nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒07‒23
eighteen papers chosen by

  1. Do Manufacturing Firms Benefit from Services FDI? – Evidence from Six New EU Member States By Damijan, Jože; Kostevc, Črt; Marek, Philipp; Rojec, Matija
  2. Trade policy reform and firm-level productivity growth: Does the choice of production function matter? By John Kealey; Pau S. Pujolas; Cesar Sosa-Padilla
  3. Assessing Public Spending Efficiency in 20 OECD Countries By António Afonso,; Mina Kazemi
  4. The Role of Structural Transformation in the Potential of Asian Economic Growth By Foster-McGregor, Neil; Verspagen, Bart
  5. Italy’s Productivity Conundrum. A Study on Resource Misallocation in Italy By S. Calligaris (University of Rome Tor Vergata); M. Del Gatto (University of Pescara); F. Hassan (Trinity College Dublin); G.I.P. Ottaviano (London School of Economics); F. Schivardi (Bocconi University)
  6. What drives bank efficiency? Interaction of bank income diversification and ownership By Kun-Li Lin
  7. Potential Growth, Misallocation, and Institutional Obstacles: Firm-Level Evidence By Leon-Ledesma, Miguel
  9. The Dynamic Effects of Works Councils on Labor Productivity: First Evidence from Panel Data By Müller, Steffen; Stegmaier, Jens
  10. Changing of the guard: Structural change and corporate science in the semiconductor industry By Pellens, Maikel; Della Malva, Antonio
  11. Renewable Technology Adoption and the Macroeconomy By Ted Temzelides; Borghan Narajabad; Bernardino Adao
  12. Cross-Country Comparison of Farm Size Distribution By Raushan Bokusheva; Shingo Kimura
  13. Energy efficiency gains from trade in intermediate inputs: firm-level evidence from Indonesia By Michele Imbruno; Tobias Ketterer
  14. Quantifying the productivity effects of global sourcing By Sara Formai; Filippo Vergara Caffarelli
  15. Emission intensity and firm dynamics: reallocation, product mix, and technology in India By Geoffrey Barrows; Hélène Ollivier
  16. The Pillars of Potential Growth and the Role of Policy: A Panel Data Approach By Lanzafame, Matteo; Felipe, Jesus; Sotocinal, Noli; Bayudan-Dacuycuy, Connie
  17. The effect of labor flows, ownership and skill-relatedness on firm productivity By Zsolt Csáfordi; László Lőrincz; Balázs Lengyel; Károly Miklós Kiss
  18. Workplace Design: The Good, the Bad, and the Productive By Michael Housman; Dylan Minor

  1. By: Damijan, Jože; Kostevc, Črt; Marek, Philipp; Rojec, Matija
    Abstract: This paper focuses on the effect of foreign presence in the services sector on the productivity growth of downstream customers in the manufacturing sector in six EU new member countries in the course of their accession to the European Union. For this purpose, the analysis combines firm-level information, data on economic structures and annual national input-output tables. The findings suggest that services FDI may enhance productivity of manufacturing firms in Central and Eastern European (CEE) countries through vertical forward spillovers, and thereby contribute to their competitiveness. The consideration of firm characteristics shows that the magnitude of spillover effects depends on size, ownership structure, and initial productivity level of downstream firms as well as on the diverging technological intensity across sector on the supply and demand side. The results suggest that services FDI foster productivity of domestic rather than foreign controlled firms in the host economy. For the period between 2003 and 2008, the findings suggest that the increasing share of services provided by foreign affiliates enhanced the productivity growth of domestic firms in manufacturing by 0.16%. Furthermore, the firms' absorptive capability and the size reduce the spillover effect of services FDI on the productivity of manufacturing firms. A sectoral distinction shows that firms at the end of the value chain experience a larger productivity growth through services FDI, whereas the aggregate positive effect seems to be driven by FDI in energy supply. This does not hold for science-based industries, which are spurred by foreign presence in knowledge-intensive business services.
    Keywords: production,cost,capital,total factor and multifactor productivity,capacity,economic integration
    JEL: D24 F15
    Date: 2015
  2. By: John Kealey; Pau S. Pujolas; Cesar Sosa-Padilla
    Abstract: This paper considers whether a fairly well-established empirical relationship between liberalized trade and firm productivity growth is sensitive to the choice of an identification strategy for production function estimation. We estimate the productivity of Colombian manufacturing plants using the methods of Levinsohn and Petrin (2003), Ackerberg, Caves, and Frazer (2006), and Gandhi, Navarro, and Rivers (2012), and at times come to surprisingly different conclusions about the country's experience with trade policy reform during the 1980s. Results from a quantile regression model and a productivity growth decomposition exercise tend to vary as we experiment with different specifcations of the production function. Research that is concerned with the short and medium-term impact of trade liberalization on domestic manufacturing industries should therefore pay close attention to issues of robustness to alternative strategies for estimating the productivity of firms.
    Keywords: Trade liberalization, production function estimation
    JEL: F1 C14
    Date: 2016–06
  3. By: António Afonso,; Mina Kazemi
    Abstract: This study follows the framework of Afonso, Schuknecht, and Tanzi (2005), aiming to look at the public expenditure of 20 OECD countries for the period 2009-2013, from the perspective of efficiency and assess if these developed countries are performing efficiently compared to each other. Public Sector Performance (PSP) and Public Sector Efficiency (PSE) indicators were constructed and Data Envelopment Analysis was conducted. The results show that the only country that performed on the efficiency frontier is Switzerland. The average input-oriented efficiency score is equal to 0.732. That is, on average countries could have reduced the level of public expenditure by 26.8% and still achieved the same level of public performance. The average output-oriented efficiency score is 0.769 denoting that on average the sample countries could have increased their performance by 23.1% by employing the same level of public expenditure. Key Words : Public Spending, Technical Efficiency, Public Sector Performance (PSP), Data Envelopment Analysis (DEA)
    JEL: C14 C87 H40 H50 Y10
    Date: 2016–06
  4. By: Foster-McGregor, Neil (UNU-Merit); Verspagen, Bart (UNU-Merit)
    Abstract: The transition from low-income developing country to high-income developed country involves a deep process of structural transformation in which the productive structure of an economy changes. In this paper we examine this process of structural change and its link to productivity growth for a sample of Asian countries. In particular, the paper addresses the following questions: What is the typical pattern of structural change that countries experience when they catch up from low-income levels to the economic frontier?; To what extent and in which form did structural change contribute to productivity growth in Asia since 1990?; How does the contribution of structural change to productivity growth compare to the effects of deviations of actual growth from potential growth?; How does the effect of structural change differ between total factor productivity growth and labor productivity growth?; And, what is the order of magnitude of the productivity effects that can be expected from further convergence of Asian countries to the economic structure that characterizes middle-income and high-income countries?
    Keywords: labor productivity; structural decomposition; total factor productivity
    JEL: O14 O47
    Date: 2016–03–29
  5. By: S. Calligaris (University of Rome Tor Vergata); M. Del Gatto (University of Pescara); F. Hassan (Trinity College Dublin); G.I.P. Ottaviano (London School of Economics); F. Schivardi (Bocconi University)
    Abstract: This paper provides a detailed analysis of the patterns of misallocation in Italy since the early 1990s. In particular, we show that the extent of misallocation has substantially increased since 1995, and that this increase can account for a large fraction of the Italian productivity slowdown since then. We gather evidence on the evolution of firm level misallocation both within and between various categories of firms, in particular those based on geographic areas, industries, and firm size classes. We do so both for firms in manufacturing and for firms in non-manufacturing. Overall, looking at the distribution of firm productivity, we uncover a thickening of the left tail as the share of firms with low productivity has increased over the period. This implies not only a decrease in average firm productivity, but also an increase in its dispersion. We show that the increase in misallocation has come mainly from higher dispersion of productivities within different firm size classes and geographical areas rather than between them. Crucially, we highlight that rising misallocation has hit firm categories that are traditionally the spearhead of the Italian economy such as firms in the Northwest and big firms. We also produce evidence that, while the 2008 crisis seems to have triggered, at least until 2013, a ‘cleansing effect’ of the least productive firms in the manufacturing sector as a whole, in non-manufacturing industries one observes the survival of firms with even lower productivities than they used to have. Finally, we propose a novel methodology to assess which firm characteristics are more strongly associated with misallocation. In particular, we investigate the role of corporate ownership/control and governance, finance, workforce composition, internationalisation, cronyism and innovation. Together with the other findings already highlighted, the analysis of those ‘markers’ provides the ground for a policy-oriented discussion on how to tackle the Italian productivity slowdown.
    JEL: D22 D24 O11 O47
    Date: 2016–05
  6. By: Kun-Li Lin (Feng Chia University)
    Abstract: This paper examines the relationship between income diversification and bank efficiency in across 83 countries over the period 2003–2012. We also evaluate how ownership structure varies the impact of bank diversification on cost efficiency. Using stochastic frontier approach to estimate bank’s cost efficiency, we find the evidence that increased diversification tend to improve bank efficiency, and government-controlled banks with fewer volatile income sources are likely to have lower efficiency of income diversification. Our results also reveal that more diversified foreign-controlled banks tend to be less efficient in developed countries, while increased foreign ownership of banks appears to improve the diversification benefits in developing countries after the financial crisis. Our findings highlight the implications of bank income diversification and ownership for efficiency and are relevant to bank regulators who are considering additional regulations on bank efficiency.
    Keywords: Income diversification, ownership structure, efficiency, banking
  7. By: Leon-Ledesma, Miguel (University of Kent)
    Abstract: One of the key determinants of potential growth are productivity gains. Total factor productivity (TFP)differences are the main determinant of per capita income differences between countries. A key factor to understand TFP is misallocation: the aggregate productivity loss from microeconomic distortions that prevent factors of production from being allocated to their optimal use. If misallocation is a key determinant of TFP differences, then reallocation of factors of production is a key driver of productivity gains. Since distortions preventing misallocation can be driven by institutional obstacles, then policies focused on the removal of these obstacles will affect potential growth. In this paper, we use a firm-level database for 62 developing countries to analyze which are the most important institutional obstacles driving misallocation. Our results highlight the importance of trade regulations, the functioning of courts, and access to finance as key determinants of misallocation within countries. Political instability, labor regulations, and access to infrastructure, appear as relevant obstacles explaining misallocation between countries.
    Keywords: firm level; misallocation; potential growth; productivity
    JEL: O40 O43 O47
    Date: 2016–04–08
    Abstract: Many small to medium scale enterprises (SMEs) in emerging economies are yet to adopt supply chain management practices. However, they have realised the strategic importance of supply chain management as a tool for optimum business performance. This paper examined the importance of dynamic capabilities, service quality and relationship continuity as mechanisms for the enhancement of supply chain performance in SMEs. Participants in the study included a total of 348 SME managers who were based in South Africa. Data were analysed using the Statistical Packages for the Social Sciences (SPSS version 23.0). Spearman correlations were used to determine the strength of the relationship between constructs. Regression analysis was used to test for prediction between the dependant and independent constructs. The results of the correlation tests showed significant positive correlations between supply chain performance and all three predictor constructs (dynamic capabilities, service quality and relationship continuity). In the regression analyses, the three predictor constructs were statistically significant. A comparison of the betas showed that service quality exerts greater influence on supply chain performance than the other two constructs. The study is significant in that it facilitates improved diagnosis of supply chain performance challenges amongst SMEs in emerging economies.
    Keywords: Service quality, dynamic capabilities, relationship continuity, supply chain performance, SME
    JEL: M00
  9. By: Müller, Steffen; Stegmaier, Jens
    Abstract: We estimate dynamic effects of works councils on labor productivity using newly available information from West German establishment panel data. Conditioning on plant fixed effects and control variables, we find negative productivity effects during the first five years after council introduction, but a steady and substantial increase in the councils' productivity effect thereafter. Given the frequently reported positive correlation between council existence and plant productivity, this finding supports causal interpretations.
    Keywords: non-union worker representation,works council,labor productivity,dynamic effects
    JEL: D24 J53
    Date: 2015
  10. By: Pellens, Maikel; Della Malva, Antonio
    Abstract: This article documents a structural change in the production of science in the U.S. semiconductor industry over almost three decades. We observe a change in scientific productivity over time, where smaller firms publish more articles per dollar in R&D. Moreover, our results show a positive relationship between the value of intangibles and scientific publications, driven by basic research results. These effects are especially strong among Fabless 'design' firms and among firms in the post-PC era of semiconductor manufacturing, in line with a premium for smaller firms which invest in science in times of structural technological change.
    Keywords: corporate science,basic science,firm value,semiconductors
    JEL: O31 O33
    Date: 2016
  11. By: Ted Temzelides (Rice University); Borghan Narajabad (Federal Reserve); Bernardino Adao (Banco de Portugal)
    Abstract: We study the adaptation of new technologies by renewable energy-producing firms in a dynamic general equilibrium model where energy is an input in the production of goods. Energy can come from fossil or renewable sources. Both require the use of capital, which is also needed in the production of final goods. Renewable energy firms can invest in improving the productivity of their capital stock. The actual improvement is subject to spillovers and comes at the cost of some renewable energy output. Together with spill-overs, this leads to under-investment in improving the productivity of renewable energy capital. In the presence of environmental externalities, the optimal allocation can be implemented through a Pigouvian tax on fossil fuel, together with a policy which promotes adaptation of new renewable technologies. We study numerical examples using world-economy data.
    Date: 2016
  12. By: Raushan Bokusheva; Shingo Kimura
    Abstract: This report summarises selected measures of the farm size distribution for fourteen OECD countries: Canada, Estonia, France, Germany, Ireland, Italy, Japan, Korea, Latvia, the Netherlands, Norway, Sweden, the United Kingdom (England) and the United States over the period 1995-2010. The farm size statistics are presented for four major production systems: crop, dairy, cattle and pig farming. The report documents consolidation of agricultural production in large-scale farms in most countries and sub-sectors covered by the report. Nevertheless, farm size growth rates show substantial differences across countries and periods which underlines the importance of country-specific natural, social, and economic conditions and the regulatory and policy environment for the evolution of farm structures. Increased inequality in farm size distributions, as captured using Gini coefficients, indicates a trend towards more polarized farm structures.
    Keywords: agriculture, structural change, farm size distribution
    JEL: D30 L11 Q12 Q18
    Date: 2016–07–14
  13. By: Michele Imbruno; Tobias Ketterer
    Abstract: This paper investigates whether importing intermediate goods improves firm-level environmental performance in a developing country, using data from the Indonesian manufacturing sector. We build a simple theoretical model showing that trade integration of input markets entails energy efficiency improvements within importers relative to non-importers. To empirically isolate the impact of firm participation in foreign intermediate input markets we use ‘nearest neighbour’ propensity score matching and difference-in-difference techniques. Covering the period 1991-2005, we find evidence that becoming an importer of foreign intermediates boosts energy efficiency, implying beneficial effects for the environment.
    Date: 2016–06
  14. By: Sara Formai (Bank of Italy); Filippo Vergara Caffarelli (Bank of Italy)
    Abstract: This work analyses the effect of the global sourcing of intermediate goods on productivity growth. To identify the impact of global sourcing, we employ the methodology proposed in a different context by Rajan and Zingales (1998). In particular we interact the length and the width of sectoral production chains with a measure of the intensity of countries’ intermediate imports. We find evidence indicating that off-shoring significantly increases labour productivity and total factor productivity at the sector level in countries that rely on global sourcing. The driver of total factor productivity growth depends on the structure of the global value chain that intermediates are sourced from: long chains trigger technology improvements while wide chains cause a reallocation of resources towards more productive firms within the same sector.
    Keywords: productivity growth, global sourcing, global value chains
    JEL: D24 F62 F66
    Date: 2016–07
  15. By: Geoffrey Barrows; Hélène Ollivier
    Abstract: We study how market conditions shape aggregate CO2 emission intensity from manufacturing. We first develop a multi-product multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific emission intensity. Competition affects output shares across heterogeneous firms, product-mix across heterogeneous products, and technological choice within firm-product lines. We find that increased competition shifts production to cleaner firms, but has ambiguous effects on withinfirm changes in emission intensity via product-mix and technology adoption. Next, using detailed firm-product emission intensity data from India, we find core-competency products tend to be cleaner than non-core products; but since market conditions have induced Indian firms to shift production away from core-competency, product-mix has increased CO2 emission intensity in India by 49% between 1990-2010. These emission intensity increases are offset by reductions within firm-product lines and by across-firm share shifts, so aggregate emission intensity has actually fallen by 50%.
    Date: 2016–06
  16. By: Lanzafame, Matteo (University of Messina); Felipe, Jesus (Asian Development Bank); Sotocinal, Noli (Asian Development Bank); Bayudan-Dacuycuy, Connie (Ateneo de Manila University)
    Abstract: Potential output growth generally decelerated after the global financial crisis during 2008–2009. This paper examines the possible determinants of potential output growth using Bayesian Model Averaging and assesses how the determinants can be used to increase the growth of potential output. It finds that the long-term growth of working-age population, the tertiary level gross enrollment ratio, the technology gap with the United States (US), labor market rigidity, trade openness, financial integration and the quality of institutions robustly affect potential output growth. Using Harrod’s definition of potential output growth as the sum of the long-run growth rates of the labor force and labor productivity, we find that the trend growth rate of working-age population is a good proxy variable for long-run labor force growth. Under this definition, the other determinants affect potential output growth through their impact on the growth of labor productivity. The paper finds support for the hypotheses that tertiary enrollment and trade openness affects potential output growth nonlinearly. It also finds that trade openness and tertiary enrollment have nonlinear effects on potential output growth, and that the technology gap with the US and financial integration have statistically significant interaction effects on potential output growth. Results suggest that reforms aimed at reducing the technology gap with the US and increasing the extent of financial integration have lower impact on countries with high-quality institutions.
    Keywords: determinants of growth; potential output growth; reforms
    JEL: O29 O41 O43 O47
    Date: 2016–05–26
  17. By: Zsolt Csáfordi (Hungarian Academy of Sciences CERS, Institute of Economics); László Lőrincz (Hungarian Academy of Sciences CERS, Institute of Economics); Balázs Lengyel (Hungarian Academy of Sciences CERS, Institute of Economics); Károly Miklós Kiss (Hungarian Academy of Sciences CERS, Institute of Economics)
    Abstract: Labor flows are major source of knowledge spillover between companies, in which the characteristics of the companies play an important role. Previous research found the more productive the sending firm is he bigger effect of labor flows on the productivity of the receiving firm. Another literature claims that domestic firms benefit from labor flows from multinational enterprises (MNE). We test these arguments by analyzing an anonymized employer-employee linked panel database from Hungary for the 2003-2011 period and also look at the similarity of necessary skills in the sending and receiving firm because industry-specific skills of employee’s matter in organizational learning and therefore in productivity growth. We construct the skill-relatedness network of industries based on inter-industry labor mobility and distinguish related and non-related labor inflows by comparing the observed level of mobility to an expected level of mobility. Our results suggest that labor flows from more productive firms increases the effect of labor flows significantly. Domestic companies obtain productivity gains from labor inflows coming from MNEs; however, inflows from MNEs have the greatest positive effect if the receiving firm is also a MNE. The effect of flows from skill-related industries, and particularly from the same industry outperform the effect of flows from unrelated industries, however, these effects are mitigated by the relative productivity effect.
    Keywords: skill-relatedness network, firm productivity, knowledge spillover, labor mobility, productivity gap, firm ownership
    JEL: D22 J24 J60
  18. By: Michael Housman (HiQ Labs); Dylan Minor (Harvard Business School, Strategy Unit)
    Abstract: We study the effects of performance spillover in the workplace?both positive and negative?on several dimensions, and find that it is pervasive and decreasing in the physical distance between workers. We also find that workers have different strengths, and that while spillover is minimal for a worker when it occurs in an area of strength, the same worker can be greatly affected if the spillover occurs in her area of weakness. We find this feature allows for a symbiotic pairing of workers in physical space that can improve performance by some 15%. Overall, workplace space appears to be a resource that firms can use to design more effective organizations.
    Keywords: strategic human resource management, peer e¤ects, productivity, spillovers, toxic worker
    Date: 2016–06

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