nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒03‒29
fourteen papers chosen by

  1. Sources of carbon productivity change: A decomposition and disaggregation analysis based on global Luenberger productivity indicator and endogenous directional distance function By Ke Wang; Yujiao Xian; Yi-Ming Wei; Zhimin Huang
  2. Earnings quality and performance in the banking industry: A profit frontier approach By Emili Tortosa-Ausina; Diego Prior Jiménez
  3. Innovation in Green Energy Technologies and the Economic Performance of Firms By Kruse, Juergen
  4. Time substitution for environmental performance: The case of Sweden manufacturing By Bostian, Moriah; Färe, Rolf; Grosskopf, Shawna; Lundgren, Tommy; Weber, William L.
  5. The effect of board directors from countries with different genetic diversity levels on corporate performance By Delis, Manthos D.; Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios
  6. Understanding the Cross-country Productivity Gap of Exporters By KIYOTA Kozo; MATSUURA Toshiyuki; Lionel NESTA
  7. Does the United States have a Productivity Slowdown or a Measurement Problem By Byrne, David M.; Reinsdorf, Marshall B.; Fernald, John G.
  8. Main determinants acquisition of skills in Latin America: a multilevel analysis from the results PISA 2012 By Geovanny Castro Aristizabal; Maribel Castillo Caicedo; Julie Carolina Mendoza Parra
  9. Investigating the Influence of Firm Characteristics on the Ability to Exercise Market Power - A Stochastic Frontier Analysis Approach with an Application to the Iron Ore Market By Germeshausen, Robert; Panke, Timo; Wetzel, Heike
  10. Measuring School Demand in the Presence of Spatial Dependence. A Conditional Approach. By Laura López-Torres; Diego Prior Jiménez
  11. Finding the Right Yardstick: Regulation under Heterogeneous Environments By Endre Björndal; Mette Bjoerndal; Astrid Cullmann; Maria Nieswand
  12. Voters' Information, Corruption, and the Efficiency of Local Public Services By Graziano Abrate; Federico Boffa; Fabrizio Erbetta; Davide Vannoni
  13. Business Practices in Small Firms in Developing Countries By McKenzie, David; Woodruff, Christopher
  14. Firms’ risk endogenous to strategic management choices By Delis, Manthos D.; Hasan, Iftekhar; Tsionas, Efthymios G.

  1. By: Ke Wang; Yujiao Xian; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology); Zhimin Huang
    Abstract: The measurement of carbon productivity makes the effort of global climate change mitigation accountable and helps to formulate policies and prioritize actions for economic growth, energy conservation, and carbon emissions control. Previous studies arbitrarily predetermined the directions of directional distance function in calculating the carbon productivity indicator, and the traditional carbon productivity indicator itself is not capable of identifying the contribution of different energy driven carbon emissions in carbon productivity change. Through utilizing an endogenous directional distance function selecting approach and a global productivity index, this paper proposes a global Luenberger carbon productivity indicator for computing carbon productivity change. This carbon productivity indicator can be further decomposed into three components that respectively identify the best practice gap change, pure efficiency change, and scale efficiency change. Moreover, the carbon productivity indicator is shown as a combination of individual carbon emissions productivity indicators that account for the contribution of different fossil fuel driven carbon emissions (i.e. coal driven CO2, oil driven CO2, and natural gas driven CO2) toward the carbon productivity change. Our carbon productivity indicator is employed to measure and decompose the carbon productivity changes of 37 major carbon emitting countries and regions over 1995¨C2009. The main findings include: (i) Endogenous directions identifying the largest improvement potentials are noticeably different from exogenous directions in estimating the inefficiencies of undesirable outputs. (ii) Carbon productivity indicator calculated with the consideration of emission structure provides a more significant estimation on productivity change. (iii) The aggregated carbon productivity and the specific energy driven carbon productivities significantly improve over our study period which are primarily attributed to technical progress. (iv) Empirical results imply that policies focused on researching and developing energy utilization and carbon control technologies might not be enough; it is also essential to encourage technical efficiency catching-up and economic scale management.
    Keywords: Data envelopment analysis (DEA); Energy driven carbon emissions; Efficiency change; Best practice gap change
    JEL: Q54 Q40
    Date: 2016–03–05
  2. By: Emili Tortosa-Ausina (Universitat Jaume I and Ivie); Diego Prior Jiménez (Business Department, Universitat Autònoma de Barcelona)
    Abstract: The analysis of efficiency and productivity in banking has received a great deal of attention for almost three decades now. However, most of the literature to date has not explicitly accounted for risk when measuring efficiency. We propose an analysis of profit efficiency taking into account how the inclusion of a variety of bank risk measures might bias efficiency scores. Our measures of risk are partly inspired by the literature on earnings managemen t and earnings quality, keeping in mind that loan loss provisions, as a generally accepted proxy for risk, can be adjusted to manage earn-ings and regulatory capital. We also consider some variants of traditional models of profit efficiency where different regimes are stipulated so that financial institutions can be evaluated in different dimensions—i.e., prices, quantities, or prices and quantities simultaneously. We perform this analysis on the Spanish banking industry, whose institutions have been deeply affected by the current international financial crisis, and where re-regulation is taking place. Our results can be explored in multiple dimensions but, in general, they indicate that the impact of earnings management on profit efficiency is of less magnitude than what might a prioribe expected, and that on the hole, savings banks have performed less well than commercial banks. However, savings banks are adapting to the new regulatory scenario and rapidly catching up with commercial banks, especially in some dimensions of performance.
    Keywords: bank, efficiency, loan loss provision, profit, risk
    JEL: C14 C61 G21 L50
    Date: 2014–11
  3. By: Kruse, Juergen (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: In this article, I empirically analyze and compare the impact of innovation in green and non-green energy technologies on the economic performance of firms. My analysis is conducted on a panel of 8,619 patenting firms including 968 green energy patenters from 22 European countries over the period 2003 to 2010. I measure economic firm performance in terms of productivity and use a panel data model based on an extended Cobb-Douglas production function. My results show that green energy innovation has a statistically significant negative impact on economic firm performance. In contrast, non-green energy innovation is shown to have a statistically significant positive impact on economic firm performance. These findings suggest that private economic returns in terms of productivity are lower for green energy than for non-green energy innovation.
    Keywords: green energy technologies; innovation; performance; patents; technological change
    JEL: C33 L25 O31 Q40 Q55
    Date: 2016–02–24
  4. By: Bostian, Moriah (Department of Economics, Lewis & Clark College); Färe, Rolf (Department of Economics, Oregon State University); Grosskopf, Shawna (CERE and Department of Economics, Oregon State University); Lundgren, Tommy (CERE); Weber, William L. (Department of Economics and Finance, Southeast Missouri State University)
    Abstract: We apply recent advances in time substitution modeling to examine the environmental performance of firms in Sweden’s pulp and paper industry for the years 2002 - 2008. Our data allow us to estimate the optimal reallocation of environmental investments, expenditures and energy use to simultaneously maximize production output and minimize emissions reductions in the years immediately before and after the implementation of the European Union Emissions Trading Scheme. We find some evidence of overall productivity decline when considering both emissions and output objectives, due primarily to technological decline, and that cumulative dynamic inefficiency outweighs static inefficiency. A comparison of optimal investment time paths to observed investment levels indicates that firms could have improved their performance by reallocating environmental investments to early periods and production-oriented investment to later periods.
    Keywords: Time Substitution; Dynamic Efficiency; Environmental Performance; Environmental Investment; DEA
    JEL: D22 D24 M14 Q40 Q41
    Date: 2016–02–22
  5. By: Delis, Manthos D.; Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios
    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
    Date: 2015–08–17
  6. By: KIYOTA Kozo; MATSUURA Toshiyuki; Lionel NESTA
    Abstract: This paper develops a framework that decomposes the international productivity gap of exporters into a selection effect and a competitiveness effect. This framework implies that the international productivity gap of exporters between two countries can be explained by three variables: the average productivity gap, the export participation rates, and the export premia within each country. The empirical analysis reveals that the exporters' productivity gap does not exclusively reflect the competitiveness of the industry, mainly because of the selection effect. These results imply that both the competitiveness and selection effects matter for explaining the cross-country productivity gap of exporters.
    Date: 2016–03
  7. By: Byrne, David M. (Board of Governors of the Federal Reserve System (U.S.)); Reinsdorf, Marshall B. (International Monetary Fund); Fernald, John G. (Federal Reserve Bank of San Francisco)
    Abstract: After 2004, measured growth in labor productivity and total-factor productivity (TFP) slowed. We find little evidence that the slowdown arises from growing mismeasurement of the gains from innovation in IT-related goods and services. First, mismeasurement of IT hardware is significant prior to the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995-2004 period than since, despite mismeasurement worsening for some types of IT--so our adjustments make the slowdown in labor productivity worse. The effect on TFP is more muted. Second, many of the tremendous consumer benefits from smartphones, Google searches, and Facebook are, conceptually, non-market: Consumers are more productive in using their nonmarket time to produce services they value. These benefits do not mean that market-sector production functions are shifting out more rapidly than measured, even if consumer welfare is rising. Still, gains in non-market production appear too small to compensate for the loss in overall wellbeing from slower market-sector productivity growth. Third, other measurement issues we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown. Finally, we suggest high-priority areas for future research.
    Keywords: Information technology; Measurement; Non-market production; Prices; Productivity
    Date: 2016–03–04
  8. By: Geovanny Castro Aristizabal; Maribel Castillo Caicedo; Julie Carolina Mendoza Parra (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali)
    Abstract: Using a random predictor model, on two levels, to analyze the PISA 2012 for the Latin American countries results we found that the main determinants of school performance are gender, condition of not repeater and quality of school materials. In addition, it was determined that the variability in skills acquisition is explained, in a smaller proportion, by the heterogeneity in the characteristics of the students. Finally, it was estimated that private schools have a better performance than public ones, where Brazil, Costa Rica and Uruguay were the countries with the highest educational inequality. Keywords: skills acquisition, educational production function, multilevel models, PISA, Latin America.
    Keywords: Skills acquisition, educational production function, multilevel models, PISA, Latin America.
    JEL: C13 C29 I21 I29
    Date: 2016–03
  9. By: Germeshausen, Robert (Center of European Economic Research (ZEW)); Panke, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Wetzel, Heike (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: This paper empirically analyzes the existence of market power in the global iron ore market dur- ing the period 1993-2012 using an innovative Stochastic Frontier Analysis approach introduced by Kumbhakar et al. (2012). In contrast to traditional econometric procedures, this approach allows for the estimation of firm- and time-specific Lerner indices and, therefore, the assessment of the influence of individual firm characteristics on the ability to generate markups. We find that markups on average amount to 20%. Moreover, location and experience are identified to be the most important determinants of the magnitude of firm-specific markups.
    Keywords: estimation of market power; Lerner indices; Stochastic Frontier Analysis; non-renewable resources
    JEL: D22 L11 L72
    Date: 2014–12–16
  10. By: Laura López-Torres; Diego Prior Jiménez (Business Department, Universitat Autónoma de Barcelona)
    Abstract: Improving educational quality is an important public policy goal. However, its success requires identifying factors associated with student achievement. At the core of these proposals lies the principle that increased public school quality can make school system more efficient, resulting in correspondingly stronger performance by students. Nevertheless, the public educational system is not devoid of competition which arises, among other factors, through the efficiency of management and the geographical location of schools. Moreover, families in Spain appear to choose a school on the grounds of location. In this environment, the objective of this paper is to analyze whether geographical space has an impact on the relationship between the level of technical qu ality of public schools (measured by the efficiency score) and the school demand index. To do this, an empirical application is performed on a sample of 1,695 public schools in the region of Catalonia (Spain). This application shows the effects of spatial autocorrelation on the estimation of the parameters and how these problems are addressed through spatial econometrics models. The results confirm that space has a moderating effect on the relationship between efficiency and school demand, although only in urban unicipalities.
    Keywords: school efficiency, school demand, spatial econometrics, spatial dependence
    JEL: C14 C21 C61 C67 I21
    Date: 2014–06
  11. By: Endre Björndal; Mette Bjoerndal; Astrid Cullmann; Maria Nieswand
    Abstract: Revenue cap regulation is often combined with systematic benchmarking to reveal the managerial inefficiencies when regulating natural monopolies. One example is the European energy sector, where benchmarking methods are based on actual cost data, which are influenced by managerial inefficiency as well as operational heterogeneity. This paper demonstrates how a conditional nonparametric method, which allows the comparison of firms operating under heterogeneous technologies, can be used to estimate managerial inefficiency. A dataset of 123 distribution firms in Norway is used to show aggregate and firm-specific effects of conditioning. By comparing the unconditional model to our proposed conditional model and the model presently used by the Norwegian regulator, we see that the use of conditional benchmarking methods in revenue cap regulation may effectively distinguish between managerial inefficiency and operational heterogeneity. This distinction leads first to a decrease in aggregate efficient costs and second to a reallocation effect that affects the relative profitability of firms and relative customer prices, thus providing a fairer basis for setting revenue caps.
    Keywords: Data Envelopment Analysis, Yardstick Regulation, Electricity Distribution
    JEL: L94 C44 L51
    Date: 2016
  12. By: Graziano Abrate (Department of Economics and Business, University of Piemonte Orientale, Italy); Federico Boffa (School of Economics and Managment, Free University of Bolzano, Italy); Fabrizio Erbetta (Department of Economics and Business, University of Piemonte Orientale, Italy); Davide Vannoni (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: This paper explores the link between voters’ information, corruption and efficiency in the context of a career concern model where politically connected local monopolies are in charge of the provision of a local public service. We find that both a corrupt environment and a low level of voters’ information on managerial actions induce managers to reduce effort levels, thereby contributing to drive down efficiency. We test our predictions using data on solid waste management services provided by a large sample of Italian municipalities. We estimate a stochastic cost frontier model that provides robust evidence that services provided in more corrupt regions and in regions with low voters’ information are substantially less cost efficient. We show that the negative impact of a corrupt environment is weaker for municipalities ruled by left-wing parties, while the positive impact of voters’ information is larger if the waste collection service is managed by limited liability companies. We finally quantify potential cost savings associated to operating in a less corrupt environment and in one in which voters are more informed through a simulation on six major Italian cities. The magnitude of the figures suggests that effective anti-corruption measures, and/or carefully designed incentives for citizens to acquire information, can generate significant economic benefits.
    Keywords: Corruption, Voters’ Information, Efficiency, Solid Waste.
    JEL: D24 D72 D73 L25 Q53
    Date: 2016–03
  13. By: McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick)
    Abstract: Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The association of business practices with firm outcomes is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices.
    Keywords: business practices; small enterprises; productivity; management JEL Classification: O12; L26; M20; O17; M53.
    Date: 2016
  14. By: Delis, Manthos D.; Hasan, Iftekhar; Tsionas, Efthymios G.
    Abstract: Use of variability of profits and other accounting-based ratios in order to estimate a firm's risk of insolvency is a well-established concept in management and economics. This paper argues that these measures fail to approximate the true level of risk accurately because managers consider other strategic choices and goals when making risky decisions. Instead, we propose an econometric model that incorporates current and past strategic choices to estimate risk from the profit function. Specifically, we extend the well-established multiplicative error model to allow for the endogeneity of the uncertainty component. We demonstrate the power of the model using a large sample of U.S. banks, and show that our estimates predict the accelerated bank risk that led to the subprime crisis in 2007. Our measure of risk also predicts the probability of bank default both in the period of the default, but also well in advance of this default and before conventional measures of bank risk.
    Keywords: risk, strategic management, endogenous, profit function
    Date: 2015–08–20

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