Regional Bank Efficiency and its Effect on Regional Growth in Normal and Bad Times By Haskamp, Ulrich; Setzer, Ralph; Belke, Ansgar
  5. Good Firms, Worker Flows and Local Productivity By Serafinelli, Michel
  6. Do age complementarities affect labour productivity? Evidence from German firm level data By Peters, Cornelius
  7. Global Sourcing of Heterogeneous Firms: Theory and Evidence By Smolka, Marcel; Kohler, Wilhelm
  8. The long-run effect of foreign direct investment on total factor productivity in developing countries: A panel cointegration analysis By Herzer, Dierk
  9. Working Hard in the Wrong Place: A Mismatch-Based Explanation to the UK Productivity Puzzle By Patterson, Christina; Sahin, Aysegül; Topa, Giorgio; Violante, Giovanni L.
  10. International Knowledge Spillovers: The Benefits from Employing Immigrants By Hiller, Sanne; Bitzer, Jürgen; Gören, Erkan
  11. Productivity Shocks, International Trade and Import Prices: Evidence from Agriculture By Ferguson, Shon; Gars, Johan
  12. Not Working at Work: Loafing, Unemployment and Labor Productivity By Burda, Michael Christopher; Genadek, Katie; Hamermesh, Daniel
  13. Is Offshoring Beneficial or Detrimental to Innovation in Developed Countries? By Fritsch, Ursula
  14. Firm R&D Investment and Export Market Exposure By Vuong, Van Anh; Peters, Bettina; Roberts, Mark

  1. By: Manner, Hans; Hafner, Christian; Simar, Leopold
    Abstract: Stochastic frontier models are widely used to measure, e.g., technical efficiencies of firms. The classical stochastic frontier model often suffers from the empirical artefact that the residuals of the production function may have a positive skewness, whereas a negative one is expected under the model, which leads to estimated full efficiencies of all firms. We propose a new approach to the problem by generalizing the distribution used for the inefficiency variable. This generalized stochastic frontier model allows the sample data to have the wrong skewness while estimating well-defined and non-degenerate efficiency measures. We discuss the statistical properties of the model and we discuss a test for the symmetry of the error term (no inefficiency). We provide a simulation study to show that our model delivers estimators of efficiency with smaller bias than those of the classical model even if the population skewness has the correct sign. Finally, we apply the model to data of the U.S. textile industry for 1958-2005, and show that for a number of years our model suggests technical efficiencies well below the frontier, while the classical one estimates no inefficiency in those years.
    JEL: C13 C18 D24
    Date: 2015
  2. By: Seifert, Stefan
    Abstract: Energy supply in Germany has undergone considerable changes during the last decade, of which especially the nuclear phase-out and enormous installations of renewable energy sources pose new challenges for conventional combustion technologies. To analyze potential adaption processes due to this changing market conditions, this paper analyzes productivity change and its components in the German electricity and heat generation sector. A unique panel data set of 1555 power plants in Germany between 2003 and 2010 allows to estimate production frontiers for coal, lignite, gas and biomass fired power plants. Production functions are estimated using stochastic non-smooth envelopment of data (StoNED) in a meta-frontier framework. Productivity developments and its components are assessed at quantiles of the input value distributions of the different technologies using a metafrontier Malmquist decomposition. Results indicate (1) a dominant position of gas-fired plants in the metafrontier, (2) productivity changes for all technologies and reductions in production potentials (3) a catch-up for biomass plants to the other technologies.
    JEL: L94 D24 C14
    Date: 2015
  3. By: Stiel, Caroline; Cullmann, Astrid; Nieswand, Maria
    Abstract: This paper examines firm-level productivity for German electricity retailers using a structural production function approach. The sector was subject to fundamental changes in market structure after retail liberalization in 1998. Competition was supposed to increase productivity and reduce retail prices. Despite increased competition, public firms are still accused of being less productive than private firms, although empirical evidence is missing. Based on a theory-driven robust empirical model we test the hypothesis whether ownership has a significant impact on the retailers' productivity. We derive an innovative production function for the retail sector using labour and external services as main inputs. Our econometric model builds on the recently developed control function approach which allows us to correct for the bias which arises when unobserved factors (such as the firm level productivity) are correlated with input choice. We use a proxy function for productivity which relies on deflated expenditure for external services and control for the effect of ownership in the law of motion for productivity. We use a new and unique dataset on German utilities provided by the German Federal Statistical Office which covers the years 2003 to 2012. Empirical results show that firm-level productivity increased during 2004 and 2008 but fell after 2009. We do not find any evidence for ownership having an impact on productivity.
    JEL: D24 C23 L94
    Date: 2015
  4. By: Haskamp, Ulrich; Setzer, Ralph; Belke, Ansgar
    Abstract: The financial crisis affected regions in Europe in a different magnitude. We examine whether regions which incorporate banks with a higher intermediation quality grow faster using a sample which includes the aftermath of the financial crisis. We measure the intermediation quality of a bank by estimating a its profit and cost efficiency. Next, we aggregate the efficiencies of all banks within a NUTS 2 region to obtain a regional proxy for financial quality in twelve European countries. Our results show that relatively more profit efficient banks foster the economic growth in their region. The link between financial quality and growth is valid in normal times as well as in bad ones.
    JEL: G21 O47 O52
    Date: 2015
  5. By: Serafinelli, Michel
    Abstract: A consensus has emerged that agglomeration economies are an important factor explaining why firms cluster next to each other. Yet disagreement remains over the sources of these agglomeration effects, given non-trivial measurement challenges. 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 as-sess 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 of 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, primarily due to unobservable firm-level productivity shocks correlated with hiring, I use a novel instrumental vari- able strategy, which exploits downsizing events at highly productive firms, in addition to control function methods in the spirit of the productivity literature. My findings from both approaches imply that worker flows can explain around 10 percent of the productivity gains experienced by other firms when new highly productive firms are added to a local labor market.
    JEL: R10 D24 J31
    Date: 2015
  6. By: Peters, Cornelius
    Abstract: In Germany as in many other European countries there will be a shift in the age structure of the workforce in the next decades. The number of older workers will increase whereas the number of young and middle aged workers will decline. This paper provides evidence how the demographic ageing affects labor productivity. It focuses on age complementarities between workers. Using a cross sectional linked employer-employee data set from 2012 translog cost functions are estimated. To maintain consistency with microeconomic theory, several parameter constraints are imposed. To control for the skill level of the workers a nested production structure is applied. In addition, this allows to analyse the complementarities between different age groups by skill level. Based on the estimated parameters pairwise elasticities of complementarity and factor price elasticities are calculated. The results indicate that workers belonging to different age groups are complementary factors. The complementarities especially arise between young and medium aged workers and are higher within groups of high skilled labor. Simulating the expected shift in the age structure due to the demographic ageing indicates that the productivity of younger and middle aged workers will increase whereas the productivity of older workers will decline due to the complementary relationship between the different age groups.
    JEL: C31 D24 J11
    Date: 2015
  7. By: Smolka, Marcel; Kohler, Wilhelm
    Abstract: This paper investigates the role of firm productivity in drawing firm boundaries in global sourcing. Our analysis focuses on how productivity affects the allocation of ownership rights between the headquarter of a firm and its intermediate input supplier (vertical integration vs. outsourcing), as well as the location of intermediate input production (offshore vs. domestic). Unlike previous work, we allow for a fully flexible productivity effect with varying magnitude and sign across different industries. Our estimation strategy is motivated by the canonical economic model of sourcing due to Antr s & Helpman (2004). This model invokes the property rights theory of the firm in order to pin down firm boundaries as the outcome of an interaction between firm heterogeneity and the industry's sourcing intensity (i.e. the importance of inputs sourced from suppliers relative to headquarter inputs). We demonstrate that, at the level of the firm, the model implies a productivity effect that varies not just in magnitude (and potentially non-monotonically), but also in sign with the sourcing intensity of the industry. To estimate the effects empirically, we use Spanish firm-level data from the Encuesta sobre Estrategias Empresariales (ESEE). We find a pattern of effects whereby productivity stimulates vertical integration in industries of low sourcing intensity, but favors outsourcing in industries of high sourcing intensity. Moreover, we find that productivity boosts offshoring throughout all industries, with the effect increasing monotonically in the sourcing intensity. Our results lend strong empirical support to the property rights view of the firm in the global economy.
    JEL: F12 F23 L22
    Date: 2015
  8. By: Herzer, Dierk
    Abstract: This paper examines the long-run effect of the level of foreign direct investment (FDI) on the level of total factor productivity (TFP) for 70 developing countries for the period 1981-2011 using panel cointegration techniques. It is found that (i) FDI has, on average, a negative long-run effect on TFP in developing countries; (ii) causality runs in only one direction, from FDI to TFP, and (iii) the long-run effect of FDI of TFP differs between selected groups of countries: while the estimated long-run FDI-TFP coefficients are significantly negative for subsamples of countries with lower levels of human capital, financial development, and trade openness, the coefficients are insignificant or significantly positive for subgroups of countries with higher levels of human capital, financial development, and trade openness.
    JEL: F21 O47 C23
    Date: 2015
  9. By: Patterson, Christina (Massachusetts Institute of Technology); Sahin, Aysegül (Federal Reserve Bank of New York); Topa, Giorgio (Federal Reserve Bank of New York); Violante, Giovanni L. (New York University)
    Abstract: The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this "productivity puzzle." If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors, and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two thirds of the deviations from trend-growth in UK labor productivity since 2007.
    Keywords: misallocation, productivity
    JEL: E24 E32 J24
    Date: 2016–01
  10. By: Hiller, Sanne; Bitzer, Jürgen; Gören, Erkan
    Abstract: This paper explores the role of immigrant employees for a firm's capability to absorb international knowledge. Using matched employer-employee data from Denmark for the years 1999 to 2009, we are able to show that non-Danish employees from technological advanced countries contribute significantly to firm's economic output through their ability to access international knowledge. The empirical results suggest that the immigrants' impact increases if they come from technological advanced countries, have a high educational level, and are employed in high-skilled positions. However, the latter does not hold for immigrant managers.
    JEL: D20 J82 L20
    Date: 2015
  11. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Gars, Johan (GEDB)
    Abstract: The purpose of this study is to measure the sensitivity of trade volumes and unit values to agricultural productivity shocks at home and abroad. We find that the unit values of trade flows vary systematically with production shocks using both aggregate data on a large sample of countries and detailed firm-level imports to Sweden. We find that import prices increase (and import volumes fall) when importer production increases. This result is likely driven by a change in the quality composition of imports or by economies of scale in international trade. This beneficial terms-of-trade effect that we find may thus be an important coping mechanism for food net-importing countries that experience negative production shocks. Our results also suggest that trade volumes are relatively insensitive to changes in production. The results suggest that trade frictions, product differentiation and storage limit the role of international trade as way of coping with production volatility.
    Keywords: Climate shocks; Pass-through; Quality sorting; Agricultural trade
    JEL: F14 F18 Q11 Q17 Q18
    Date: 2016–02–03
  12. By: Burda, Michael Christopher; Genadek, Katie; Hamermesh, Daniel
    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 co-varies positively with the local unemployment rate. While the fraction of workers who spend some time in non-work varies pro-cyclically, the average time spent by workers in non-work conditional on any positive non-work varies countercyclically. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model also predicts relationships of the incidence and conditional amounts of non-work with wage rates and unemployment benefits that are observed in links of the ATUS to data characterizing states unemployment insurance schemes.
    JEL: J22 E24 J30
    Date: 2015
  13. By: Fritsch, Ursula
    Abstract: This paper empirically investigates the effects of offshoring on innovation in a sample of 18 developed countries. Offshoring of services relates positively to innovation whereas offshoring of manufacturing depicts a negative relation with innovation. Solely offshoring manufacturing to high-income countries is found to be detrimental to domestic innovation, but not offshoring of manufacturing to emerging countries. These results are robust to an instrumental variables approach. Labor market dynamics can mitigate or even reverse these negative effects of offshoring of manufacturing if skill upgrading takes place simultaneously. This paper documents that innovation effects differ from the positive productivity effects found in earlier research and suggests that policy makers should take these different effects into account when designing a regulatory framework for further trade integration.
    JEL: F14 F16 O30
    Date: 2015
  14. By: Vuong, Van Anh; Peters, Bettina; Roberts, Mark
    Abstract: In this paper, we estimate a dynamic structural model of a rm s decision to invest in R&D and use it to measure the expected long-run bene t from R&D investment. We apply the model to German rms in ve high-tech manufacturing industries and distinguish rms by whether they sell in just the domestic market or also export some of their production. We nd that R&D investment leads to a higher rate of product and process innovation among exporting rms and these innovations have a larger impact on productivity improvement in export market sales. As a result, exporting rms have a higher payo from R&D investment, invest in R&D more frequently than rms that only sell in the domestic market, and, subsequently, have higher rates of productivity growth. The endogenous investment in R&D is an important mechanism that leads to a divergence in the long-run performance of rms that di er in their export market exposure.
    JEL: L60 O31 O33
    Date: 2015

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