nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒10‒16
twelve papers chosen by
Angelo Zago
Università degli Studi di Verona

  2. Does Higher Productivity Dispersion Imply Greater Misallocation?A Theoretical and Empirical Analysis By J. David Brown; Emin Dinlersoz; John S. Earle
  3. Effects of Logistics Capabilities on Efficiency of Automotive Parts Industry in Thailand By Phat Pisitkasem
  4. Investment in Productivity and the Long-Run Effect of Financial Crises on Output By Maarten de Ridder
  5. The profitability of inorganic fertilizer use in smallholder maize production in Tanzania: Implications for alternative strategies to improve smallholder maize productivity. By Mather, David; Minde, Isaac; Waized, Betty; Ndyetabul, Daniel; Temu, Anna
  6. Economics of Pipelines: the United Kingdom Continental Shelf (UKCS) and the case for government intervention By Anastasia Charalampidou
  7. Should the host economy invest in a new industry? The roles of FDI spillovers, development level and heterogeneity of firms By Huu Thanh Tam Nguyen; Ngoc-Sang Pham
  8. FDI effects on the labor market of host countries By Hale, Galina; Xu, Mingzhi
  9. Labour market regulations and capital labour substitution. By G. Cette; J. Lopez; J. Mairesse
  10. Productivity, wages and unions in Japan By Kato, Takao.
  11. Economic growth in Iran through labor productivity growth By Nazak Nobari; Mahmoud Askari Azad
  12. Unleashing private sector productivity in the United States By John Millar; Douglas Sutherland

  1. By: Tomislav Herceg (Faculty of Economics and Business, University of Zagreb); Iva Vuksanovic (Faculty of Economics Belgrade, University of Belgrade)
    Abstract: Agricultural sector in Croatia declines or stagnates from 1980’s. Croatian agriculture did not improve its production level despite high subsidies and EU accession. In this paper perennial agriculture is analysed in detail since it is a high yielding segment of agriculture in EU. A panel data set for all Croatian perennial agriculture legal entities in the period of 2008 – 2014 was used to build production function. Cross section data were sub-sectors of perennial agriculture. Contributions of capital and labour were obtained as well as total factor productivity. It is shown that common approximation of production elasticities with share in costs is entirely inadequate in this case, showing decreasing returns to scale. TFP in perennial agriculture remained constant in this period despite subsidies. Finally, a TFP model was built. Using a set of 301 variables only two remained significant: export and subsidies, but with almost inexistent effect, showing that exports and subsidies make almost no effect on perennial agriculture productivity in Croatia. It may be the consequence of inefficient distribution of subsidies.
    Keywords: Total factor productivity, Croatian agriculture, Cobb-Douglas production function, agricultural subsidies, export orientation, perennial agriculture, non-perennial agriculture
    JEL: D24 Q12
  2. By: J. David Brown; Emin Dinlersoz; John S. Earle
    Abstract: Recent research maintains that the observed variation in productivity within industries reflects resource misallocation and concludes that large GDP gains may be obtained from market-liberalizing polices. Our theoretical analysis examines the impact on productivity dispersion of reallocation frictions in the form of costs of entry, operation, and restructuring, and shows that reforms reducing these frictions may raise dispersion of productivity across firms. The model does not imply a negative relationship between aggregate productivity and productivity dispersion. Our empirical analysis focuses on episodes of liberalizing policy reforms in the U.S. and six East European transition economies. Deregulation of U.S. telecommunications equipment manufacturing is associated with increased, not reduced, productivity dispersion, and every transition economy in our sample shows a sharp rise in dispersion after liberalization. Productivity dispersion under central planning is similar to that in the U.S., and it rises faster in countries adopting faster paces of liberalization. Lagged productivity dispersion predicts higher future productivity growth. The analysis suggests there is no simple relationship between the policy environment and productivity dispersion.
    Date: 2016–01
  3. By: Phat Pisitkasem (Rangsit University)
    Abstract: This research aims to study the effects of logistics capabilities in terms of customer services, flexibility, and technology on the efficiency of automotive parts industry in Thailand and its efficiency in terms of costs, time, and reliability. 408 questionnaires were sent to selected automotive parts companies in Thailand listed in “Thai Automotive Industry Directory 2014†agribusiness organizations in Thailand. Descriptive and inferential statistics were conducted for data analysis including percentages, averages, standard deviations, and multiple regressions.Of 408 responders, most organizations have the registered capitals of less than 50 million Baht, Thai nationality, average number of employees of 173.4, and average operation period of 18.95 years. Most responders are assistant managers, male, bachelor degree, and average age of 30.15 years old with 10.12 years of experiences. Hypothesis tests indicate that customer service capability has an effect on cost and reliability efficiencies, flexibility capability have an effect on time efficiency, and information technology capability has an effect on cost, time and reliability efficiencies.
    Keywords: Logistics Capabilities, Efficiency, Automotive Parts Industry
    JEL: M10
  4. By: Maarten de Ridder (Centre for Macroeconomics (CFM); University of Cambridge)
    Abstract: This paper analyzes the channels through which financial crises exert long-term negative effects on output. Recent models suggest that a shortfall in productivity-enhancing investments temporarily slows technological progress, creating a gap between pre-crisis trend and actual GDP. This hypothesis is tested using a linked lender-borrower dataset on 519 U.S. corporations responsible for 54% of industrial research and development. Exploiting quasi-experimental variation in firm-level exposure to the 2008-9 financial crisis, I show that tight credit reduced investments in productivity-enhancement, and has significantly slowed down output growth between 2010 and 2015. A partial-equilibrium aggregation excercise suggests output would be 12% higher today if productivity-enhancing investments had grown at pre-crisis rates.
    Keywords: Financial crises, Endogenous growth, Innovation, Business cycles
    JEL: E32 E44 O30 O47
    Date: 2016–09
  5. By: Mather, David; Minde, Isaac; Waized, Betty; Ndyetabul, Daniel; Temu, Anna
    Keywords: Agricultural and Food Policy, International Development, Productivity Analysis,
    Date: 2016–06
  6. By: Anastasia Charalampidou (University of Strathclyde- Business School)
    Abstract: In the UK Continental Shelf (UKCS), private negotiations determine the terms of third party access to infrastructure and often hinder high complexity. Given the fact that the market is vertically integrated, where the infrastructure owners are also developers in their own producing fields, a misalignment of commercial and technical interests is observed. Considering the high capital cost of replicating existing infrastructure, the infrastructure owners, who are natural monopolies within their geographical market, find themselves gaining the bargaining advantage in the negotiations charging in several cases disproportionately high fees. In general, natural monopoly in capital intensive industries is linked with the concept of economies of scale- a situation where one firm can produce the market’s desirable output at a lower average cost comparing to two companies operating in a smaller scale. Therefore, economic literature views competition in the industry as socially undesirable as the existence of a large number of firms would result in needless duplication of capital equipment. Many authors emphasise also the fact that the extensive need for capital is probably the most important exogenous structural barrier. However, although production efficiency arguments suggest that network infrastructure should be provided by a single firm, economic inefficiencies, such as pricing to access, may arise due to unregulated market outcomes creating a case for government intervention in order to ensure that high levels of output grown are achieved. This research work is concerned with the economics of the UKCS oil and gas infrastructure, the ownership of transportation structures and the market inefficiencies under the existing regulatory environment. The issue of third party access is analysed by applying the economics of regulation of natural monopoly to the case of the pipeline transportation infrastructure in the North Sea. The economic and structural challenges the ultra-mature UK basin faces can have a potential negative effect on exploration outcomes not allowing, the full utilisation of the remaining reserves. The issue of access to UKCS infrastructure seems to adversely affect new entrants for undertaking exploration activities. The possibility for government intervention is linked with the maturity of the basin which changes the efficiency of natural monopoly that might require additional supervision. The market of oil and gas infrastructure networks could be efficient for the current participants but unable to attract new entrants. This research aims to analyse the effect of access in oil and gas infrastructure on exploration under the presence of incomplete contracts.
    Keywords: oil and gas industry, pipeline economics, natural monopoly, government intervention
  7. By: Huu Thanh Tam Nguyen (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne); Ngoc-Sang Pham (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We consider a small open economy with two productive sectors (an old and a new). There are two types of firms in the new industry: a well planted multinational firm and a potential domestic firm. Our framework highlights a number of results. First, in a poor country with low return of training and weak FDI spillovers, the domestic firm does not exist in the new industry requiring a high fixed cost. Second, once the host economy has the capacity to create the new firm, the productivity of the domestic firm is the key factor allowing it to enter into the new industry, and even eliminate the multinational firm. Interestingly, in some cases where FDI spillovers are strong, the country should invest in the new industry, but not train specific workers. Last, credit constraints and labor/capital shares play important roles in the competition between the multinational firm and the domestic one.
    Keywords: FDI spillovers,investment in training,heterogeneous firms,entry cost
    Date: 2014–10
  8. By: Hale, Galina (Federal Reserve Bank of San Francisco); Xu, Mingzhi (University of California, Davis)
    Abstract: This paper surveys literature on impact of foreign direct investments (FDI) on host country’s labor market, including employment, wages, labor productivity, skill premium, and inequality. Meta-analysis of empirical findings suggests that there is solid consensus with respect to wages: in both developing and developed countries FDI leads to higher wages in target firms and industries. Majority of the papers also find positive productivity spillovers as well as increase in skill premium as a result of FDI, especially in developing economies. We analyze all the findings together to address possible mechanisms of FDI effects on labor in target firms, in competing firms, and in vertically related firms. We present a stylized model that is consistent with many empirical regularities found in meta-analysis of empirical literature.
    Date: 2016–09–21
  9. By: G. Cette; J. Lopez; J. Mairesse
    Abstract: On the basis of a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007, this study proposes an econometric investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on four components of total capital and for two skill components of total labor. Relying on a difference-in-difference econometric approach, we find that an increase in EPL has (i) positive and significant effects on the non-ICT capital - labor ratio and the share of high-skill labor; (ii) non-significant effects on the ICT capital – labor ratio; (iii) negative and significant effects for R&D capital – labor ratio and the share of low-skilled labor. These results suggest that firms consider that the strengthening of Employment Protection Legislation is equivalent to a rise in the cost of labour, resulting in capital-to-labour substitution in favour of non-ICT capital and working at the disadvantage of low-skill relatively to high-skill workers. They indicate to the contrary that structural reforms for more labour flexibility weakening this legislation could have a favourable impact on firms’ R&D investment and their hiring of low-skill workers.
    Keywords: Capital intensity, labour market regulations, factor substitution, R&D capital.
    JEL: E22 E24 O30 L50 O43 O47 C23
    Date: 2016
  10. By: Kato, Takao.
    Abstract: This paper begins by providing the historical context for the study of the link between productivity and wages and the role of unions in Japan since 1980. Using quantitative data from a variety of surveys conducted by the Japanese Government and qualitative data from field research, it then documents significant changes in the nature of Japanese unions and Shunto wage bargaining and their role in generating the link between productivity and wages during Japan’s “Lost Decade” and subsequent quiet recovery. Wages did not lag behind productivity growth during the “Japanese Miracle” that preceded the “Lost Decade” thanks in part to the contribution of an effective neutral third-party institution trusted by all parties to the development of a share economy with strong cooperation between labour and management and a strong link between wages and productivity. During the “Lost Decade”, wages started to fall behind productivity growth, however. Negotiations over base wage increases (base-up) were less pervasive, and negotiations over bonuses took centre stage. The idea of establishing the market for annual wage settlements became less relevant, suggesting the diminishing value of the Shunto synchronization of wage negotiations. In the end, the Japanese bonus system proved to be less downward rigid than the base wage, and this downward flexibility of bonuses appears to be a major factor in lagging wages (along with an insufficient increase in the base wage when productivity rises). The possibility that the changing nature of Japanese enterprise unions was an underlying cause of lagging wages is explored, and policy implications are identified.
    Keywords: productivity, wage policy, trade union role, wage determination, trend, Japan, productivité, politique des salaires, rôle du syndicat, fixation du salaire, tendance, Japon, productividad, política salarial, papel del sindicato, determinación del salario, tendencia, Japón
    Date: 2016
  11. By: Nazak Nobari (Management and Planning Organization of Iran); Mahmoud Askari Azad (Free Researcher)
    Abstract: Economic growth is a fundamental measurement to assess a country's performance and productivity. For this reason, growth and productivity are in policy agenda of many countries especially success economic countries. Based on some studies and reports (e.g., those by UK parliament, 2016; OECD, 2012), labor productivity in developed countries is analyzed and considered as a secondary economic growth. In this study, we investigated the relationship between economic growth and change of labor productivity in Iran and their challenges. Our object was to answer to two questions: 1) Is any relationship between level of GPD and labor productivity in Iran? ; 2) What are the driving forces (effective factors) behind the growth of labor productivity?To answer to question 1, economic data from national and international information bank gathered. Relation between GDP and labor productivity examined by calculating some ratios and finally, trends and behavioral patterns analyzed. Patterns drew on Iran’s economic status compared with 10 other countries in regional category (such as USA, Japan, Turkey, and France). Therefore, the study findings revealed that there is a direct relationship between GDP and labor productivity In Iran. To answer to the question 2, initially we developed a conceptual model based on theories and considered labor productivity as complex and multi-dimensional phenomenon (Economic and social dimensions) and assumed labor productivity as a function of internal (organizational) and external (environmental) factors. According to find effective factors, a questionnaire based on conceptual model designed and before evaluating the reliability and validity of questionnaire, it reviewed with 15 academic and professionals. Data collected through questionnaires that distributed to 250 managers and employees from government and non-government sectors.Structural Equation Modeling (SEM) employed, which reported significant and positive relationship between the labor productivity and driving forces such as: competitiveness, size of government sector, unemployment, corruption, social security system (external factors) and Wage/salary, work culture, employee adaptability, employee knowledge and skill, team working, performance appraisal system, career management (internal factors). Whereas, the association between labor productivity and some variables such as sex, age, post and position, sector were not supported. Eventually, challenges based on driving forces that are identified as more effective, discussed.As conclusion findings can be applied by policy makers and managers to make policies to improve labor productivity and increase economic growth rate in Iran.
    Keywords: labor productivity, Economic Growth, Effective Factors, Modeling, planning
    JEL: J24 O53 O20
  12. By: John Millar; Douglas Sutherland
    Abstract: Productivity growth has been sluggish since the Great Recession and had been slowing before it. This slowdown has touched nearly every industry. Although part the slowdown may be related to weakness of investment related to the slow recovery of aggregate demand, structural issues also appear to be playing a role, including persistent declines in business dynamism (market entry and exit of firms) and signs of diminishing competitive pressures. Historically, young productive firms have been an important source of productivity growth, but start-up rates have been slowing for some time and have been especially low in the aftermath of the crisis, and failure rates of new firms have risen. This diminished dynamism appears to be associated with other trends such as population ageing, funding difficulties, reforms in 2005 to the personal bankruptcy code that made debt discharge more difficult, intellectual property rights that favour some established companies, the spread of state-level occupational licensing requirements, as well as zoning and land use restrictions that inhibit resources from flowing to their most productive use. There are also signs that market power is gradually intensifying on balance, restraining competitive forces that would otherwise translate productivity gains into broad-based improvements in household purchasing power. Stimuler la productivité du secteur privé aux États Unis La croissance de la productivité est très faible depuis la Grande Récession et elle avait déjà commencé à ralentir auparavant. Tous les secteurs ou presque sont concernés. Si ce ralentissement peut s’expliquer en partie par la faiblesse de l’investissement liée à la fragile reprise de la demande globale, des problèmes structurels semblent également être en cause, notamment le manque de dynamisme persistant de l’appareil productif (entrées et sorties d’entreprises) et une apparente réduction de la pression concurrentielle. Dans le passé, la naissance de nouvelles entreprises performantes a toujours été une source importante de gains de productivité, mais depuis un certain temps, les taux de création d’entreprises ralentissent et ils étaient tombés à des niveaux particulièrement bas au lendemain de la crise. Cette perte de dynamisme semble être associée à d’autres phénomènes comme le vieillissement de la population, des difficultés de financement, la réforme du code de la faillite personnelle en 2005 qui a rendu plus difficile la liquidation des dettes, des droits de propriété intellectuelle qui favorisent les entreprises établies, une multiplicité de réglementations des activités professionnelles au niveau des États et des restrictions en matière d’urbanisme et d’occupation des sols qui empêchent les ressources de se diriger vers les emplois les plus productifs. Certains signes indiquent aussi que le pouvoir de marché est en train de se renforcer de façon générale, empêchant ainsi la concurrence de faire en sorte que l’amélioration de la productivité se traduise par des gains de pouvoir d’achat pour l’ensemble des ménages.
    Keywords: productivity, innovation, antitrust, investment
    Date: 2016–10–11

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