nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒04‒23
eighteen papers chosen by

  1. Trade Liberalization and Industrial Productivity: Evidence from Pakistan By Ahmed, Gulzar; Arshad Khan, Muhammad; Afzal, Muhammad
  2. Does environmental policy stringency foster innovation and productivity in OECD countries? By Morales-Lage, Rafael; Bengochea-Morancho, Aurelia; Martínez-Zarzoso, Inmaculada
  3. Isoelastic Elasticity of Substitution Production Functions By Jakub Growiec; Jakub Muck
  4. Networks of Enterprises and Innovations: Evidence from SMEs in Vietnam By Doan, Quang Hung; Vu, Hoang Nam
  5. The Effect of Local Taxes on Firm Performance: Evidence from Geo-referenced Data By Federico Belotti; Edoardo Di Porto; Gianluca Santoni
  6. Environmental Policy Design, Innovation And Efficiency Gains In Electricity Generation By Nick Johnstone; Shunsuke Managi; Miguel Cárdenas Rodríguez; Ivan Haščič; Hidemichi Fujii; Martin Souchier
  7. Innovation, Competition and Productivity. Firm Level Evidence for Eastern Europe and Central Asia By Klaus S. Friesenbichler; Michael Peneder
  8. Mergers and Acquisitions in Latin America: Industrial Productivity and Corporate Governance By Lina M. Cortés; Iván A. Durán; Sandra Gaitán-Riaño; Mateo Vasco
  9. Competition makes IT better : evidence on when firms use it more effectively By Iacovone,Leonardo; Pereira Lopez,Mariana De La Paz; Schiffbauer,Marc Tobias
  10. Productivity and organization in Portuguese firms By Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
  11. What type of finance matters for growth ? Bayesian model averaging evidence By Hasan,Iftekhar; Horvath,Roman; Mares,Jan
  12. An Empirical Assessment of Global Capital Productivity By Knolle, Julia; Lehmann, Kai
  13. Determinants of Industrial Coagglomeration and Establishment-level Productivity By Fujii, Daisuke; Nakajima, Kentaro; Saito, Yukiko Umeno
  14. The big trade-off between efficiency and equity - is it there? By Andersen, Torben M; Maibom, Jonas
  15. Competitiveness and current account adjustments in the euro area By Böing, Tobias; Stadtmann, Georg
  16. Exports, Exchange Rates, and Productivity: An analysis of the Japanese manufacturing sectors By KATO Atsuyuki
  17. The Rise and Fall of Exceptional Australian Incomes since 1800 By David Greasley; Jakob B. Madsen
  18. Boards of directors and bank performance in United Arab Emirates By 齋藤, 純

  1. By: Ahmed, Gulzar; Arshad Khan, Muhammad; Afzal, Muhammad
    Abstract: This study examines the impact of trade liberalization on industrial productivity for a panel of twenty seven 3-digit manufacturing industries in Pakistan over the period 1980-2006. Following Olley and Pack’s (1996) Control Function Approach (CFA) we deal with the endogeneity arises from unobserved productivity shocks. Using a variant of Cobb-Douglas production function, in the first step we estimate output elasticities. We find positive output elasticities with respect to labor, capital and raw materials for the pre-trade liberalization period (1981-1995) and post-trade liberalization period (1996-2006). For the pre-liberalization, we observed positive output elasticity with respect to energy, while it turns out to be negative in the post-liberalization period; probably due to energy crisis in Pakistan. In the second stage, we estimate total factor productivity (TFP) and examine the impact of trade liberalization on TFP for pre-and post-trade liberalization regimes. The results reveal that trade liberalization proxied by excise duty has positive but negligible impact on TFP in the pre-as well as post-liberalization periods. On the other hand, effective rate of protection exerts large negative impact on TFP in the post-liberalization than the pre-liberalization period.
    Keywords: Trade Liberalization, Endogeneity and Production Function, Industrial Panel Data
    JEL: C33 D24 F13 L60
    Date: 2015–08–15
  2. By: Morales-Lage, Rafael; Bengochea-Morancho, Aurelia; Martínez-Zarzoso, Inmaculada
    Abstract: In this paper we use panel data models and quantile regressions to test the "weak" and "strong" versions of the Porter hypothesis, using data from 14 OECD countries over the period 1990-2011. A newly-released environmental policy stringency index (EPS) provided by the OECD is used as an indicator of the stringency of environmental regulations in order to tackle endogeneity issues of proxies used in earlier research. The findings indicate that more stringent environmental regulations positively influence R&D expenditure, the number of patent applications and total factor productivity (TFP). The results show that environmental stringency has a positive effect on R&D, mainly for the lower quantiles (0.10, 0.25) of the distribution of R&D, whereas for the number of patent applications and total factor productivity, the effect increases for the highest quantiles (0.75, 0.90) of the distribution of the targeted indicators.
    Keywords: environmental regulations,Porter hypothesis,OECD,innovation,quantile regression
    JEL: Q43 Q48 Q53
    Date: 2016
  3. By: Jakub Growiec; Jakub Muck
    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: 2016–03
  4. By: Doan, Quang Hung; Vu, Hoang Nam
    Abstract: By using the latest dataset from the survey of SMEs conducted in Vietnam in 2011, we show that a firm both participating in a wider network of input suppliers, buyers, and associations of enterprises and conducting innovative activities in production has higher labor productivity than others, implying that networks of enterprises and innovation are complementary to each other in affecting performance of SMEs in Vietnam. We also find that supports of the government including providing better infrastructure to the SMEs and helping the SMEs to be formalized when being established are conducive to the development of the SMEs in Vietnam.
    Keywords: Complementary, supermodularity, Network, Innovation, SMEs.
    JEL: D58 O3
    Date: 2016–01
  5. By: Federico Belotti (CEIS,University of Rome "Tor Vergata"); Edoardo Di Porto (University of Naples Federico II, CSEF and UCFS Uppsala University); Gianluca Santoni (CEPII)
    Abstract: This paper investigates the impact of business property taxation on firms' performance using a panel of italian manufacturing firms. To account for endogeneity in local taxation, we exploit a pairwise spatial differenced generalized method of moments estimator. As well as providing robust inference, we also improve on existing work by exploiting the exogenous variation in local taxes generated by the political alignment of each local government with the central one. We find that property taxation exerts a negative impact on firms' employment, capital and sales to such an extent as to significantly affect total factor productivity.
    Keywords: Local taxation, endogeneity, spatial differencing, two-way clustering.
    JEL: H22 H71 R38
    Date: 2016–04–13
  6. By: Nick Johnstone; Shunsuke Managi; Miguel Cárdenas Rodríguez; Ivan Haščič; Hidemichi Fujii; Martin Souchier
    Abstract: This paper explores the relationship between environmental regulation, innovation, and competitiveness, drawing upon a unique dataset on environmental regulations directed at combustion plants, a global dataset of power plants, and a global dataset of ‘environmental’ patents. The analysis is conducted in two stages. First, a nonparametric frontier analysis is implemented to estimate efficiency scores, including a measure of technological innovation based on patent stocks. Second, econometric methods are applied to analyse the role of policy stringency and policy design on efficiency. Our estimation sample covers thermal power plant sectors in 20 countries from 1990 to 2009. The results show that the stringency of environmental regulations is a significant determinant of productive efficiency with respect to pollutant emissions as well as fuel use. However, these effects turn negative once the level of stringency leaps over a certain threshold. In addition, the paper concludes that the positive effect of regulatory stringency can be diminished by a negative effect of regulatory differentiation with measures which are differentiated across plant size and age having negative consequences, and these effects are increasing over time. This finding is important given the prevalence of size- and vintage-differentiated policies in many countries. Finally, it is found that integrated approaches to environmental innovation are more likely to bring about efficiency improvements than end-of-pipe technologies. Cet article étudie les relations entre réglementation environnementale, innovation et efficacité, en s’appuyant sur un ensemble de données mondiales sur les inventions « environnementales » brevetées et sur les centrales électriques, ainsi que sur un jeu unique de données sur la réglementation environnementale applicable aux installations de combustion. Cette étude comporte deux étapes. Dans un premier temps, des scores d’efficience sont estimés à l’aide d’une analyse non-paramétrique de la frontière efficiente de production, en utilisant notamment des indicateurs d’innovation comme les stocks de brevets. Ensuite, l’impact des politiques environnementales sur ces scores d’efficience est analysé économétriquement. Notre analyse couvre le secteur des centrales thermiques dans 20 pays entre 1990 et 2009. Les résultats montrent que des politiques environnementales contraignantes ont un effet positif sur l’efficacité de la production tant concernant l’émission de polluants que la consommation de carburant. Néanmoins, cet effet devient négatif lorsque la contrainte réglementaire dépasse un certain seuil. Par ailleurs, l’effet positif d’une réglementation contraignante peut être atténué lorsque celle-ci est différentiée en fonction de l’âge ou de la taille de la centrale. Les conséquences négatives d’une telle différentiation se font alors souvent sentir à long terme. Compte tenu de la prédominance d’une telle approche dans de nombreux pays, ce constat invite à une refonte des politiques environnementales en matière de limitation des émissions polluantes. Enfin, il est également constaté que des innovations environnementales intégrées (modifiant l’ensemble de la chaine de production) ont un impact plus important sur l’efficacité de la production que les innovations de fin de processus.
    Keywords: policy design, regulatory differentiation, productive efficiency, environmental innovation, directional distance function, fonction de distance directionnelle, innovation environnementale, élaboration des politiques, efficience productive, différentiation de la réglementation
    JEL: O33 Q48 Q55
    Date: 2016–04–14
  7. By: Klaus S. Friesenbichler (WIFO); Michael Peneder (WIFO)
    Abstract: We investigate the drivers of firm level productivity in catching-up economies by jointly estimating its relationship to innovation and competition using data from the EBRD-WB Business Environment and Enterprise Performance Survey (BEEPS) in Eastern Europe and Central Asia. The findings confirm an inverted-U shaped impact of competition on R&D. Both competition and innovation have a simultaneous positive effect on labour productivity in terms of either sales or value added per employee, as does a high share of university graduates and foreign ownership. Further positive impacts come from firm size, exports, or population density. Innovation and foreign ownership appear to be the strongest drivers of multifactor productivity.
    Keywords: innovation, competition, productivity, development, transition economies, simultaneous system
    Date: 2016–04–13
  8. By: Lina M. Cortés; Iván A. Durán; Sandra Gaitán-Riaño; Mateo Vasco
    Abstract: Abstract: This paper examines the impact of industrial productivity on transnationals M&As from OECD countries towards Latin American countries in the period 1996 to 2010. It also analyzes the relationship between external mechanism of corporate governance and transnational M&As. For this purpose we use a gravitational model at the industry level. We find that industry productivity and higher standards of corporate governance in the country of origin promote transnational M&As activity. However, it is also found that higher levels of capital and technological productivity decreases transnational M&As activity.
    Keywords: Mergers and Acquisitions, Industry Productivity, Corporate Governance
    JEL: F30 G34 L21
    Date: 2016–03–02
  9. By: Iacovone,Leonardo; Pereira Lopez,Mariana De La Paz; Schiffbauer,Marc Tobias
    Abstract: This paper uses a unique firm-level data set for Mexico, with information never used for research before, to assess how use of information technology (IT henceforth) influences firm performance. Further, the paper explores if, in the context of increasing competition from China, this effect is different for firms more strongly affected by competition where incentives for upgrading and innovation may be more intense. In this perspective, the paper analyzes the complementarity between IT and other changes spurred by competition, taking advantage of the exogenous shock generated by Chinese competition. The results indicate that IT use has higher effects over productivity in the case of firms facing higher competition from China, in the domestic market and in the U.S. market. Furthermore, the paper shows how these changes appear to be driven by complementary investments in innovation and organizational changes.
    Keywords: E-Business,ICT Policy and Strategies,Technology Industry,Labor Policies,Knowledge for Development
    Date: 2016–04–13
  10. By: Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
    Abstract: The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.
    Keywords: Productivity; organization; wages; managers; layers; TFP; firm size
    JEL: J1
    Date: 2015–12
  11. By: Hasan,Iftekhar; Horvath,Roman; Mares,Jan
    Abstract: This paper examines 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. These indicators are examined jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once the finance-growth regressions are subjected to model uncertainty,the results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from the global sample indicate that one newly developed indicator -- the efficiency of financial intermediaries -- is robustly related to long-term growth.
    Keywords: Debt Markets,Banks&Banking Reform,Economic Theory&Research,Access to Finance,Pro-Poor Growth
    Date: 2016–04–18
  12. By: Knolle, Julia; Lehmann, Kai
    Abstract: Does the world experience a secular decline in capital productivity? Due to the long-run downward trend in interest rates, some economists do think so. However, this reasoning equates capital productivity with interest, which is a critical assumption. This paper presents a new proxy that can be used to estimate capital productivity. It is based on weighted average cost of capital (WACC), which are employed by firms in their investment appraisals as a benchmark return. The paper uses an original WACC data set for many OECD countries and for the time period 2000-2015. Data are adjusted for tax distortions and expected inflation. The principle finding is that the data do not indicate a long-run decline in capital productivity.
    Keywords: Capital productivity; cost of capital; interest-growth-differential; WACC.
    JEL: D24 E22 E43
    Date: 2016–04
  13. By: Fujii, Daisuke; Nakajima, Kentaro; Saito, Yukiko Umeno
    Abstract: This paper investigates the relationships between determinants of industrial coagglomeration and establishment-level productivity. For each pair of industries, we first construct degree of coagglomeration and indices for three factors of coagglomeration: inter-firm transactions, knowledge spillover, and labor market pooling. We then examine correlation between these three factors and degree of coagglomeration. Overall, inter-firm transactions and labor market pooling are positively correlated with the degree of coagglomeration whereas knowledge spillover has no significant relationship with coagglomeration. We also find that determinants of coagglomeration are quite different across industries. Further, we examine relationships between these factors and establishment-level productivity. In the results, we find that determinants of coagglomeration are not necessarily positively associated with productivity of establishments.
    Keywords: coagglomeration, transaction costs, knowledge spillover, labor pooling
    JEL: R11
    Date: 2016–03
  14. By: Andersen, Torben M; Maibom, Jonas
    Abstract: Widely quoted cross-country evidence finds income to be negatively associated with inequality, which suggests that there is no trade-off between efficiency and equity. Such inference presumes that countries are at the frontier in the efficiency-equity space. We refute this for most OECD countries, and find that the best-practice frontier displays a trade-off. In accordance with standard economic theory, a larger tax burden is associated with lower efficiency and more equity. Interestingly, there is no evidence that the trade-off has become steeper over the sample period 1980-2010. Country positions differ significantly with some being consistently at or close to the frontier, while others are well inside the opportunity set.
    Keywords: efficiency; equity; trade-off.
    JEL: D61 D63 E02 H2
    Date: 2016–03
  15. By: Böing, Tobias; Stadtmann, Georg
    Abstract: We empirically assess the impact of competitiveness measured by unit labor costs for current account balances in the Euro area. For this purpose, we estimate a panel with annual observations from 2000 to 2013. Our findings confirm the importance of competitiveness: Higher unit labor costs growth leads to lower current account balances. By splitting up unit labor costs growth in wage growth and productivity growth, we find wage growth and productivity growth to have a significantly negative and positive effect, respectively. However, the effect of unit labor costs is mainly driven by productivity growth, so that wage cuts are relatively ineffective and painful to fight current account deficits. But pushing productivity is also likely to be ineffective, since its positive effect for the current account may be offset by its effect on wages and GDP, which decreases current account balances.
    Keywords: Euro Area,Competitiveness,Unit Labor Costs,Wage Growth,Labor Productivity Growth,Current Account,Panel
    JEL: F32 E69 C33
    Date: 2016
  16. By: KATO Atsuyuki
    Abstract: This paper examines the effects of exchange rate changes and productivity on manufacturing exports. Using the dataset of Japanese manufacturing firms during the period 2002-2012, we discuss whether exchange rate fluctuations deter export activities and whether productivity and markup differences affect them. For this study, we estimate both firm specific productivity and markups by the production function based approaches and incorporate them into the Heckman sample selection model. Our results show exchange rates are important factors to affect firm-level exports as a whole while temporal aggregation should be carefully considered. In addition, this study also reveals that productivity and markups give different impacts on firm-level exports across industries. In the transportation equipment industry, the negative effects of appreciation on exports are partly mitigated by higher productivity. Markups are positively related to exports in the electronics industry while negatively related in the transportation equipment. Neither productivity nor markup absorbs the impact of exchange rate changes in the machinery industry. Those findings imply that stability of exchange rates is very important while the effective trade policy may vary across industries following their trade structure.
    Date: 2016–03
  17. By: David Greasley (Emeritus Professor of Economic History, University of Edinburgh); Jakob B. Madsen (Professor of Economics, Monash University)
    Abstract: We gauge how productivity and factor endowments shaped the rise and fall of Australia’s exceptional incomes. New measures of TFP, which include natural resource inputs, are utilized in an accounting of income growth. Further, the drivers of TFP growth are explored. Pastoralism and mining had negative TFP externalities, and we incorporate these finding into a unified accounting of incomes which distinguishes the roles of endowments and productivity. Nevertheless, TFP growth played an important role in promoting exceptional incomes between 1842-1890. Our findings favour a more balanced interpretation of Australian growth that has roles for natural resources, labour participation and productivity.
    Keywords: Australia, productivity, natural resources, knowledge, education
    JEL: N1 N5 O30 O40
    Date: 2016–03
  18. By: 齋藤, 純
    Abstract: This study presents an empirical analysis about corporate governance of financial institutions in United Arab Emirates (UAE). The purpose of this research is to analyze the influence of the structure of board of directors on the performance of these institutions. To examine the effect of control exerted by particular families on bank management, we estimated models where the dependent variable is return on assets (ROA) and return on equity (ROE), independent variables are board of directors variables, and control variables are bank management variables. Our results show that the control of corporate governance by a ruler's family within a board of directors has a positive effect on bank profitability. Our results indicate that control by a ruler's family through a bank's board of directors compensates for the inadequacy of UAE's corporate governance system.
    Keywords: Banks, Corporate governance, Board of directors, Bank performance, GCC banks
    JEL: G34 D22
    Date: 2016–03

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