nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒10‒30
fifteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Productivity, efficiency and technological change in French agriculture during 2002-2014: A Färe-Primont index decomposition By Dakpo, K Hervé; Desjeux, Yann; Jeanneaux, Philippe; Latruffe, Laure
  2. Acquisitions, markups, efficiency, and product quality: Evidence from India By Stiebale, Joel; Vencappa, Dev
  3. Risk-taking behavior, earnings quality, and performance in Spanish banking: A profit frontier approach By Mª Pilar García-Alcober; Manuel Illueca; Diego Prior; Emili Tortosa-Ausina
  4. Evidence for the Effects of Mergers on Market Power and Efficiency By Bruce A. Blonigen; Justin R. Pierce
  5. Firm Level Allocative Inefficiency: Evidence from France By Lionel Fontagné; Gianluca Santoni
  7. Management practices and productivity in Germany (Managementpraktiken und Produktivität in Deutschland) By Broszeit, Sandra; Fritsch, Ursula; Görg, Holger; Laible, Marie-Christine
  8. Hospital productivity growth in the English NHS 2008/09 to 2013/14 By María José Aragón; Martin Chalkley; Adriana Castelli; James Gaughan
  9. Resource misallocation and productivity in Ukrainian food industry By Ryzhenkov, Mykola
  10. Impact of succession on performance: The case of the Italian family farms By Bertoni, Danilo; Cavicchioli, Daniele; Latruffe, Laure
  11. Biodiversity productive effects in milk farms of western France: a multi-output primal system By Bareille, François; Dupraz, Pierre
  12. Feed substitution and economies of scale in Irish beef production systems By Tsakiridis, Andreas; Hanrahan, Kevin; Breen, James; Wallace, Michael; O’Donoghuea, Cathal
  13. Cost performance on the Norwegian continental shelf By Lorentzen, Sindre; Osmundsen, Petter
  14. Adapting to changing prices before and after the crisis: The case of US commercial banks By Laura Spierdijk; Sherrill Shaffer; Tim Considine

  1. By: Dakpo, K Hervé; Desjeux, Yann; Jeanneaux, Philippe; Latruffe, Laure
    Abstract: The objective of the article is to assess productivity change in French agriculture during 2002-2014, namely total factor productivity (TFP) change and its components technological change and efficiency change. For this, we use the economically-ideal Färe-Primont index which verifies the multiplicatively completeness property and is also transitive, allowing for multi-temporal/lateral comparisons. To compare the technology gap change between the six types of farming considered, we extend the Färe-Primont to the meta-frontier framework. Results indicated that during 2002-2014, all farms had a TFP progress. Pig/poultry farms had the lowest TFP increase while beef farms had the highest (19.1%). The latter had the strongest increase in efficiency change, while technological progress was the highest for mixed farms. The meta-frontier analysis indicates that field crop farms’ technology is the most productive of all types of farming.
    Keywords: total factor productivity, Färe-Primont index, meta-frontier, French farms, Agricultural and Food Policy, Farm Management,
    Date: 2016
  2. By: Stiebale, Joel; Vencappa, Dev
    Abstract: This paper uses a rich panel data set of Indian manufacturing firms to analyze the effects of domestic and international acquisitions on various outcomes at target firm and product level. We apply recent methodological advances in the estimation of production functions together with information on prices and quantities to estimate physical productivity, markups, marginal costs and proxies for product quality. Using a propensity score reweighting estimator, we find that acquisitions are associated with increases in quantities and markups and lower marginal costs on average. These changes are most pronounced if acquirers are located in technologically advanced countries. We also provide evidence that the quality of products increases while quality-adjusted prices fall upon acquisitions.
    Keywords: Foreign Direct Investment,Foreign Ownership,Mergers and Acquisitions,Multi-Product Firms,Productivity
    JEL: F61 F23 G34 L25 D22 D24
    Date: 2016
  3. By: Mª Pilar García-Alcober (Department of Economics and Business, Universidad CEU-Cardenal Herrera, Valencia, Spain); Manuel Illueca (IVIE and Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Diego Prior (Department of Business, Universitat Autònoma de Barcelona); Emili Tortosa-Ausina (IVIE, Valencia and Department of Economics, Universidad Jaume I, Castellón, Spain)
    Abstract: After the financial crisis of 2007–2008 two bank performance dimensions, among others, have become partly subject to debate. One of them is bank efficiency, and the other one bank risk taking behavior. The literature on bank efficiency and productivity has expanded remarkably since almost three decades ago, and has regained momentum over the last few years in the aftermath of the financial crisis. Regarding bank risk taking behavior, whose focus has been usually on its links to monetary policy, the interest has been comparatively minor but it has also increased exponentially more recently. This paper mixes these two stems of research. Specifically, we test if more inefficient banks are riskier when selecting their borrowers, when charging interests and pledge collateral, and if these links between inefficiency and risk change depending on the type of bank. We perform this analysis on the Spanish banking system, which has been severely affected by the burst of the housing bubble and has gone through deep restructuring. In order to test our hypotheses, we build a database with information on banks and savings banks, their borrowers (non-financial firms), and the links between them. On the methodology side, we also try to contribute to the literature by considering a novel profit frontier approach. Our results suggest that more inefficient banks are riskier when selecting their borrowers, and that his high risk-taking behavior is not offset by higher interest rates.
    Keywords: bank, profit frontier, risk-taking behavior, savings bank
    JEL: C14 C61 G21 L50
    Date: 2016
  4. 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.
    JEL: D22 G34 L22
    Date: 2016–10
  5. By: Lionel Fontagné (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Gianluca Santoni (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)
    Abstract: A large portion of productivity differentials among locations is related to density. Firms located in denser areas are more productive due to agglomeration economies (Combes et al., 2012). We provide in this paper an explanation of such economies: lower input misallocation. The distribution of resources among heterogeneous firms has relevant consequences on allocative efficiency and denser areas provide a more favorable environment for dynamic matching between employers and employees. Using a methodology proposed by Petrin and Sivadasan (2013) we are able to assess the degree of resource misallocation among firms within sectors for each of the 96 French "Départements". Based on firm-level productivity estimates, we identify in the gap between the value of the marginal product and marginal input price the output loss due to inefficiencies in inputs allocation. Over the period 1993-2007 the average gap at firm level is around 10 thousands euro, showing a relevant increase starting from the early 2000s. Importantly, firms misallocations are lower in denser areas, suggesting that the matching mechanism is playing a role in explaining the productivity premium of agglomerated locations.
    Keywords: Misallocation, Productivity, Firm Level Data
    Date: 2015–07
  6. By: Frick, Fabian; Sauer, Johannes
    Abstract: We investigate development of productivity and its relation to resource reallocation effects in the dairy sector in South-East Germany during the phase-out of the EU milk quota. We use a dataset containing dairy farm accounting data of 15 years. Farm-level productivity is estimated by applying a proxy approach recently discussed in the literature and compared to other estimation approaches and an index analysis. After aggregation we decompose sector productivity into unweighted mean productivity and a covariance term quantifying the allocation of production resources towards more productive farms. We observe an increase in the covariance term coinciding with a period of rather volatile milk prices. Therefore, we hypothesize that reallocation of production resources are triggered by extreme prices possibly powered by market deregulation. We seek to find support for this hypothesis in a regression analysis linking the covariance term and price variability. However, we find only little support for our hypothesis in this analysis.
    Keywords: Productivity, EU Milk Quota, Agricultural and Food Policy, Production Economics, Productivity Analysis,
    Date: 2016
  7. By: Broszeit, Sandra (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Fritsch, Ursula; Görg, Holger; Laible, Marie-Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Based on a novel dataset, the 'German Management and Organizational Practices' (GMOP) Survey, we calculate establishment specific management scores following Bloom and van Reenen as indicators of management quality. We find substantial heterogeneity in management practices across establishments in Germany, with small firms having lower scores than large firms on average. We show a robust positive and economically important association between the management score and establishment level productivity in Germany. This association increases with firm size. Comparison to a similar survey in the US indicates that the average management score is lower in Germany than in the US. Overall, our results point towards lower management scores being at least in part to blame for the differences in aggregate productivity between Germany and the US." (Author's abstract, IAB-Doku) ((en))
    JEL: D24 L2 M2
    Date: 2016–10–17
  8. By: María José Aragón (Centre for Health Economics, University of York, York, UK.); Martin Chalkley (Centre for Health Economics, University of York, York, UK.); Adriana Castelli (Centre for Health Economics, University of York, York, UK.); James Gaughan (Centre for Health Economics, University of York, York, UK.)
    Abstract: This report is concerned with the extent to which NHS hospital Trusts make better use of resources over time by increasing the number of patients they treat and the services they deliver for the same or fewer inputs. The ratio of all outputs to all inputs is termed Total Factor Productivity (TFP) and growth in TFP is vital to achieving patient care with increasingly limited resources. Measures of TFP for the NHS as a whole are well-established but any aggregate measure may reflect a diversity of experience and performance across individual Trusts. In this report we extend earlier studies to determine whether measures of TFP growth at the level of individual Trusts can establish consistently high performers - Trusts that habitually exhibit above average TFP growth. This work is potentially important because it may establish a benchmark figure for high performance and thus enable setting realistic targets for efficiency savings, and identify Trusts that are exemplars of good performance so that others can learn from their practices and methods.
    Date: 2016–10
  9. By: Ryzhenkov, Mykola
    Abstract: The paper studies resource misallocation in Ukraine’s food industry and its impact on industry’s total factor productivity during the period of 2002-2010. Applying Hsieh and Klenow (2009) framework to the dataset of 8,410 Ukrainian food producers, I found that optimal allocation of resources can potentially increase the productivity of this sector by 166-400%. The extent of misallocation in the manufacturing of food and beverages is not uniform across industries, as well as across regions of Ukraine. Results also show that in the case of optimal allocation of resources, small and medium enterprises should have a higher role in food production sector.
    Keywords: resource misallocation, food industry, total factor productivity, output distortions, capital distortions, Productivity Analysis, D24, D61, L66, O12, Q18,
    Date: 2016–09–20
  10. By: Bertoni, Danilo; Cavicchioli, Daniele; Latruffe, Laure
    Abstract: In this paper we analyse whether the event of succession changes the performance of farms, for the case of Italian family farms during the period 2008-2014. We using data from the Italian Farm Accountancy Data Network (FADN) and several performance indicators. Analyses based on t-tests of equality of means and propensity score matching reveal that succession has a negative effect on performance indicators related to capital, revealing that the capital value has increased after succession. In addition, for farms with succession in the first years of the period considered, performance per hectare after succession is lower for those farms than for farms in which no succession occurred. But this negative effect of succession on performance per hectare is not systematically confirmed when performance is related per labour unit.
    Keywords: family farms, succession, performance, propensity score matching, Italy, Agricultural and Food Policy, Farm Management,
    Date: 2016
  11. By: Bareille, François; Dupraz, Pierre
    Abstract: It is widely recognized that human activities and especially agriculture have negative impacts on biodiversiy. However, biodiversity can also benefit to farmers through its positive effects on production. This two-way causality relationship between biodiversity and agriculture has raised numerous authors to examine the behaviour of farmers regarding environment. However, only few empirical studies have analysed biodiversity management considering previous results in production economics. Indeed, they usually do not take into account farmers’ strategic choices. These studies did notably not correct for the endogenous bias linked to simultaneity of choices between input and output levels and did not take into account market evolution. On the other hand, production economic studies have rarely introduced ecological feedbacks in the production function and prefer to analyse environmental effects in an ex-post way. On this paper, we estimate crop and milk primal production functions of a sample of mixed farms of western France. Our sample is composed of 5654 FADN observations from 2002 to 2014 in French regions of Bretagne, Basse-Normandie and Pays-de-la-Loire. We estimate the productive effect of biodiversity taking into account for the variable input endogenous biases and joint technology specificity. Using Three Stage Least Square method, we estimate linear and quadratic of both production functions with ad-hoc addition of variable input demand functions. We measure biodiversity through the utilization of landscape metric indicators. For the first time in this literature, we examine the effect of two kind of biodiversity: arable land biodiversity and permanent grassland biodiversity. Our preliminary results seem to confirm previous results of the literature on the productive effect of arable land biodiversity on crop production. For the first time in empirical economics analysis, we find that permanent grasslands enhance crop production. On the other side, milk production is less sensible to biodiversity but it seems that permanent grasslands decrease milk production. The effect of arable land biodiversity on milk production is not robust for the moment. Our results can be useful for policymakers as they bring new insights on the management of biodiversity by farmers.
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy, Farm Management,
    Date: 2016
  12. By: Tsakiridis, Andreas; Hanrahan, Kevin; Breen, James; Wallace, Michael; O’Donoghuea, Cathal
    Abstract: We use a short-run translog cost function to model Irish beef production over the period 2000-2011. Similar to other countries Irish beef farmers operate in various production systems with many farmers specializing in calf rearing, and other farmers specializing in beef fattening or other production systems. In order to identify potential technological differences and differences in scale economies across beef systems we estimate scale economies, own- and cross-price elasticities, and Morishima elasticities of substitution between purchased cattle, purchased feed, home-grown feed and veterinary services for three beef systems. Results suggest that all inputs are substitutes in the cow-calf, calf-to-finish, and other beef systems (store-to-finish and mixed beef systems) whereas extensive economies of scale exist in the cow-calf and calf-to-finish systems. The same trend is observed for other beef systems until 2005 although post-decoupling these systems operate under decreasing returns to scale.
    Keywords: Input demand, Morishima elasticities of substitution, economies of scale, Irish beef systems, unbalanced panel data, Agricultural and Food Policy, Livestock Production/Industries,
    Date: 2016
  13. By: Lorentzen, Sindre (UiS); Osmundsen, Petter (UiS)
    Abstract: The oil and gas sector plays a crucial role in the Norwegian economy. It accounts for a very large proportion of gross domestic product, government revenues, investment and exports. A sharp fall in oil prices has had a significant impact on the economy and focused great attention on the cost side of the sector. Enhancing cost efficiency and curbing cost overruns now top the agenda. It is not difficult to find examples of projects suffering extensive cost overruns. What factors underlie these overruns? Media coverage might easily give the impression that Norway’s oil and gas sector is suffering from a lack of ability and competence to plan and execute projects to budget. Is this reputation deserved? Does the oil sector perform more poorly in Norway than in other producer nations? Can we see learning effects? How do the Norwegian and the international oil industry compare with other industries with respect to cost performance?
    Keywords: cost overrun; petroleum industry; experience; comparison
    JEL: D22 D24 G31
    Date: 2016–10–17
  14. By: Laura Spierdijk; Sherrill Shaffer; Tim Considine
    Abstract: For banks, cost management has gained importance in the current environment of low interest rates. In this environment, banks' revenues from interest are under pressure, leading to renewed interest in the substitutability of banks' input factors. Substitution elasticities typically depend on two factors: cost technology and economic conditions (relative input prices or cost shares). Technological shifts and policy changes are therefore expected to affect firms' elasticities of substitution. This study estimates U.S. commercial banks' substitution elasticities during the 2000-2013 period. It analyzes the total effects of the technological shifts and policy changes on banks' substitution elasticities during that period. An endogenous-break test divides the sample into a precrisis period (2000-2008) and a crisis period (2009-2013). During the pre-crisis period, banks' inputs are inelastic substitutes. After the onset of the crisis, especially the long-run substitutability of most input factors decreases to even lower levels due to changes in both cost technology and economic conditions. At the same time, banks' response to input price changes becomes more sluggish. The results indicate that the availability of substitutes is substantially worse during the (post-) crisis period, which limits banks' possibilities for cost management.
    Keywords: financial crisis, substitution elasticities, US commercial banks
    JEL: G21 D24 C30
    Date: 2016–10
  15. By: Wimmer, Stefan G; Sauer, Johannes
    Abstract: This work aims to empirically evaluate economies of scale and scope in the Bavarian dairy sector, representing dairy farms in many other regions of the European Union. Against the background of structural change with the development towards fewer and larger farms, economies of scale and scope are of particular interest because they give an indication about the optimal farm structure. Increasing price volatility and an adverse development of the inputoutput price ratio have put economic pressure on the agricultural sector. Therefore, there is a strong need to improve farm competitiveness. In this study, a multiple-output quadratic cost function framework is applied to a sample of Bavarian dairy farms covering the years between 2006 and 2014. The results show that Bavarian farms experience overall economies of scale of 1.55, indicating that they are too small from a technological point of view. As expected, economies of scale decrease with farm size, but even the largest farms in the sample operate at increasing returns to scale. Furthermore, considerable economies of scope are evident. The average farm in the sample achieves cost savings of 77 per cent when milk, crop, and livestock are jointly produced compared to a separate production. Furthermore, economies of scope decrease with farm size, indicating that small farms benefit to a greater extent from diversification than large farms. If policy aims to slow down the structural change and to protect traditional family farms, it is recommended to promote farm diversification.
    Keywords: Cost function, dairy farms, economies of scale and scope, farm size, structural change, Farm Management, Production Economics,
    Date: 2016

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