nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒05‒21
twenty-two papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Growing like Spain: 1995-2007 By Manuel García-Santana; Josep Pijoan-Mas; Enrique Moral-Benito; Roberto Ramos
  2. Estimating the materials balance condition: A stochastic frontier approach By Hampf, Benjamin
  3. Efficiency and Technological Progress in Brazilian Agricultural Cooperatives By Neves, Mateus de Carvalho; Goncalves, Marcos; Gomes, Adriano; Braga, Marcelo J.
  4. Quality of Human Capital and Total Factor Productivity in New European Union Members States By Michal Bernard Pietrzak; Adam P. Balcerzak
  5. Cost-benefit analyses of the adoption of irrigation on oranges in São Paulo, Brazil By Rossi, Fabiana Ribeiro; Silva, Felipe de Figueiredo; Perrin, Richard K.; Fulginiti, Lilyan E.; Souza Filho, Hildo Meirelles de; Carrer, Marcelo Jose
  7. The pre-Great Recession slowdown in productivity By Cette, Gilbert; Fernald, John G.; Mojon, Benoit
  8. Dynamic Panel Analysis of Influence of Quality of Human Capital on Total Factor Productivity in Old European Union Countries By Adam P. Balcerzak; Michal Bernard Pietrzak
  9. The impact of pollution abatement investments on production technology: new insights from frontier analysis By Antonio Musolesi; Jean Pierre Huiban; Camilla Mastromarco; Michel Simioni
  10. Energy Intensity and Convergence in Swedish Industry: A Combined Econometric and Decomposition Analysis By Karimu, Amin; Brännlund, Runar; Lundgren, Tommy; Söderholm, Patrik
  11. The "Sugar Rush" from Innovation Subsidies. A Robust Political Economy Perspective By Gustafsson, Anders; Stephan, Andreas; karlson, Nils; Hallman, Alice
  12. How Common Crop Yield Measures Misrepresent Productivity among Smallholder Farmers By Reynolds, Travis W.; Anderson, C. Leigh; Slakie, Elysia; Gugerty, Mary Kay
  13. Board Structure and Financial Performance Efficiency of Turkish Business Groups with GRA and DEA methods By İskender Peker; Tarhan Okan; Emine Yılmaz; Şerife Demirelli
  14. Productivity distribution and drivers of productivity growth in the construction sector By Adam Jaffe; Trinh Le; Nathan Chappell
  15. R&D and Productivity in the US and the EU: Sectoral Specificities and Differences in the Crisis By Castellani, Davide; Piva, Mariacristina; Schubert, Torben; Vivarelli, Marco
  16. Unraveling firms: demand, productivity and markups heterogeneity By Emanuele Forlani; Ralf Martin; Giordano Mion; Mirabelle Muuls
  17. Predation, Protection and Productivity: A Firm-Level Perspective By Timothy Besley; Hannes Mueller
  18. Determinants of Nitrogen Surplus at Farm Level in Swiss Agriculture By Jan, Pierrick; Calabrese, Chiara; Lips, Markus
  19. Academic Inbreeding and Research Productivity Of Russian Faculty Members By Olga Gorelova; Andrey Lovakov
  20. A RECONSIDERATION OF THE THEORY OF NON-LINEAR SCALE EFFECTS: Causes and Consequences of Varying Returns to, and Economies of, Scale By Richard G. Lipsey
  21. The Effect of Halal Requirement Practices on Organization Performance among Food Manufactures in Malaysia By Baharudin Othman; Sharifudin Md. Shaarani; Arsiah Bahron
  22. Management practices, workforce selection, and productivity By Bender, Stefan; Bloom, Nicholas; Card, David; van Reenen, John; Wolter, Stefanie

  1. By: Manuel García-Santana (UPF, Barcelona GSE and CEPR); Josep Pijoan-Mas (CEMFI and CEPR); Enrique Moral-Benito (Banco de España); Roberto Ramos (Banco de España)
    Abstract: Spanish GDP grew at an average rate of 3.5% per year during the 1995-2007 expansion, well above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains as TFP fell at an annual rate of 0.7%. Using firm-level administrative data for all sectors we show that deterioration in the allocative efficiency of productive factors across firms was at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. We show that within-industry misallocation of production factors increased substantially over the period in all industries. Absent such deterioration, average TFP growth would have been around 0.8% per year, in line with the growth of the technological frontier. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where the incidence of regulations is greater. In contrast, sectoral differences in financial dependence, skill intensity, innovative content, tradability and the intensity of capital structures appear to be unrelated to changes in allocative efficiency. All in all, the observed high output growth together with increasing firm-level misallocation in all sectors is consistent with an expansion driven by a demand boom rather than by structural reforms
    Keywords: TFP, misallocation, Spain.
    JEL: D24 O11 O47
    Date: 2016–05
  2. By: Hampf, Benjamin
    Abstract: In this paper we propose a stochastic formulation of the materials balance condition which imposes physical constraints on production technologies. The estimation of the model involves a composed error term structure that is commonly applied in the literature on stochastic frontier analysis of productive efficiency. Moreover, we discuss how OLS, maximum likelihood and Bayesian methods can be used to estimate the proposed model. In contrast to previous approaches our model allows to estimate the physical limitations to production possibilities in the presence of statistical noise and depends on substantially weaker data requirements. We demonstrate the applicability of our new approach by estimating the materials balance condition for SO2 and CO2 using a sample of fossil-fueled power plants in the United States.
    Keywords: Materials balance condition,Abatement efficiency,Stochastic frontier analysis,Laws of thermodynamics,Applied econometrics,Environmental economics
    JEL: Q53 C51 Q40 D24
    Date: 2015
  3. By: Neves, Mateus de Carvalho; Goncalves, Marcos; Gomes, Adriano; Braga, Marcelo J.
    Abstract: Against a background of concentrated production chains and profound changes in the agri-food system, Brazilian agricultural cooperatives are challenged to remain competitive to withstand large multinational companies. This paper proposed to investigate nuances in the behavior of these cooperative organizations due to the changes in their operating environment. It does so by analyzing alterations in efficiency and total factor productivity of a sample of Brazilian agricultural cooperatives, classified according to size, from 2006 to 2010. For this, non-parametric models of Data Envelopment Analysis (DEA) and the Malmquist Index were used. Through the DEA approach, it was seen that larger cooperatives faced decreasing efficiency, while smaller ones experienced the opposite. Moreover, as demonstrated by the Malmquist Indices, the cooperatives, on average, presented negative technological variations, and smaller cooperatives underwent positive changes in technical efficiency. The results suggest directions which public policies could take to strengthen Brazilian agricultural cooperatives in the face of new challenges.
    Keywords: Agribusiness, Research and Development/Tech Change/Emerging Technologies,
    Date: 2015
  4. By: Michal Bernard Pietrzak (Nicolaus Copernicus University, Poland); Adam P. Balcerzak (Nicolaus Copernicus University, Poland)
    Abstract: Closing development gap and avoiding middle income trap are currently considered as the main challenges for the new EU member states. To obtain both those aims the countries must implement policies that support total factor productivity (TFP) growth. The main scientific purpose of the article is to examine the influence of quality of human capital (QHC) on TFP in Central European countries in the years 2000-2010. All the EU countries must be able compete internationally in reality of global knowledge economy. Thus, the QHC was analysed from the perspective of the knowledge-based economy. As the QHC is a multidimensional phenomenon in order to measure it and obtain time series for further econometric research, TOPSIS method was applied. To evaluate TFP the parameters of the Cobb-Douglas production function for the new EU members were estimated. Finally, it was possible to identify the relationship between the QHC and the level of TFP with application of dynamic panel model. The analysis was conducted for the years 2000-2010 based on Eurostat data. It confirmed a significant influence of the QHC on the level of TFP in the new EU members states.
    Keywords: multiple-criteria decision analysis (MCDA), TOPSIS method, panel model, TFP, human capital, new EU members
    JEL: C23 C38 O47
    Date: 2016–05
  5. By: Rossi, Fabiana Ribeiro; Silva, Felipe de Figueiredo; Perrin, Richard K.; Fulginiti, Lilyan E.; Souza Filho, Hildo Meirelles de; Carrer, Marcelo Jose
    Abstract: Brazil contributes 55% and 60% of the world’s production of fresh oranges and orange juice, respectively. In recent years, increasing production costs and low orange prices reduced the citrus producers’ profitability. In this paper we investigate the potential for irrigation to improve the profitability of orange production, using data from a sample of 98 citrus producers in the state of Sao Paulo, 34 of whom had adopted irrigation. Based on a translog production function, we use 3SLS to estimate a system of equations comprising the production function and the inverse derived demands for inputs, to obtain the impact of irrigation adoption on productivity. Results show that adopting irrigation increases citrus production by 19%. We estimate production elasticities of capital (.16), labor (.21), land (.26) and fertilizers (.20). We found that by considering yield increases versus both fixed and variable costs of implementation, farmers could expect to break even by the fifth year of irrigation use
    Keywords: Orange production, Irrigation adoption, Production economic theory, Agribusiness, Agricultural Finance, Farm Management, Financial Economics, Production Economics, D22, D24, Q16,
    Date: 2016
  6. By: Cenk Gokce ADAS (Istanbul University, Faculty of Economics)
    Abstract: It is believed that export firms are more productive than non-export firms. The reasons for that exporting firms have to endure additional cost because of transport costs, marketing research, advertising, local regulations etc. Export firms are also inclined to pay higher wages than non-export firms, because they use a higher skilled and more productive labours. Hence, export firms have to be more productive due to these additional costs. The aim of this study is to explain whether the productivity advantage of export firms does lead to a profitability advantage of exporters compared to non-export firms. For this reason, this paper attempts to summarise previous empirical studies on the firm level data considering the relationship between exporting firms, productivity, and profitability.
    Keywords: Productivity; Profitability; Exporting Firms; Manufacturing Sectors; Firm Level Data.
    JEL: D22 F14 L60
  7. By: Cette, Gilbert (Banque de France); Fernald, John G. (Federal Reserve Bank of San Francisco); Mojon, Benoit (Banque de France)
    Abstract: In the years since the Great Recession, many observers have highlighted the slow pace of productivity growth around the world. For the United States and Europe, we highlight that this slow pace began prior to the Great Recession. The timing thus suggests that it is important to consider factors other than just the deep crisis itself or policy changes since the crisis. For the United States, at the frontier of knowledge, there was a burst of innovation and reallocation related to the production and use of information technology in the second half of the 1990s and the early 2000s. That burst ran its course prior to the Great Recession. Continental European economies were falling back relative to that frontier at varying rates since the mid-1990s. We provide VAR and panel-data evidence that changes in real interest rates have influenced productivity dynamics in this period. In particular, the sharp decline in real interest rates that took place in Italy and Spain seem to have triggered unfavorable resource reallocations that were large enough to reduce the level of total factor productivity, consistent with recent theories and firm-level evidence.
    JEL: D24 E23 E44 F45 O47
    Date: 2016–03–28
  8. By: Adam P. Balcerzak (Nicolaus Copernicus University, Poland); Michal Bernard Pietrzak (Nicolaus Copernicus University, Poland)
    Abstract: Improving productivity is the main determinant of long term develop-ment. In the EU in Europe 2020 strategy special attention was given to the role of quality of human capital (QHC) as an important determinant of productivity growth. In this context the aim of the article is to assess the impact of the QHC on total factor productivity (TFP) in “old” EU countries. The research is conducted at macroeconomic level. EU economies must build their competitiveness in reality of knowledge-based economy. Thus, the QHC was analysed from the point of view of global knowledge economy. This factor was treated as a multidimensional phenom-enon. As a result, it was measured with application of TOPSIS method, which al-lowed to obtained time series for dynamic panel analysis of determinants of TFP. In order to evaluate TFP parameters of the Cobb-Douglas production function for de-veloped EU countries were estimated. Then, the relationship between the QHC and the level of TFP was assessed with application of dynamic panel model. The re-search was based on Eurostat data for the years 2000-2010. It confirmed a signifi-cant influence of the QHC on the level of TFP in the analysed economies.
    Keywords: panel model, TOPSIS, TFP, quality of human capital, EU countries
    JEL: O47 C23 C38
    Date: 2016–05
  9. By: Antonio Musolesi; Jean Pierre Huiban; Camilla Mastromarco; Michel Simioni
    Abstract: This paper attempts to estimate the impact of pollution abatement investments on the production technology of firms by pursuing two new directions. First, we take advantage of recent econometric developments in productivity and efficiency analysis and compare the results obtained with two complementary approaches: parametric stochastic frontier analysis and conditional nonparametric frontier analysis. Second, we focus not only on the average effect but also on its heterogeneity across firms and over time and search for potential nonlinearities. We provide new results suggesting that such an effect is heterogeneous both within firms and over time and indicating that the effect of pollution abatement investments on the production process is not monotonic. These results have relevant implications both for modeling and for the purposes of advice on environmentally friendly policy.
    Keywords: Pollution abatement investments; technology; stochastic frontier analysis; conditional nonparametric frontier analysis; generalized product kernels; eneralized local polynomial kernel regression
    JEL: C14 C23 D24 Q50
    Date: 2016–05–09
  10. By: Karimu, Amin (CERE and the Department of Economics, Umeå University); Brännlund, Runar (CERE and the Department of Economics, Umeå University); Lundgren, Tommy (CERE and the Department of Economics, Umeå University); Söderholm, Patrik (Department of Business Administration, Technology and Social Sciences, Economics Unit, Luleå University of Technology)
    Abstract: This paper analyzes the determinants of energy intensity and tests for convergence across 14 Swedish industrial sectors. The analysis builds on a non-parametric regression analysis of an intensity index constructed at the industry sector level as well as indexes constructed from a decomposition of this index. The latter isolates two key determinants of changes in energy intensity and convergence patterns: energy efficiency improvements and changes in economic output (activity). The empirical analysis relies on a detailed sectorial dataset covering the period 1990-2008. The findings indicate that input prices, including the price of energy, have been significant determinants of energy intensity in the Swedish industrial sectors. This effect can primarily be attributed to the efficiency channel and with a less profound influence from the activity channel. These results suggest that a well-designed tax system could be effective in delivering significant energy efficiency improvements in Swedish industry. We also find evidence of energy intensity convergence among the industrial sectors, and this primarily stems from the activity channel rather than from the efficiency channel. The above implies that during the studied time period Swedish industry shifted away from more to less energy-intensive production, in part perhaps driven by moving energy-intensive manufacturing abroad.
    Keywords: energy intensity; convergence; index numbers; decomposition; industrial sectors.
    JEL: C14 O13 O47 Q43
    Date: 2016–03–30
  11. By: Gustafsson, Anders (The Ratio institute and Jönköping School of Economics); Stephan, Andreas (The Ratio institute and Jönköping School of Economics); karlson, Nils (The Ratio institute); Hallman, Alice (The Ratio institute)
    Abstract: The governments of most advanced countries offer some type of financial subsidy to encourage firm innovation and productivity. This paper analyzes the effects of innovation subsidies using a unique Swedish database that contains firm level data for the period 1997-2011, specifically information on firm subsidies over a broad range of programs. Applying causal treatment effect analysis based on matching and a diff-in-diff approach combined with a qualitative case study of Swedish innovation subsidy programs, we test whether such subsidies have positive effects on firm performance. Our results indicate a lack of positive performance effects in the long run for the majority of firms, albeit there are positive short-run effects on human capital investments and also positive short-term productivity effects for the smallest firms. These findings are interpreted from a robust political economy perspective that reveals that the problems of acquiring correct information and designing appropriate incentives are so complex that the absence of significant positive long-run effects on firm performance for the majority of firms is not surprising.
    Keywords: Innovation subsidies; market failures; causal treatment effect evaluation; firm performance; CEM; robust political economy
    JEL: H25 O38 P16
    Date: 2016–04–25
  12. By: Reynolds, Travis W.; Anderson, C. Leigh; Slakie, Elysia; Gugerty, Mary Kay
    Abstract: Common estimates of agricultural productivity rely upon crude measures of crop yield, typically defined as the weight of a crop harvested divided by the area harvested. But this common yield measure poorly reflects performance among farm systems combining multiple crops in one area (e.g., intercropping), and also ignores the possibility that farmers might lose crop area between planting and harvest (e.g., partial crop failure). Drawing on detailed plot-level data from Tanzania’s National Panel Survey, this paper contrasts measures of smallholder productivity using production per hectare harvested and production per hectare planted. Yield by area planted differs significantly from yield by area harvested, particularly for smaller farms and female-headed households. OLS regression further reveals different demographic and management-related drivers of variability in yield gains – and thus different implications for policy and development interventions – depending on the yield measurement used. Findings suggest a need to better specify “yield” to more effectively guide agricultural development efforts.
    Keywords: Crop Production/Industries, Farm Management,
    Date: 2015
  13. By: Ä°skender Peker (GümüÅŸhane University); Tarhan Okan (GümüÅŸhane University); Emine Yılmaz (Osmaniye Korkut Ata University); Åžerife Demirelli (GümüÅŸhane University)
    Abstract: In emerging countries like Turkey, where state-dependent characteristics of business system is dominant, the corporate governance principles are expected to be internalized in a larger scale through the political regulative pressures. Also, business groups, that are unrelated-diversified and highly controlled by the owning family members, are the dominating economic actors in many late-developing countries. In Turkey, Capital Markets Board enacted provisions regarding the structure of board of directors under the Communique of Principles Regarding Determination and Application of Corporate Governance Principles published on 30.12.2011. Based on this policy reform, this study aims at analyzing the relationship between firm performance and board structures of business groups and revealing the fact that whether the new policy leads to the outcomes expected. The population of the study consists of the whole business groups registered in Borsa Istanbul (the sole entity of exchange in Turkey). The analyses are conducted in two stages. First, using the Grey Relational Analysis, grey relational grade is obtained from the financial outputs (ROA, ROE, and ROS) of the years 2010-2014. Then, Data Envelopment Analysis-Total Factor Productivity (TFP) is used to obtain efficiency comparisons of the business groups according to their inputs (board size, women board members, independent board members, executive board members) and grey relational grade. The results show that following the policy enactment the efficiency rates are improved in parallel to their improved managerial efficiency. The study results give insight into the embracement of corporate governance principles and future discussions on principle-agent problems in developing countries.
    Keywords: corporate governance, board structure, grey relational analysis, data envelopment
    JEL: M10 G14 G34
  14. By: Adam Jaffe (Motu Economic and Public Policy Research); Trinh Le (Motu Economic and Public Policy Research); Nathan Chappell (Motu Economic and Public Policy Research)
    Abstract: This study draws on firm-level data from the Longitudinal Business Database to examine productivity in the New Zealand construction industry. It finds that over the period 2001–2012, on average labour productivity in this industry grew by 1.7 percent annually and multi-factor productivity by 0.5 percent annually, compared with 0.5 and 0.1 percent annually respectively for firms in the overall measured sector. Within the construction industry, productivity growth rates vary markedly by sub-industry and other firm characteristics. Labour productivity is more widely dispersed across the construction industry than is multi-factor productivity. High-productivity firms tend to be younger, more likely to be a new start-up, to belong to a business group, and to locate in Auckland than low-productivity firms. Working-proprietor-only firms are slightly less productive on average than employing firms, and also exhibit much greater productivity variation. Overall, however, productivity variation or dispersion is no greater in construction than in other industries. We decompose productivity changes over time into that due to changes at continuing firms, to reallocation of output from low- to high-productivity firms, and to entry and exit. In the ‘Building construction’ and ‘Heavy and civil engineering and construction’ industries, productivity was enhanced by net entry and reallocation, but reduced by an overall decline in the productivity of continuing firms. In the ‘Construction services’ industry, net entry, reallocation, and productivity improvement of continuing firms all contributed to positive productivity growth.
    Keywords: Construction industry, labour productivity, multi-factor productivity
    JEL: D24 L74
    Date: 2016–05
  15. By: Castellani, Davide (Henley Business School, University of Reading); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Schubert, Torben (CIRCLE, Lund University); Vivarelli, Marco (Università Cattolica del Sacro Cuore, IZA, UNU-MERIT)
    Abstract: Using data on the US and EU top R&D spenders from 2004 until 2012, this paper investigates the sources of the US/EU productivity gap. We find robust evidence that US firms have a higher capacity to translate R&D into productivity gains (especially in the high-tech industries), and this contributes to explaining the higher productivity of US firms. Conversely, EU firms are more likely to achieve productivity gains through capital-embodied technological change at least in medium and low-tech sectors. Our results also show that the US/EU productivity gap has worsened during the crisis period, as the EU companies have been more affected by the economic crisis in their capacity to translate R&D investments into productivity. Based on these findings, we make a case for a learning-based and selective R&D funding, which - instead of purely aiming at stimulating higher R&D expenditures - works on improving the firms’ capabilities to transform R&D into productivity gains.
    Keywords: R&D; productivity; economic crisis; US; EU
    JEL: O33 O51 O52
    Date: 2016–05–09
  16. By: Emanuele Forlani; Ralf Martin; Giordano Mion; Mirabelle Muuls
    Abstract: We develop a new econometric framework that simultaneously allows recovering heterogeneity in demand, TFP and markups across firms while leaving the correlation among the three unrestricted. We do this by systematically exploiting assumptions that are implicit in previous firm-level productivity estimation approaches. We use Belgian firms production data to quantify TFP, demand and markups and show how they are correlated among them, across time and with measures obtained from other approaches. We also show to what extent our three dimensions of heterogeneity allow us to gain deeper and sharper insights on two key firm-level outcomes: export status and size.
    Keywords: Demand; productivity; markups; production function estimation; export status; firm size
    JEL: J1 N0
    Date: 2016–01
  17. By: Timothy Besley; Hannes Mueller
    Abstract: This paper studies the consequences of predation when firms deploy guard labor as a means of protecting themselves. We build a simple model and combine it with data for 142 countries from the World Bank enterprise surveys which ask about firm-level experiences with predation and spending on protection. We use the model to estimate the output loss caused by the misallocation of labor across firms and from production to protection. The loss due to protection effort is substantial and patterns of state protection at the micro level can have a profound impact on aggregate output losses. Various extensions are discussed.
    Keywords: predation, firm data, labour misallocation, security, aggregate output loss, Property rights, law enforcement, enterprise surveys, cost of crime
    JEL: O43 K42 O47 O12
    Date: 2016–04
  18. By: Jan, Pierrick; Calabrese, Chiara; Lips, Markus
    Abstract: This paper investigates the determinants of nitrogen surplus and of its two components-nitrogen intensity and nitrogen-inefficiency- at farm level in Swiss agriculture. Our analysis is based on a cross-section of 210 farms from the eyar 2010. The nitrogen balance of each farm is estimated according to the OECD soil-surface approach. The determinants are analysed by means of a three-equartion regression model estimated using a robust SUR approach. Farm size, part-time farming, organic farming, arable cropping and farmer's age are found to negatively affect nitrogen surplus, whilst dairy, pig and poultry farming are associated with a higher nitrogen surplus.
    Keywords: Environmental Economics and Policy, Land Economics/Use, Livestock Production/Industries,
    Date: 2015
  19. By: Olga Gorelova (National Research University Higher School of Economics); Andrey Lovakov (National Research University Higher School of Economics)
    Abstract: The literature on the consequences of academic inbreeding shows ambiguous results: some papers show that inbreeding positively influences research productivity, measured in the quantity and quality of publications, while others show the opposite effect. There are contradictory results both in studies of different countries and within countries. Such a variety of results makes it impossible to transfer the findings from one academic system to another, and in Russia this problem has been under explored. This paper focuses on the relationship between inbreeding and publication activity among Russian faculty members. The results, using Russian data from the Changing Academic Profession survey, showed no substantial effect of academic inbreeding on research productivity. Inbred and non-inbred faculty members do not differ substantially in terms of the probability of having publications, or how many, although for inbreds such probability is slightly higher. These results are robust for different operationalizations of inbreeding and measures of publication activity. However the absence of significant differences in the number of publications may not mean the absence of a difference in their quality. The possible explanations and limitations of the standard measures of research productivity are discussed.
    Keywords: Academic profession, Academic inbreeding, Research productivity, Faculty members, Russian higher education, Changing Academic Profession
    JEL: I23 I28
    Date: 2016
  20. By: Richard G. Lipsey (Simon Fraser University)
    Abstract: This paper reconsiders the explanations of why a firm’s costs vary when its scale of operations varies over the long run, as expressed by its long run average cost curve and described as economies and diseconomies of scale. The first half of the paper deals with considerations of theory. It is argued that the nature of our world, with its 3-dimensions, its physical laws and the many random elements in its behaviour, is such that when the scale of anything changes, we should always expect to encounter non-linear scale effects. Static effects concerning the nature of the cost and production functions at a moment in time, which are the concern of this paper, are distinguished from dynamic effects over time, the concern of Allyn Young and his followers. It is argued that both treatments are valid but deal with distinctly different issues. A treatment of the sources of scale effects, particularly in the reconfiguration of capital goods, leads to a distinction between the set of production functions that are consistent with Viner’s treatment of long run cost curves and the single production function that is found in virtually all modern microeconomic textbooks. It is argued that the inconsistencies and ambiguities relating to the use of such a single production function to cover all possible scales of a firm’s production are such that it is an imperfect tool for analysing the scale effects that firms actually face. The second half of the paper critically assesses the treatment of scale issues in a large sample of the existing literature. Most authors list a series of examples of sources that are assumed to give rise to scale effects but seldom attempt to show in any detail how these are supposed to work. When we do this, some alleged sources are found not to give rise to scale effects at all, while others have effects that differ from what has been assumed. Furthermore, there is seldom agreement among authors whether a particular source is a cause of varying returns to scale or economies of scale. Most authors argue that indivisibilities are an important source of scale effects, although these are seldom well defined, nor are the precise ways in which these are supposed to work typically analysed. When we do this, we identify two basic types of indivisibilities, ex post and ex ante, plus several variations of each of these main types. We then argue that the discussion of indivisibilities has been confused by use of different implicit definitions of the term and also that their importance as a source of scale effects has been greatly over stated. The ability to replicate production facilities is found to be consistent with ranges of rising followed by ranges of falling unit costs and, in some important circumstances, to be consistent with falling unit costs over an indefinite range of output. Constant returns production functions are found to be inconsistent with much that is known about actual production techniques, even when firms expand by duplicating identical plants. Although several authors argue that the US market is large enough for scale effects to be exhausted, this may be true of some industries, but is clearly not true for the many industries in which non-plant specific costs are significant enough to confer an economy of scale on the firm as it increases the number of its ‘plants’ indefinitely. Unless ruled out by definition, decreasing returns are found to be a real possibility in many circumstances.
    Keywords: economies of scale, production function, returns to scale, indivisibilities, replication, long run cost curves
    JEL: D24
    Date: 2016–04
  21. By: Baharudin Othman (Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah); Sharifudin Md. Shaarani (Faculty of Food Science and Nutrition, Universiti Malaysia Sabah); Arsiah Bahron (Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah)
    Abstract: Halal management has grown rapidly including the production process and halal verification. Therefore, the aim of this study focused on the effects of halal practices on the organizational performance in Malaysian halal food industry. In this study, the halal requirement elements consisted of halal and thoyyib, internal process, halal assurance, and staff as the predictor of organizational performance. This study used a self-administered questionnaire with closed-ended questions. The questionnaire was distributed to multinational companies and small and medium enterprises (SME) in which 620 were applicable for analysis. The respondents were among the halal committee members in the respective companies. The data was analyzed using SPSS Version 21. The results showed that halal requirement practices have a positive relation to the dependent variables. Moreover, only halal and thoyyib aspects (β = 0.319, p
    Keywords: halal, halal requirement practices, organizational performance.
  22. By: Bender, Stefan; Bloom, Nicholas; Card, David; van Reenen, John; Wolter, Stefanie (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices. Many of these practices - including monitoring, goal setting, and the use of incentives - are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers' skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees. We use a unique data set that combines detailed survey data on the management practices of German manufacturing establishments with longitudinal earnings records for their employees to study the relationship between productivity, management, worker ability, and pay. As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highestpaid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms. Looking at employee inflows and outflows, we confirm that better-managed firms systematically recruit and retain workers with higher average human capital. Overall, we conclude that workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing." (Author's abstract, IAB-Doku) ((en))
    JEL: L2 M2 O32 O33
    Date: 2016–04–28

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