nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒10‒23
twelve papers chosen by

  1. Emissions trading and productivity: Firm-level evidence from German manufacturing By Lutz, Benjamin Johannes
  2. Evidence for the Effects of Mergers on Market Power and Efficiency By Bruce A. Blonigen; Justin R. Pierce
  3. Persistent and transient efficiency on the stochastic production and cost frontiers – an application to the motorway sector By Daniel Albalate; Jordi Rosell
  4. A Ricardian-Demand Explanation for Changing Pharmaceutical R&D Productivity By Mark Pauly; Kyle Myers
  5. The Role of Services for Economic Performance in Brazil By Dorothée Rouzet; Francesca Spinelli
  6. Persistent inefficiency in the higher education sector: Evidence from Germany By Gralka, Sabine
  7. How labor manages productivity advances and crisis response : a comparative study of automotive manufacturing in Germany and the US By Cody, John.
  9. Hospital policy and productivity: Evidence from German states By Karmann, Alexander; Roesel, Felix
  10. Marx, the Production Function and the Old Neoclassical Equilibrium: Workable under the Same Assumptions? With an Appendix on the Likelihood of Reswitching and of Wicksell Effects By Schefold, Bertram
  11. An anatomy of Italian cities: evidence from firm-level data By Andrea Lamorgese; Andrea Petrella
  12. Convergence of bank competition in Central and Eastern European countries: Does ownership matter? By Ion Lapteacru

  1. By: Lutz, Benjamin Johannes
    Abstract: I study the causal effect of the European Union Emissions Trading System (EU ETS) on the productivity of German manufacturing firms. Using administrative firm-level data, I estimate robust production functions for narrowly defined industries. This approach allows for an endogenous dynamic productivity process and corrects for simultaneous changes in input use or productivity after a firm is regulated by the EU ETS. After estimating the firm specific productivity, I employ a difference-in-differences framework in order to identify and quantify the average treatment effect of the EU ETS on the productivity of regulated firms. The results suggest no significant negative effect of the EU ETS on productivity. In contrast, the EU ETS had a positive effect on productivity during the first compliance period. An alternative identification strategy based on a combination of the difference-in-differences framework and nearest neighbor matching supports this finding. A subsample analysis provides evidence that the effect of the EU ETS is heterogeneous across industries.
    Keywords: Control of Externalities,Emissions Trading,Robust Production Function Estimation,Productivity,Difference-in-Differences
    JEL: D22 D24 Q52
    Date: 2016
  2. By: Bruce A. Blonigen; Justin R. Pierce
    Abstract: Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using detailed plant-level data. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to address the endogeneity of firms' merger decisions.
    Keywords: Acquisitions ; Efficiency ; Market Power ; Markups ; Mergers ; Productivity
    JEL: D24 G34 L41
    Date: 2016–10
  3. By: Daniel Albalate (GiM-IREA, Universitat de Barcelona); Jordi Rosell (GiM-IREA, Universitat de Barcelona)
    Abstract: This paper implements both stochastic production and cost frontier analyses to estimate the efficiency of toll motorway companies in Spain, the country with the largest number of private concessionaires in this economic sector. Our dataset includes 32 concessionaires with different features for a time span of 26 years (1988-2014). The results support the existence of scale and density economies, showing that an increase in vehicle-kilometers is more important for cost efficiency than extending the motorway. The differences between transient and persistent efficiency are significant, so that we can test for regulatory and ownership differences. The price cap regulation seems to increase management technical efficiency. Regional governments grant better projects than central governments and, as shareholders, they also perform better. However, their performance is not significantly differently from that of full private concessionaires. We also find limited evidence of efficiency gains from privatization. These results help us provide new insights to evaluate policy and regulatory reforms aimed at enhancing technical efficiency in the sector.
    Keywords: Motorways, Efficiency, Stochastic Frontier, Concessions, Infrastructure.
    JEL: D22 D24 D78 H4 H54 L25 L32 L33 L5 L9
    Date: 2016–10
  4. By: Mark Pauly; Kyle Myers
    Abstract: This paper examines trends in the aggregate productivity of the pharmaceutical sector over the past three decades. We incorporate Ricardo’s insight about demand-driven productivity in settings of variable scarce resources, and estimate the industry’s responsiveness to changes in demand over this timeframe using therapeutic class-specific data. In contrast to many analyses, our empirical estimates indicate that the industry has “met demand” with remarkable consistency since the late-1980s. The growth in total R&D spending, and therefore R&D costs per new drug, appear to have been profitable and productive investments. While we identify a significant increase in the industry’s fixed costs - the intercept of the production function - we find no decline in the marginal productivity of industry investments that might suggest significant supply-side frictions. While we cannot diagnose in detail why average, but not marginal, productivity declined, the data suggests that firms have finally begun to compete down returns from the supranormal levels of decades past.
    JEL: D20 I11 L10 L65 O31
    Date: 2016–10
  5. By: Dorothée Rouzet; Francesca Spinelli
    Abstract: This paper highlights the large contribution of services to the Brazilian economy and the under-exploited potential of services to sustain productivity gains and international competitiveness. The areas with the largest potential for regulatory reform include improvements in the general business and trading environment as well as specific policies in transport sectors, telecoms and financial services. Reforms targeting services that add value by favouring productivity and quality enhancements, as well as services that increase efficiency by reducing production costs, have strong potential to unlock manufacturing performance. The set of proposed recommendations emerging from this analysis underlines the importance of streamlining sector-level regulatory frameworks to encourage foreign entry and competition, and the role that cross-cutting improvements in the trade and business environment would play to render services providers more competitive.
    Keywords: trade policy, services, competitiveness, services trade restrictions
    JEL: F13 F14 F15 F6 L8 L9 O24 O54
    Date: 2016–10–20
  6. By: Gralka, Sabine
    Abstract: Evaluations of the Higher Education Sector are receiving increased attention, due to the rising expenditures and the absence of efficiency enhancing market pressure. To what extent universities are able to eliminate inefficiency is a question that has only partially been answered. This paper argues that heterogeneity among universities as well as persistent inefficiency hinder the institutions to achieve full efficiency - at least in the short run. Two standard and one novel specification of the Stochastic Frontier Analysis are applied to a new, comprehensive set of panel data to show how the standard efficiency evaluation changes when both aspects are taken into account. It is the first time that the idea of persistent inefficiency is considered in the analysis of the German Higher Education Sector. The comparison reveals that the disregard of heterogeneity distorts the estimation results towards lower efficiency values. The newly introduced specification improves the accuracy of the heterogeneity assumption and exposes that inefficiency tends to be long term and persistent rather than short term and residual. This implies that increasing efficiency requires a comprehensive change of the university structure.
    Keywords: Persistent Inefficiency,Stochastic Frontier Analysis,Cost Efficiency,Higher Education,Germany
    JEL: C14 C23 D61 I22 I23 H52
    Date: 2016
  7. By: Cody, John.
    Keywords: labour relations, motor vehicle industry, economic recession, collective bargaining, productivity, technology, comparative study, Germany, USA, relations de travail, industrie du véhicule à moteur, récession économique, négociation collective, productivité, technologie, étude comparative, Allemagne, Etats-Unis, relaciones laborales, industria de vehículos a motor, recesión económica, negociación colectiva, productividad, tecnología, estudio comparativo, Alemania, Estados Unidos
    Date: 2015
  8. By: K L KRISHNA (Department of Economics, Delhi School of Economics, University of Delhi,); DEB KUSUM DAS (Department of Economics, Ramjas College, University of Delhi); ABDUL A ERUMBAN (The Conference Board and University of Groningen); SURESH AGGARWAL (Department of Business Economics, University of Delhi, South Campus); PILU CHANDRA DAS (Dyal Singh Evening College, University of Delhi,)
    Abstract: The rapid rise of service sector in India, as in its developing counterparts in Asia, follows the pattern of skipped industrialization and raises concern for sustaining economic growth in India. While the share of services in India’s GDP has risen over much of the post-independence period, the economic liberalization in the 1990s paved the way for the emergence of service sector as a key player in India’s growth story. The present paper examines the productivity dynamics in service sector at detailed industry level—the India KLEMS (K = capital, L = labor, E = energy, M = materials, and S = services) panel dataset version 2015. Our results suggest that labor productivity in Indian service sector has been growing substantially over decades, and much of this productivity gain is accruing through acceleration in market services labor productivity. This observed productivity gain in market services, and in particular information and communications technology (ICT) intense services, might indicate the role of increasing ICT in contributing to labor productivity growth. The labor reallocation effect is positive for the period 1980–2011 and has increased in the 2000s, suggesting a structural transformation which is growth enhancing. The paper also examines the dynamics of total factor productivity in the service sector, measured using KLEMS growth accounting framework. The observed growth pattern in the service sector has not been uniform across all services in India. The performance of market-based ICT intensive sectors is impressive, especially in telecommunications and financial services. However, by and large, we find a dominance of capital deepening in accounting for growth.
    Keywords: 041; 047; 053
    Date: 2016–10
  9. By: Karmann, Alexander; Roesel, Felix
    Abstract: Total factor productivity (TFP) growth allows for additional health care services under restricted resources. We examine whether hospital policy can stimulate hospital TFP growth. We exploit variation across German federal states in the period 1993 to 2013. State governments decide on hospital capacity planning (number of hospitals, departments and beds), ownership, medical students, and hospital investment funding. We show that TFP growth in German hospital care reflects quality improvements rather than increases in output volumes. Second-stage regression results indicate that reducing the length of stay is generally a proper way to foster TFP growth. The effects of other hospital policies depend on the reimbursement scheme: under activity-based (DRG) hospital funding, scope-related policies (privatization, specialization) come with TFP growth. Under fixed daily rate funding, scale matters to TFP (hospital size, occupancy rates). Differences in capitalization in East and West Germany allows to show that deepening capital may enhance TFP growth if capital is scarce. We also show that there is less scope for hospital policies after large-scale restructurings of the hospital sector.
    Keywords: Hospitals,TFP,Productivity,Policy,Germany
    JEL: I11 I18 O47
    Date: 2016
  10. By: Schefold, Bertram (Goethe University, Frankfurt am Main)
    Abstract: A stochastic approach has been introduced to explain the empirically observed fact that wage curves calculated from input-output systems tend to be nearly linear and that the paradoxes of capital appear to be rare. The stochastic approach allows to justify the simplifying treatment of normal prices common to 19th and early 20th century authors as diverse as Marx (transformation problem), Wicksell (old neoclassical equilibrium), J.B. Clark (neoclassical production function). It is shown that the likelihood of reverse capital deepening is much lower than that of Wicksell effects. With this, the likely characteristics of the wage frontier obtained from a multiplicity of input-output tables are derived. The conclusion summarises what we know and do not know about the validity of the Cambridge critique of capital.
    Keywords: Capital theory; Random matrices; Aggregate Production Function; Transformation problem; Wicksell effects
    JEL: B13 B14 E25
    Date: 2016–04
  11. By: Andrea Lamorgese (Bank of Italy); Andrea Petrella (Bank of Italy)
    Keywords: urban productivity premium, agglomeration, urban growth
    JEL: D24 O47 R30 A A A
    Date: 2016–10
  12. By: Ion Lapteacru (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux 4)
    Abstract: Many reforms of banking market liberalization in CEE countries raised the question on the convergence of banks’ competitive behaviour, particularly because of the presence of foreign banks from same European regions. We find within-country convergence of three used bank competition measures, with higher convergence levels of market power and of competitive behaviour, and with faster convergence trend for foreign banks. Despite the efforts for banking market integration, there is no general movement toward across-countries convergence of competitive behaviour of CEE banks, neither for foreign nor for domestic institutions, higher dispersion of countries being however observed for the former.
    Keywords: Banking, competition, convergence, Central and Eastern European countries.
    Date: 2016

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