nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒09‒11
sixteen papers chosen by

  1. The Impact of Product Market Reforms on Firm Productivity in Italy By Sergi Lanau; Petia Topalova
  2. Capital Obsolescence and Agricultural Productivity By Elisa Keller; Julieta Caunedo
  3. Merger and Acquisitions in South African Banking: A Network DEA Model By Peter Wanke; Andrew Maredza; Rangan Gupta
  4. From Firm-Level Imports to Aggregate Productivity; Evidence from Korean Manufacturing Firms Data By JaeBin Ahn; Moon Jung Choi
  5. The Impact of R&D and ICT Investment on Innovation and Productivity in Chilean Firms By Roberto Álvarez
  6. A stochastic production frontier estimator of the degree of oligopsony power in the U.S. cattle industry By Panagiotou, Dimitrios; Stavrakoudis, Athanassios
  7. Do Institutions Matter for Economic Performance? Theoretical Insights and Evidence from Turkey By Tamer Cetin; Yildirim B. Cicen; Kadir Y. Eryigit
  8. Profitability and Balance Sheet Repair of Italian Banks By Andreas Jobst; Anke Weber
  9. Valuing "Free" Media in GDP: An Experimental Approach By Nakamura, Leonard I.; Samuels, Jon; Soloveichik, Rachel
  10. Knowledge Composition, Jacobs Externalities and Innovation Performance in European Regions By Antonelli, Cristiano; Crespi, Francesco; Mongeau, Christian; Scellato, Giuseppe
  11. The effect of a specialized versus a general upper secondary school curriculum on students’ performance and inequality. A difference-in-differences cross country country comparison. By Alfonso Leme; Josep-Oriol Escardíbul
  12. Aggregate Uncertainty and Sectoral Productivity Growth; The Role of Credit Constraints By Sangyup Choi; Davide Furceri; Yi Huang; Prakash Loungani
  13. A Post-crisis Slump in Europe: A Business Cycle Accounting Analysis By Florian Gerth; Keisuke Otsu
  14. The relationship between animal welfare and economic performance at farm level: A quantitative study of Danish pig producers By Arne Henningsen; Tomasz Gerard Czekaj; Björn Forkman; Mogens Lund; Aske Schou Nielsen
  15. The Impact of Climate Change on Agricultural Output in South Africa (1997-2012) By Ncube, Free; Cheteni, Priviledge; Ncube, Prince; Muzawazi, Strugle
  16. Banking Competition and Firm-Level Financial Constraints in Latin America By Roberto Álvarez; Mauricio Jara

  1. By: Sergi Lanau; Petia Topalova
    Abstract: This paper examines the role of removing obstacles to competition in product markets in raising growth and productivity. Using firm-level data from Italy during 2003–13 and OECD measures of product market regulation, we estimate the effect of deregulation in network sectors on value added and productivity of firms in these sectors, as well as firms using these intermediates in their production processes. We find evidence of a significant positive impact. These effects are more pronounced in Italian provinces with more efficient public administration, underscoring the complementarities of advancing public administration and product market reforms simultaneously.
    Keywords: Business enterprises;Italy;Industry;Services;Total factor productivity;Labor productivity;Markets;Fiscal reforms;Economic sectors;Time series;Econometric models;productivity, growth, structural reforms, product markets
    Date: 2016–06–15
  2. By: Elisa Keller (Durham University Business School); Julieta Caunedo (Cornell University)
    Abstract: Cross-country disparities in agricultural productivity are large and on average, larger than in other sectors of the economy. This paper studies the role of capital-embodied technology adoption in explaining these cross-country disparities. We construct a novel data set of second-hand prices of agricultural equipment (tractors) across countries. We then present a vintage capital model that links equipment prices to the quality and composition of the stock of capital. In particular, a) the path of the best available equipment quality in a country is linked to the evolution of the price of any piece of equipment through time; and b) the composition of the capital stock is linked to cross country dierences in the price level of a piece of equipment. Using the unique characteristics of our data set, we document that countries with higher agricultural labor productivity have steeper age-price proles for tractors with comparable characteristics. We find that quality disparities in the stock of capital explain 24% of the differences in agricultural productivity growth across countries. Moreover, one-third of the disparities in the level of productivity can be accounted for by disparities in capital embodied technology.
    Date: 2016
  3. By: Peter Wanke (COPPEAD Graduate Business School, Federal University of Rio de Janeiro, Rio de Janeiro); Andrew Maredza (School of Economics and Decision Science, North West University, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria)
    Abstract: Banking in South Africa is known for its small number of companies that operate as an oligopoly. This paper presents a strategic fit assessment of mergers and acquisitions (M&A) in South African banks. A network DEA (Data Envelopment Analysis) approach is adopted to compute the impact of contextual variables on several types of efficiency scores of the resulting virtual merged banks: global (merger), technical (learning), harmony (scope), and scale (size) efficiencies. The impact of contextual variables related to the origin of the bank and its type is tested by means of a set of several robust regressions to handle dependent variables bounded in 0 and 1: Tobit, Simplex, and Beta. The results reveal that bank type and origin impact virtual efficiency levels. However, the findings also show that harmony and scale effects are negligible due to the oligopolistic structure of banking in South Africa
    Keywords: Banks, South Africa, Merger and Acquisitions, Network, DEA, Robust Regression Analysis
    JEL: C6 G21
    Date: 2016–09
  4. By: JaeBin Ahn; Moon Jung Choi
    Abstract: Using the Korean manufacturing firm-level data, this paper confirms that three stylized facts on importing hold in Korea: the ratio of imported inputs in total inputs tends to be procyclical; the use of imported inputs increases productivity; and larger firms are more likely to use imported inputs. As a result, we find that firm-level import decisions explain a non-trivial fraction of aggregate productivity fluctuations in Korea over the period between 2006 and 2012. Main findings of this paper suggest a possible link between the recent global productivity slowdown and the global trade slowdown.
    Keywords: Imports;Korea, Republic of;Total factor productivity;Manufacturing sector;Econometric models;Time series;Firm-level imports, Productivity pro-cyclicality, Aggregate TFP growth
    Date: 2016–08–05
  5. By: Roberto Álvarez
    Abstract: This paper examines the impact of information and communication technology (ICT) and research and development (R&D) investment on innovation and productivity in Chilean firms, in particular those in the services industry. It provides new evidence on this topic for a developing country and also for firms in the services sector, areas in which existing evidence is limited. The findings for services industries are relevant because this sector in Latin America has a large productivity gap when compared to the sector in developed countries. The results show that ICT contributes positively to innovation and productivity in both the total sample and the services industry. They also confirm that ICT investment increases productivity directly and not only through innovation, suggesting that this investment would have additional effects on productivity.
    Date: 2016–09
  6. By: Panagiotou, Dimitrios; Stavrakoudis, Athanassios
    Abstract: The objective of this study is to estimate the degree of oligopsony power in the U.S. cattle industry with the use of the recently developed stochastic frontier estimator of market power. Unlike the seminal paper where estimation of the mark-up in an output market at firm level was the main objective, this work proposes a stochastic production frontier estimator in order to estimate the mark-down in an input market at aggregate level. Furthermore, with the help of the new estimator we derive and estimate the Lerner index of oligospony power for the U.S. cattle market. For the empirical part of the study we employed annual time series data from the U.S. cattle/beef industry for the time period 1970-2009. Our results suggest that beef packers exert market power when purchasing live cattle for slaughter.
    Keywords: cattle; stochastic frontier analysis; oligopsony; market power
    JEL: C13 L66 Q11
    Date: 2015
  7. By: Tamer Cetin (Yildiz Technical University); Yildirim B. Cicen (Gumushane University, Turkey); Kadir Y. Eryigit (Uludag University)
    Abstract: This paper studies whether institutions matter for economic performance. For this aim, we first construct a simple framework illustrating how to examine the interaction between institutions and economic performance from a different point of view. Then, using this framework, we introduce an innovative estimation approach including cutting-edge econometric techniques so-called Johansen et al. (2000) co-integration methodology with structural breaks to empirically investigate the interaction between institutions and economic performance in Turkey. Co-integration analysis finds a long-run relationship between institutions and economic performance in the presence of structural breaks. Also, the estimate of structural breaks reveals the effect of noteworthy changes in institutional structure on investments and economic growth. The findings confirm that institutions matter for economic performance in Turkey, even though the institutional quality of the country is not satisfactory. Lastly, the results suggest that approach employed in this paper is useful and convenient to empirically investigate whether institutions matter for economic performance in the study of a country-level time-series data.
    Keywords: Institutions, Transaction Costs, Credible Commitment, Investments, Economic Growth.
    JEL: D02 D23 O43
    Date: 2016–09
  8. By: Andreas Jobst; Anke Weber
    Abstract: The profitability of Italian banks depends, among other factors, on the strength of the ongoing economic recovery, the stance of monetary policy, and the beneficial effects of current and past reforms, notably to address structural obstacles to resolving nonperforming loans (NPLs) and to foster banking sector consolidation. Improved profitability would enable banks to raise capital buffers and accelerate the cleanup of their balance sheets. This paper investigates quantitatively the current and prospective earnings capacity of Italian banks. A bottom-up analysis of the 15 largest Italian banks suggests that the system is on the whole profitable, but that there is significant heterogeneity across banks. Many banks should become more profitable as the economy recovers, but their capacity to lend depends on the size of their capital buffers. However, a number of smaller banks face profitability pressures, even under favorable assumptions. There is thus a need to push ahead decisively on cleaning up balance sheets, including through cost cutting and efficiency gains.
    Keywords: Banks;Italy;Profits;Non-performing loans;Credit expansion;Bank capital;Balance sheets;banks, nonperforming loans, bank profitability.
    Date: 2016–08–19
  9. By: Nakamura, Leonard I. (Federal Reserve Bank of Philadelphia); Samuels, Jon (U.S. Bureau of Economic Analysis); Soloveichik, Rachel (U.S. Bureau of Economic Analysis)
    Abstract: “Free” consumer entertainment and information from the Internet, largely supported by advertising revenues, has had a major impact on consumer behavior. Some economists believe that measured gross domestic product (GDP) growth is badly underestimated because GDP excludes online entertainment (Brynjolfsson and Oh 2012; Ito 2013; Aeppel 2015). This paper ntroduces an experimental GDP methodology that includes advertising-supported media in both final output and business inputs. For example, Google Maps would be counted as final output when it is used by a consumer to plan vacation driving routes. On the other hand, the same website would be counted as a business input when it is used by a pizza restaurant to plan delivery routes. Contrary to critics of the U.S. Bureau of Economic Analysis (BEA), the process of including “free” media in the input-output accounts has little impact on either GDP or total factor productivity (TFP). Between 1998 and 2012, measured nominal GDP growth falls 0.005% per year, real GDP growth rises 0.009% per year and TFP growth rises 0.016% per year. Between 1929 and 1998, measured nominal GDP growth rises 0.002% per year, real GDP growth falls 0.002% per year, and TFP growth rises 0.004% per year. These changes are not nearly enough to reverse the recent slowdown in growth. Our method for accounting for free media is production oriented in the sense that it is a measure of the resource input into the entertainment (or other content) of the medium rather than a measure of the consumer surplus arising from the content. The BEA uses a similar productionoriented approach when measuring GDP. In contrast, other researchers use broader approaches to measure value. Brynjolfsson and Oh (2012) attempt to capture some consumer surplus by measuring the time expended on the Internet. Varian (2009) argues that much of the value of the Internet is in time saving, an additional metric for capturing consumer surplus. The McKinsey Institute (Bughin et al. 2011) attempts to measure the productivity gain from search directly. In particular, this production-oriented accounting has no method to account for instances in which the good or service precedes the revenue that it eventually generates. Over the past two decades, many Silicon Valley firms have followed the disruptive business model described as URL: ubiquity now, revenue later. Some firms have been creating proprietary software or research, which is already captured in the national accounts as investment. Other firms have been creating intangible investments in open source software, customer networks and other organizational capital. Despite their long-run value, none of these intangible assets are currently captured in the national accounts as investment. If we treat these asset categories as capital, then the productivity boom from 1995 to 2000 becomes even stronger and the weak productivity growth of the past decade may be ameliorated somewhat.
    Keywords: Internet; Productivity; Advertising; Measurement; GDP
    JEL: C82 L81 M37 O3
    Date: 2016–08–05
  10. By: Antonelli, Cristiano; Crespi, Francesco; Mongeau, Christian; Scellato, Giuseppe (University of Turin)
    Abstract: This paper analyses the role of the composition of the regional stock of knowledge in explaining innovation performance. The paper provides three main contributions. First, it investigates the relevance of Jacobs knowledge externalities in characterizing the technological capabilities at the regional level. Second, it applies the Hidalgo-Hausmann (HH) methodology to analyze knowledge composition by looking at patent data of 214 regions, located in 27 state members of the European Union (EU) during the years 1994- 2008. Third, it econometrically assesses the role of knowledge base composition in a knowledge generation function. The results of the empirical analysis confirm that the characterization of regional knowledge base through the HH indicators provides interesting information to understanding its composition and to qualify it as a provider of the Jacobs knowledge externalities that account for the dynamics of regional innovative performance.
    Date: 2016–07
  11. By: Alfonso Leme (Nova School of Business and Economics - Universidade Nova de Lisboa); Josep-Oriol Escardíbul (University of Barcelona & Barcelona Institute of Economics)
    Abstract: Countries differ in their upper secondary school systems in a way that some require their students to choose a specialization from a set of areas - typically natural sciences, economic sciences, humanities or arts - and follow that specialization for the course of their upper secondary education years (e.g. Portugal, Spain, Sweden) whereas by contrast, others including Finland, Denmark or the U.S. follow a general curriculum where students, albeit being able to choose between different classes in distinct areas, are not required to follow a single specialization and thus, receive a more general education. Because countries only follow one system or the other, a cross-country analysis is required to estimate the possible effects of these institutional differences. An international differences-in-differences approach is chosen to account for country heterogeneity and unobserved factors influencing student outcomes, by using both PISA and PIAAC data for 20 different countries. The regression results suggest that the choice of one system or the other does not account for differences across countries in either the mean performance or the inequality of students’ test scores.
    Keywords: fuel efficiency, technological change, car characteristics
    JEL: L62 Q50 R4
    Date: 2016
  12. By: Sangyup Choi; Davide Furceri; Yi Huang; Prakash Loungani
    Abstract: We show that an increase in aggregate uncertainty—measured by stock market volatility—reduces productivity growth more in industries that depend heavily on external finance. This effect is larger during recessions, when financing constraints are more likely to be binding, than during expansions. Our statistical method—a difference-in-difference approach using productivity growth for 25 industries for 18 advanced economies over the period 1985-2010—mitigates concerns with omitted variable bias and reverse causality. The results are robust to the inclusion of other sources of interaction effects, such as financial development (Rajan and Zingales, 1998) and counter-cyclical fiscal policy (Aghion et al., 2014). The results also hold if economic policy uncertainty (Baker et al., 2015) is used instead of stock market volatility as the measure of aggregate uncertainty.
    Keywords: Productivity;Industry;Economic growth;Manufacturing sector;Developed countries;Econometric models;Time series;productivity growth; financial dependence; uncertainty
    Date: 2016–08–16
  13. By: Florian Gerth; Keisuke Otsu
    Abstract: This paper analyses the Post-crisis slump in 29 European economies during the 2008Q1 - 2014Q4 period using the Business Cycle Accounting (BCA) method a la Chari, Kehoe and McGrattan (2007). We find that the deterioration in the efficiency wedge is the most important driver of the European Great Recession and that this adverse shock persists throughout our sample. Moreover, we find that the growth rate of non-performing loans are negatively associated with the decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises.
    Keywords: Great Recession in Europe; Business Cycle Accounting
    JEL: E13 E32
    Date: 2016–09
  14. By: Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen); Tomasz Gerard Czekaj (Department of Food and Resource Economics, University of Copenhagen); Björn Forkman (Department of Large Animal Sciences, University of Copenhagen); Mogens Lund (Division for Food Production and Society, Norwegian Institute of Bioeconomy Research); Aske Schou Nielsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We propose a theoretical framework for the relationship between animal welfare and the economic performance of livestock farms. We empirically analyse this relationship based on a unique data set of randomly sampled Danish pig herds that includes information from unannounced inspections of the compliance with the animal welfare legislation. We find large variations in economic performance indicators and animal welfare indicators. The relationship between these two indicators is rather weak, but tends to be slightly positive. We conclude that management has a major influence on both economic performance and animal welfare so that good farm managers are able to obey all animal welfare regulations and, at the same time, achieve a high economic performance.
    Keywords: animal welfare, gross margin, technical efficiency, pig farms, Denmark
    JEL: Q12
    Date: 2016–08
  15. By: Ncube, Free; Cheteni, Priviledge; Ncube, Prince; Muzawazi, Strugle
    Abstract: South Africa has shown major interest in the climate change discourse since the Kyoto Protocol in 1997. Climate change has moved from an issue of environmental concern to an issue of commercial significance. The purpose of this study was to investigate the impact of climate change on agriculture output in South Africa. The impact of climate change on output is examined in this study using the ordinary least squares (OLS) method. The estimated econometric model regresses temperature, rainfall, labour and capital on GDP in the agricultural sector. The results suggest that there is a negative relationship between climate change and agricultural output in South Africa.
    Keywords: Impact, OLS, South Africa, Climate Change, Agricultural Output.
    JEL: Q1 Q5 Q54
    Date: 2015
  16. By: Roberto Álvarez; Mauricio Jara
    Abstract: Prior literature argues that, given the existence of information asymmetries and agency costs, higher competition may increase financial constraints by reducing banks’ incentives to build lending relationships. Using a sample of listed firms for six Latin American countries, we analyze the relation between banking competition and financial constraints. We find evidence in line with prior research that banking competition increases financial constraints. This result is robust and heterogeneous. We include other country-specific variables and check the robustness of our findings; the main results hold. Our results show that the effect of competition differs across firms and industries. Specifically, consistent with the information hypothesis, the negative impact of competition is higher for small quoted firms and for lowassets tangibility industries. Also, as expected, we find evidence that firms are more affected by financial constraints during the last crisis. This negative effect is larger for firms in more competitive banking industries.
    Date: 2016–08

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