nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒09‒25
eleven papers chosen by

  1. Measuring Productivity and Efficiency: A Kalman By Duygun, Meryem; Kutlu, Levent; Sickles, Robin C.
  2. Panel Data and Productivity Measurement By Sickles, Robin C.; Hao, Jiaqi; Shang, Chenjun
  3. How Regulatory Capital Requirement Affect Banks' Productivity: An Application to Emerging Economies' Banks By Duygun, Meryem; Shaban, Mohamed; Sickles, Robin C.; Weyman-Jones, Thomas
  4. Decomposition of Output Growth in the Presence of Input Quality: A Stochastic Frontier Approach By Yasmina Rim Limam; Stephen M. Miller; Giampaolo Garzarelli
  5. Government Assistance and Total Factor Productivity: Firm-level Evidence from China, 1998-2007 By Richard Harris; Shengyu Li
  6. Productivity Measurement, Model Averaging, and World Trends in Growth and Inequality By Sickles, Robin C.; Hao, Jiaqi; Shang, Chenjun
  7. World Productivity Growth: A Model Averaging Approach By Duygun, Meryem; Hao, Jiaqi; Isaksson, Anders; Sickles, Robin C.
  8. A Spatial Autoregressive Stochastic Frontier Model for Panel Data with Asymmetric Efficiency Spillovers By Glass, Anthony J.; Kenjegalieva, Karligash; Sickles, Robin C.
  9. Regulatory harmonization, profits, and productivity: Firm-level evidence from Morocco By Olivier CADOT; Patricia AUGIER; Marion DOVIS
  10. Analysis of production and economic potential of the industry of dairy farming with the use of the tracer method By Generalova Svetlana Vladimirovna; Dzhamalodinova Nanish Asadulaevna
  11. Analyzing Bank Efficiency: Are "Too-Big-to-Fail" Banks Efficient? By Inanoglu, Hulusi; Jacobs, Michael, Jr.; Liu, Junrong; Sickles, Robin

  1. By: Duygun, Meryem (University of Leicester); Kutlu, Levent (GA Institute of Technology); Sickles, Robin C. (Rice University)
    Abstract: In the Kalman Filter setting, one can model the inefficiency term of the standard stochastic frontier composed error as an unobserved state. In this study a panel data version of the local level model is used for estimating time-varying efficiencies of firms. We apply the Kalman filter to estimate average efficiencies of U.S. airlines and find that the technical efficiency of these carriers did not improve during the period 1999-2009. During this period the industry incurred substantial losses, and the efficiency gains from reorganized networks, code-sharing arrangements, and other best business practices apparently had already been realized.
    JEL: C13 C23 R49
    Date: 2014–10
  2. By: Sickles, Robin C. (Rice University); Hao, Jiaqi (?); Shang, Chenjun (?)
    Abstract: The chapter first discusses how productivity growth typically has been measured in classical productivity studies. We then briefly discuss how innovation and catch-up can be distinguished empirically. We next outline methods that have been proposed to measure productivity growth and its two main factors, innovation and catch-up. These approaches can be represented by a canonical form of the linear panel data model. A number of competing specifications are presented and model averaging is used to combine estimates from these competing specifications in order to ascertain the contributions of technical change and catch-up in world productivity growth. The chapter ends with concluding remarks and suggestions for the direction of future analysis. The literature on productivity and its sources is vast in terms of empirical and theoretical contributions at the aggregate, industry, and firm level. The pioneering work of Dale Jorgenson and his associates and Zvi Griliches and his associates, the National Bureau of Economic Research, the many research contributions made in U.S universities and research institutions, the World Bank and research institutes in Europe and other countries are not discussed here as our goal is by necessity rather narrow. We focus on work directly related to panel data methods that have been developed to address specific issues in specifying the production process and in measuring the sources of productivity growth in terms of its two main components of innovation (technical progress) and catch-up (efficiency growth), with emphasis given to one of the more important measures of the latter component and that is technical efficiency.
    Date: 2015
  3. By: Duygun, Meryem (University of Hull); Shaban, Mohamed (University of Leicester); Sickles, Robin C. (Rice University); Weyman-Jones, Thomas (Loughborough University)
    Abstract: This paper presents a novel approach to measure efficiency and productivity decomposition in the banking systems of emerging economies with a special focus on the role of equity capital. We model the requirement to hold levels of a fixed input, i.e. equity, above the long run equilibrium level or, alternatively, to achieve a target equity-asset ratio. To capture the effect of this under-leveraging, we allow the banking system to operate in an uneconomic region of the technology. Productivity decomposition is developed to include exogenous factors such as policy constraints. We use a panel data set of banks in emerging economies during the financial upheaval period of 2005-2008 to analyse these ideas. Results indicate the importance of the capital constraint in the decomposition of productivity.
    JEL: C23 D24 G21
    Date: 2015–06
  4. By: Yasmina Rim Limam (Faculté des Sciences Économiques et de Gestion de Nabeul and Institutions and Political Economy Group (IPEG), University of the Witwatersrand); Stephen M. Miller (University of Nevada, Las Vegas and University of Connecticut); Giampaolo Garzarelli (Università di Roma and Institutions and Political Economy Group (IPEG), University of the Witwatersrand)
    Abstract: How do physical capital accumulation and Total Factor Productivity (TFP) individually add to economic growth? We approach this question from the perspective of the quality of both labor and physical capital, namely human capital and the age of physical capital. We build a unique dataset by explicitly calculating the age of physical capital for each year of our time frame and estimate a stochastic frontier production function incorporating input quality in five groups of countries (Africa, East Asia, Latin America, South Asia, and West). Quality of capital significantly and positively affects output growth in three groups. The decomposition of output growth demonstrates that factor growth generally proves much more important than either the improved quality of factors or TFP growth in explaining output growth.
    Keywords: Age of Physical Capital, Growth Accounting, Output Growth, Technical Efficiency
    JEL: F43 O47
    Date: 2016–09
  5. By: Richard Harris (Durham Business School); Shengyu Li (Durham Business School)
    Abstract: The provision of large-scale assistance to industry is very important in China. The major contribution of this paper is to use Chinese firm-level panel data for 1998-2007 to introduce measures of assistance received by each firm directly into industry-level production functions determining firm output. Our results indicate inverted U-shaped gains from assistance: across the 26 industries considered, firms receiving assistance rates of 1-10%, 10-19%, 20-49% and 50+% experienced on average 4.5%, 9.4%, 9.2% and -3% gains in TFP, respectively. We also provide a simple agency model that justifies such a result
    Keywords: Subsidies; TFP; China; firm-level
    JEL: D24 O14 O43
    Date: 2016–09
  6. By: Sickles, Robin C. (Rice University); Hao, Jiaqi (ATB Financial, Edmonton); Shang, Chenjun (Rice University)
    Abstract: Our paper provides new methods to robustify productivity growth measurement by utilizing various economic theories explaining economic growth and productivity and the econometric model generated by that particular theory. We utilize the World Productivity Database from the UNIDO to analyze productivity during the period 1960-2010 for OECD countries. We focus on three competing models from the stochastic frontier literature, Cornwell, Schmidt, and Sickles (1990), Kumbhakar (1990) and Battese and Coelli (1992) to estimate productivity growth and its decomposition into technical change and efficiency change and utilize methods due to Hansen (2010) to construct optimal weights in order to model average the results from these three approaches.
    Date: 2015
  7. By: Duygun, Meryem (University of Hull); Hao, Jiaqi (ATB Financial, Edmonton); Isaksson, Anders (UN Industrial Development Organization); Sickles, Robin C. (Rice University)
    Abstract: The paper provides a discussion of panel data and productivity analysis in applied economic modeling. We discuss a variety of modeling scenarios and justifications for them based on classical economic theory and on more recent advances in production modeling, which formulate methods to decompose productivity growth based on a Solow-type residual (Solow, 1957) into innovation and catch-up. Methods to combine the various estimates based on different empirical specifications that model and estimate productivity growth are then discussed and these provide the econometric approaches we use to estimate world productivity growth. We also provide a counterfactual analysis of a scenario in which the rise in income inequality since the 1970's in the US is tempered by distributing productivity growth to wage compensation growth as had been the case during the post-WWII years to the early 1970's.
    JEL: C23 D24 O47
    Date: 2015–05
  8. By: Glass, Anthony J. (Loughborough University); Kenjegalieva, Karligash (Loughborough University); Sickles, Robin C. (Rice University and Loughborough University)
    Abstract: By blending seminal literature on non-spatial stochastic frontier models with key contributions to spatial econometrics we develop a spatial autoregressive (SAR) sto- chastic frontier model for panel data. The specification of the SAR frontier allows efficiency to vary over time and across the cross-sections. Efficiency is calculated from a composed error structure by assuming a half-normal distribution for inefficiency. The spatial frontier is estimated using maximum likelihood methods taking into account the endogenous SAR variable. We apply our spatial estimator to an aggregate production frontier for 41 European countries over the period 1990-2011. In the application section, the fitted SAR stochastic frontier specification is used to discuss, among other things, the asymmetry between efficiency spillovers to and from a country.
    JEL: C23 C51 D24 E23
    Date: 2015–04
  9. By: Olivier CADOT (Faculté des hautes études commerciales - Université de Lausanne); Patricia AUGIER (FERDI); Marion DOVIS (FERDI)
    Abstract: This paper combines a new database on non-tariff measures (NTMs) with Morocco’s firm census to explore the effect of regulatory harmonization with the E.U. on firm-level outcomes. Exploiting cross-sectoral variation in the timing and extent of regulatory harmonization, we find that harmonization waves correlate with rises in labor productivity and with higher markups, allowing self-financing of the adaptation process at the firm level. We identify an induced market-structure change that made the observed rise in markups possible. Namely, harmonization temporarily sheltered the Moroccan market from competition from low-end producers in other developing countries, who took time to adapt. We identified this effect through changes in both trade patterns and firm-level outcomes. Thus, harmonization apparently generated a self-financing adaptation process by affecting both firm-level incentives and market structure.Keywords : Morocco, Trade, Non-Tariff Measures, Firms, Harmonization, Profit, Productivity
    Keywords: Morocco; Trade; Non-Tariff Measures; Firms; Harmonization; Profit; Productivity
    JEL: F13 F15
    Date: 2016–08
  10. By: Generalova Svetlana Vladimirovna (Russian Presidential Academy of National Economy and Public Administration- Stolypin Volga Region Institute of administration); Dzhamalodinova Nanish Asadulaevna (Saratov State Vavilov Agrarian University)
    Abstract: The article examines the nature and the structure of productive and economic potential of companies in the dairy breeding sphere. The mechanism of evaluation of productive and economic potential using the tracer method is described. The analysis of the potential of big companies using the indicator method in dairy breeding sphere of Saratov region is given here. The adequacy and accuracy of conducted assessment is confirmed by correlation and regression analysis where was set a close relationship of assessment indicators with the indexes of industrial efficiency
    Keywords: productive and economic potential, potential assessment, indicator method, dairy breeding sphere, Saratov region
    Date: 2015
  11. By: Inanoglu, Hulusi (Federal Reserve Board); Jacobs, Michael, Jr. (Pricewaterhouse Coopers LLC); Liu, Junrong (IFE Group); Sickles, Robin (Rice University)
    Abstract: Abstract This paper analyzes the provision of banking services--the multioutput/ multi-input technology that is utilized by banks in their role in the provision of banking services, including both balance-sheet financial intermediation businesses and off-balance-sheet activities. We focus on the largest financial institutions in the U. S. banking industry. We examine the extent to which scale efficiencies exist in this subset of banks in part to address the issue of whether or not there are economic justifications for the notion that these banks may be "too-big-to-fail." Our empirical study is based on a newly developed set data based on Call Reports from the FDIC for the period 1994-2013. We contribute to the post-financial crisis "too-big-to-fail" debate concerning whether or not governments should bail-out large institutions under any circumstances, risking moral hazard, competitive imbalances and systemic risk. Restrictions on the size and scope of banks may mitigate these problems, but may do so at the cost of reducing banks' scale efficiencies and international competitiveness. Our study also utilizes a suite of econometric models and assesses the empirical results by looking at consensus among the findings from our various econometric treatments and models in order to provide a robust set of inferences on large scale banking performance and the extent to which scale economies have been exhausted by these large financial institutions. The analyses point to a number of conclusions. First, despite rapid growth over the last 20 years, the largest surviving banks in the U.S. have decreased their level of efficiency. Second, we find no measurable returns to scale across our host of models and econometric treatments and in fact find negative correlation between bank size and the efficiency with which the banks take advantage of their scale of operations. In addition to the broad policy implications of our analysis our paper also provides an array of econometric techniques, findings from which can be combined to provide a set of robust consensus-based conclusions that can be a valuable analytical tool for supervisors and others involved in the regulatory oversight of financial institutions.
    JEL: C14 C21 C23 G28
    Date: 2015–03

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.