nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒10‒02
fifteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Agri-environmental subsidies and French suckler cow farms’ technical efficiency accounting for GHGs By K Hervé Dakpo; Laure Latruffe
  2. Is corruption efficiency-enhancing? A case study of nine Central and Eastern European countries By Gamberoni, Elisa; Gartner, Christine; Giordano, Claire; Lopez-Garcia, Paloma
  3. Flexible Functional Forms and Curvature Conditions: Parametric Productivity Estimation in Canadian and U.S. Manufacturing Industries By Jakir Hussain; Jean-Thomas Bernard
  4. Environmentally Adjusted Multifactor Productivity: Methodology and Empirical results for OECD and G20 countries By Miguel Cárdenas Rodríguez; Ivan Haščič; Martin Souchier
  5. Multinationality, R&D and productivity: Evidence from the top R&D investors worldwide By Davide Castellani; Sandro Montresor; Torben Schubert; Antonio Vezzani
  6. A tale of two sectors: why is misallocation higher in services than in manufacturing? By Daniel Dias; Carlos Robalo Marques; Christine Richmond
  7. On modeling pollution-generating technologies: a new formulation of the by-production approach By K Hervé Dakpo
  8. Corporate Governance of SOEs and performance in transition countries. Evidence from Lithuania By Claudia Curi; Justas Gedvilas; Ana Lozano-Vivas
  9. R&D and Productivity in the US and the EU: Sectoral Specificities and Differences in the Crisis By Davide Castellani; Mariacristina Piva; Torben Schubert; Marco Vivarelli
  10. Production with storable and durable inputs: nonparametric analysis of intertemporal efficiency By Laurens Cherchye; Bram De Rock; Pieter Jan Kerstens
  11. Market Regulations, Prices, and Productivity By Gilbert Cette; Jimmy Lopez; Jacques Mairesse
  12. Intangible Investment and Firm Performance By Nathan Chappell; Suzi Kerr
  13. Technological Progress and Sectoral Shares By Gamal Atallah; Aggey Semenov
  14. Product diversification and bank performance: does ownership structure matter? By Nadia Saghi-Zedek
  15. The Benefits and Costs of Geographic Diversification in Banking By Céline Meslier-Crouzille; Donald P. Morgan; Katherine Samolyk; Amine Tarazi

  1. By: K Hervé Dakpo; Laure Latruffe
    Abstract: In this article we assess the impact of agri-environmental subsidies on farms’ technical efficiency, when the latter is measured with and without accounting for greenhouse gases (GHGs). The application is to a sample of beef cattle farms located in grassland areas in France during the 1993-2013 period. In a first stage we calculate robust technical efficiency accounting for both good output (meat) and bad output (GHGs). In a second stage we regress the different technical efficiency scores on a set of explanatory variables including agri-environmental subsidies as an amount received by the farmer related per livestock unit. The results indicate that these subsidies had a positive impact on farms’ technical efficiency among the farmers that have adopted agri-environmental measures. This is the first work on the effect of subsidies on technical efficiency including environmental outputs, and it does not confirm the negative effect generally found in existing studies based on classic technical efficiency.
    Keywords: by-production, GHG emissions, agri-environmental subsidies, livestock
    JEL: D24 O47 Q10 Q50
    Date: 2016
  2. By: Gamberoni, Elisa; Gartner, Christine; Giordano, Claire; Lopez-Garcia, Paloma
    Abstract: We investigate the role of corruption in the business environment in explaining the efficiency of within-sector production factor allocation across firms in nine Central and Eastern European countries in the period 2003-2012. Using a conditional convergence model, we find evidence of a positive relationship between corruption growth and both labour and capital misallocation dynamics, once country framework conditions are controlled for: the link between corruption and input misallocation dynamics is larger the smaller the country, the lower the degree of political stability and of civil liberties, and the weaker the quality of its regulations. As input misallocation is one of the determinants of productivity growth, we further show that the relationship between changes in corruption and TFP growth is indeed negative. Our results hold when we tackle a possible omitted variable bias by instrumenting corruption with two instrumental variables (the percentage of women in Parliament and freedom of the press). JEL Classification: D24, D73, O47
    Keywords: bribes, capital misallocation, labour misallocation, total factor productivity
    Date: 2016–08
  3. By: Jakir Hussain (Department of Economics, University of Ottawa, Ottawa, ON); Jean-Thomas Bernard (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: It is well-known that econometric productivity estimation using flexible functional forms often encounter violations of curvature conditions. However, the productivity literature does not provide any guidance on the selection of appropriate functional forms once they satisfy the theoretical regularity conditions. In this paper, we provide an empirical evidence that imposing local curvature conditions on the flexible functional forms affect total factor productivity (TFP) estimates in addition to the elasticity estimates. Moreover, we use this as a criterion for evaluating the performances of three widely used locally flexible cost functional forms - the translog (TL), the Generalized Leontief (GL), and the Normalized Quadratic (NQ) - in providing TFP estimates. Results suggest that the NQ model performs better than the other two functional forms in providing TFP estimates.
    Keywords: Technical change, Productivity, Flexible functional forms, Translog (TL), Generalized Leontief (GL), Normalized Quadratic (NQ), Cost function, Concavity
    JEL: C22 F33
    Date: 2016
  4. By: Miguel Cárdenas Rodríguez; Ivan Haščič; Martin Souchier
    Abstract: This paper further refines the OECD framework for measuring the environmentally adjusted multifactor productivity growth that seeks to incorporate environmental services in productivity analysis. Compared to standard productivity measurement, this framework allows accounting also for the use of natural capital (currently including 14 types of fossil fuels and minerals) and the emission of pollutants as negative by-products (currently including 8 types of greenhouse gases and air pollutants). An updated series of the indicator is presented, with a geographic coverage extended to all OECD and G20 countries for the 1990-2013 time period. The indicators presented here allow the sources of economic growth to be better identified, and growth prospects in the long run to be better assessed. Le présent rapport affine le cadre de mesure de la croissance de la productivité multifactorielle corrigée des incidences environnementales utilisé par l’OCDE pour incorporer les services environnementaux dans l’analyse de la productivité. Comparé à la mesure classique de la productivité, ce cadre permet également de tenir compte de l’utilisation du capital naturel (actuellement 14 types de combustibles fossiles et minéraux) et des émissions de polluants en tant que sous-produits négatifs (actuellement 8 types de gaz à effet de serre et polluants atmosphériques). Une série actualisée de cet indicateur, dont la couverture géographique s’étend à tous les pays de l’OCDE et du G20, est présentée pour la période 1990-2013. Ces indicateurs permettent de mieux identifier les sources de croissance économique et de mieux évaluer les perspectives de croissance sur le long terme.
    Keywords: multifactor productivity, air pollution, total factor productivity, green productivity, productivity measurement, emission shadow prices, productivité multifactorielle, productivité verte, mesure de la productivité, productivité totale des facteurs, pollution atmosphérique
    JEL: D24 O44 O47 Q3 Q52 Q53 Q56
    Date: 2016–09–22
  5. By: Davide Castellani (Henley Business School, University of Reading); Sandro Montresor; Torben Schubert; Antonio Vezzani
    Abstract: This paper investigates the effects of multinationality on firm productivity, and contributes to the literature in two respects. First, we argue that multinationality affects productivity both directly and indirectly, through higher incentives to invest in R&D. Second, we maintain that the multinational depth and breadth have different direct effects on productivity and R&D. Using data from the top R&D investors in the world, we propose an econometric model with an R&D and a productivity equation that both depend on multinationality. We find: i) multinational depth has a positive effect on productivity, while the effect of multinational breadth is negative; ii) multinationality (along both dimensions) has a positive effect on R&D intensity, translating into an indirect positive effect on productivity; iii) the positive indirect effect is however not large enough to compensate the negative direct effect of multinational breadth.
    Keywords: Multinationality, R&D, productivity
    JEL: F23 F61 O32
    Date: 2016–06
  6. By: Daniel Dias; Carlos Robalo Marques; Christine Richmond
    Abstract: Recent empirical studies document that the level of resource misallocation in the service sector is signicantly higher than in the manufacturing sector.We quantify the importance of this difference and study its sources. Conservative estimates for Portugal (2008) show that closing this gap, by reducing misallocation in the service sector to manufacturing levels, would boost aggregate gross output by around 12 percent and aggregate value added by around 31 percent. Differences in the effect and size of productivity shocks explain most of the gap in misallocation between manufacturing and services, while the remainder is explained by differences in firm productivity and age distribution. We interpret these results as stemming mainly from higher output-price rigidity, higher labor adjustment costs and higher informality in the service sector.
    JEL: D24 O11 O41 O47
    Date: 2016
  7. By: K Hervé Dakpo
    Abstract: We contribute to the literature on undesirable-output technology modeling by first discussing the limits of the recently proposed by-production approach of Murty et al. (2012) (hereafter we will refer to these authors as MRL) and second by proposing some possible extensions. We identify two theoretical limits and two practical drawbacks when using Data Envelopment Analysis (DEA) with this approach. Theoretically, MRL’s by-production model is based on estimating two sub-technologies, one representing good outputs and the other one representing undesirable outputs. However, MRL assume independence of the sub-frontiers. In our paper, by contrast, we discuss the importance and implications of considering that all production processes are interconnected and should not be considered separately. Among the three extensions proposed, we argue that the introduction of some dependence constraints that link the two sub-technologies considered in this framework is very powerful. The two by-production approaches, MRL’s and ours, are discussed under the restrictive assumption of fixed levels of inputs and under the flexible case of free choice of polluting input quantities. An application to a sample of 112 countries reveals that MRL model gives higher inefficiency scores compared to our extension with dependence constraints.
    Keywords: by-production, cost disposability, factor bands, product couplings, dependence constraints, data envelopment analysis
    JEL: C61 D24 Q50
    Date: 2016
  8. By: Claudia Curi (Free University of Bolzano‐Bozen, Faculty of Economics and Management); Justas Gedvilas; Ana Lozano-Vivas (University of Malaga)
    Abstract: This paper investigates whether and to what extent corporate governance mechanisms affect the efficiency of State Owned Enterprises (SOEs) operating in transition economies. Furthermore, it examines the relationship between corporate governance practice and its impact on both wholly state run SOEs and majority state run SOEs. We employed a unique dataset of corporate governance ratings (related to quality of transparency, quality of board, and quality of strategic planning, implementation and control) of commercial Lithuanian SOEs relating to the period following the introduction of the corporate governance reforms in the years 2012-2013. In order to investigate our research hypotheses, we set-up a two stage empirical research strategy that combined a non-parametric efficiency estimator (i.e., Data Envelopment Analysis) with a bootstrapped truncated regression. We built two aggregate indexes of corporate governance ratings to represent one dimension of corporate governance quality. We then ran a battery of regressions using both the aggregated and the single corporate governance indexes as independent variables. First, the paper finds that the wholly state ownership model of SOEs is positively correlated to efficiency (i.e., wholly SOEs are more efficient than majority SOEs). Moreover, overall corporate governance practices are efficiency-enhancing; more specifically, board quality and strategic planning seem to be effective internal governance mechanisms in promoting overall organizational efficiency. Interestingly, we uncovered that there exists a relationship between concentration of ownership and corporate governance practices, but this mitigated efficiency enhancement in wholly state run SOEs compared to majority state run SOEs. This effect was driven by the lower quality of the board. Overall, our findings illustrate that corporate governance reforms have enhanced efficiency, but wholly SOEs require a better implementation in order to achieve full efficiency gains.
    JEL: C14 D24 G34 L32 P31
    Date: 2016–09
  9. By: Davide Castellani (Henley Business School, University of Reading); Mariacristina Piva; Torben Schubert; Marco Vivarelli
    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: 2016–06
  10. By: Laurens Cherchye; Bram De Rock; Pieter Jan Kerstens
    Abstract: We propose a nonparametric methodology for intertemporal production analysis that accounts for durable as well as storable inputs. Durable inputs contribute to the production outputs in multiple consecutive periods. Storable inputs are non-durable and can be stored in inventories for use in future periods. We explicitly model the possibility that firms use several vintages of the durable inputs, i.e. they invest in new durables and scrap older durables over time. Furthermore, we allow for production delays of durable inputs. We characterize production behavior that is dynamically cost efficient, which allows us to evaluate the efficiency of observed production decisions. For cost inefficient behavior, we propose a measure to quantify the degree of inefficiency. An attractive feature of this measure is that it can be decomposed in period-specific cost inefficiencies. We demonstrate the usefulness of our methodology through an application to Swiss railway companies.
    Date: 2016–09
  11. By: Gilbert Cette (Centre de recherche de la Banque de France - Banque de France); Jimmy Lopez (LEDi - Laboratoire d'Economie de Dijon - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique, Centre de recherche de la Banque de France - Banque de France); Jacques Mairesse (CREST-ENSAE - Centre de Recherche en Économie et STatistique (CREST), UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University, Centre de recherche de la Banque de France - Banque de France)
    Abstract: This study is, to our knowledge, the first attempt to infer the consequences on productivity entailed by anticompetitive regulations in product and labor markets through their impacts on production prices and wages. Results show that changes in production prices and wages at country*industry levels are informative about the creation of rents impeding productivity in different ways and to different extents. A simulation based on OECD regulation indicators suggests that nearly all countries could expect sizeable gains in multifactor productivity from the implementation of large structural reform programs changing anticompetitive regulation practices on product and labor markets.
    Keywords: rents, anti-competitive regulations,Productivity, market imperfections
    Date: 2016
  12. By: Nathan Chappell (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research)
    Abstract: We combine survey and administrative data for about 13,000 firms from 2005 to 2013 to study the inter-relationships among firm characteristics, intangible investment and firm performance. We find that firm size is associated with higher intangible investment, while firm age, very low competition (‘captive market’) and very high competition (‘many competitors, none dominant’) are associated with lower intangible investment. Relating intangible investment to subsequent firm performance, we find that higher investment is associated with higher labour and capital input and higher revenue, relative to what would otherwise have been predicted. We also find that higher investment is associated with higher firm-reported employee and customer satisfaction, but is not associated with higher productivity or profitability. While we cannot estimate a causal model, the evidence suggests that intangible investment is associated with firm strategies related to growth and possibly to ‘soft’ performance objectives, but not to productivity or profitability.
    Keywords: Intangible investment; productivity; firm performance; industrial policy
    JEL: D22 D24 L21
    Date: 2016–09
  13. By: Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON); Aggey Semenov (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper studies the effect of differences in the rate of technological progress between sectors on the relative sizes of those sectors in terms of revenues. There are two sectors: a stagnant sector, where productivity does not change over time, and a progressive sector, where costs decrease over time due to exogenous technological progress. We consider a conjectural variation approach to competition in the progressive sector which encompasses perfect competition, Cournot oligopoly and monopoly. The main result of the paper is that the share of the stagnant sector increases over time when demand in the progressive sector is inelastic. Under perfect competition, when initial production costs in the progressive sector are sufficiently low (so that demand is inelastic), the share of the stagnant sector rises over time. Whereas, when initial production costs are sufficiently high (so that demand is elastic), the relative size of the stagnant sector is U-shaped with respect to time. Under monopoly, the share of the stagnant sector always decreases over time. However, the decline in that share is much more rapid the higher are initial costs in the progressive sector. The interaction of market structure and price elasticity (or initial costs) determines how the relative sizes of sectors differing in productivity growth evolve over time. The relationship with the cost disease literature is discussed.
    Keywords: Cost decrease, productivity growth, sectoral shares, cost disease
    JEL: D24 D41 D42 L11 O33
    Date: 2016
  14. By: Nadia Saghi-Zedek (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Using detailed data on control chains of 710 European commercial banks, we test whether the presence of some categories of controlling shareholders affects product diversification performance. We find that when banks have no controlling shareholder or have only family and state shareholders activity diversification yields diseconomies. However, as long as the control chain involves banking institutions, institutional investors, industrial companies or any other combination of these shareholder categories, banks benefit from diversification economies: they display higher profitability, lower earnings volatility and lower default risk. This is potentially because such categories of shareholders bring additional skills to manage diverse activities. A further exploration shows that such mitigating roles are greater for domestic and diversified shareholders. Our findings provide insights on why banks suffer from greater activity diversification and have several policy implications.
    Keywords: performance,European banking,ownership structure,product diversification
    Date: 2016
  15. By: Céline Meslier-Crouzille (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société); Donald P. Morgan (Federal Reserve Bank of New-York - Federal Reserve Bank of New-York); Katherine Samolyk (Consumer Financial Protection Bureau - Consumer Financial Protection Bureau); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société)
    Abstract: We estimate the benefits of geographic diversification within states and across states for bank risk and return for all U.S. bank holding companies over 1994 to 2008, and assess whether such benefits depend on bank size.For small banks, only intrastate diversification increases risk-adjusted returns and reduces default risk while for very large institutions only interstate expansions are beneficial but only in terms of default risk. In all cases the relationship ishump-shaped indicating that at some point, the possible agency costs associated with banks getting wider and more geographically diversified outweigh the benefits.Our results indicate that small banks and very large banks could still benefit from further geographic diversification. Email Addresses: (Céline Meslier), (Donald P. Morgan) (Katherine Samolyk), (Amine Tarazi). The views herein do not necessarily reflect those of the Federal Reserve System. 2
    Keywords: bank geographic diversification,risk,return,agency costs
    Date: 2016

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