nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒11‒20
eighteen papers chosen by

  1. Efficiency analysis: a multi-output nonparametric approach By Barnabé Walheer
  2. Fertilizer subsidy and agricultural productivity in Senegal By Seck, Abdoulaye
  3. Measuring agricultural water productivity using a partial factor productivity approach By Njuki, Eric; Bravo-Ureta, Boris E.
  4. Understanding the Eff ect of Land Fragmentation on Farm Level Efficiency: An Application of Quantile Regression-Based Thick Frontier Approach to Maize Production in Kenya By Kiplimo, L.B.; Ngeno, V.
  5. Resource Efficiency and Economic Efficiency in Fish Farming in the South-east of Côte d’Ivoire By Aboua, Christian
  6. Urban Productivity Estimation with Heterogeneous Prices and Labour By David C. Maré
  7. Offshore Profit Shifting and Domestic Productivity Measurement By Raymond Mataloni; Kim Ruhl; Dylan Rassier; Fatih Guvenen
  8. Estimating the impact of climbing bean adoption on bean productivity in Rwanda: Endogenous Switching Regression. By Katungi, Enid; Larochelle, Catherine; Mugaboo, Josephat; Buruchara, Robin
  9. Are farmers profit efficient? Evidence from groundnut farmers in Malawi By Bocher, Temesgen; Simtowe, Franklin
  10. Misalignment of Productivity and Wages across Regions? Evidence from Belgian Matched Panel Data By Rycx, Francois; Saks, Yves; Tojerow, Ilan
  11. Welfare Effect of Farm Input Subsidy Program in the Context of Climate Change: Evidence from Malawi By Asfaw, Solomon; Carraro, Alessandro
  12. Drivers of technical efficiency and technology gaps in Ghana’s mango production sector: a stochastic metafrontier approach By Mensah, Amos; Brummer, Bernhard
  13. Labour Productivity and the Distribution of Real Earnings in Canada, 1976 to 2014 By James Uguccioni, Andrew Sharpe and Alexander Murray
  14. Modelling farm-household level impacts of fertilizer subsidy programs on productivity and food security: The case of Ethiopia By Riesgo, Laura; Louhichi, Kamel; Paloma, Sergio Gomez y
  15. The inverse productivity size relationship: can it be explained by systematic measurement error in self-reported production? By Desiere, Sam
  16. Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector By Lundin, Erik
  17. Growth-enhancing effect of openness to trade and migrations: What is the effective transmission channel for Africa? By Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
  18. The Growth of Multinational Firms in the Great Recession By Vanessa Alviarez; Andrei A. Levchenko; Javier Cravino

  1. By: Barnabé Walheer
    Abstract: Benchmarking is a technique used by Decision Making Units (DMUs) to enable continuous quality improvement. Benchmarking includes almost any activity that compares a DMU's performance with some standard. Benchmarking offers the possibility of optimizing the DMU's processes, services, outcomes and products through those comparisons. Quite often, benchmarking is understood to be an act of imitating or copying but in reality benchmarking proves to be a concept that helps in innovation rather than imitation. Though benchmarking is not new, it has become popular both as an analytical research instrument and a practical decision-support tool. To some, benchmarking is not a choice; it is a necessity. Indeed, the penalty for neglecting proper benchmarking is loss of competitive edge, which is the key to survival and profitability.Usually, benchmarking involves four distinct phases. Phase I: determine the set of comparison partners. There are three types of benchmarking procedure: internal benchmarking (i.e. the benchmark is chosen within the same organization), functional benchmarking (i.e. the benchmark is chosen regardless of which industry they are) and competitive benchmarking (i.e a competitor is used as the benchmark). Phase II: collect the data. Much information is already in the public domain (financial reports, newspaper reports, analysts' reports) but it is unlikely to provide all the information required for a successful benchmarking exercise. Phase III: analyze the collected information which results in the creation of a model and an identification of performance gaps. The model will have huge influence on the results. It is crucial to motivate all assumptions made in that phase. The model could be specific to the benchmarking exercise. Phase IV: the action phase. Analyzing the reasons for the performance differentials and use the findings to redefine goals, redesign processes, and change expectations regarding the evaluated DMU's own functions and activities.Amongst the models chosen in Phase III, Data Envelopment Analysis (DEA) has received more and more attention in the benchmarking literature. The goal of such analysis is to evaluate the efficiency of a DMU by comparing its input-output performance to that of other DMUs operating in a similar technological environment. The increasing attention for DEA could be explained by two main reasons. On the one hand, DEA does not resort to any unverifiable parametric/functional specifications of the production technology but rather lets the data speak for themselves by reconstructing the production possibilities using the observed inputs and outputs and imposing some technology axioms (such as monotonicity, convexity, returns-to-scale). Consequently, DEA is nonparametric in nature. On the other hand, deviation from efficiency, which is measured as the distance to the reconstructed production possibilities, is very easily computed. Indeed, the computation of the efficiency measures merely requires solving simple linear programming problems.Recently, Cherchye et al (2008, 2013) argued that standard DEA models provide a black-box treatment of efficiency production behavior since they ignore the links between inputs and outputs, i.e. they implicitly assume that all the inputs produce all the outputs simultaneously. This assumption is not plausible in several applications (e.g. employees that are allocated to different productions processes, specific capital which is used to produce only one type of goods). These authors suggested a multi-output nonparametric efficiency measurement technique, based on a cost minimization condition, which uses available information on the allocation of inputs to outputs. The new methodology characterizes each output by its own production technology while accounting for interdependencies between the different output-specific technologies giving rise to scope economies. This methodology provides a more realistic modelling of the production process and has a bigger ability to detect inefficient behavior (i.e. has more discriminatory power) than standard DEA techniques.In this thesis, we extend the method suggested by Cherchye et al (2008, 2013) in several directions. Firstly, we incorporate bad outputs (in contrast to good outputs). This extension deals in a natural way with several limitations of existing DEA approaches to treat undesirable outputs. As demonstrated with our application to the electricity sector. Next, we extend the methodology to allow for output-specific returns-to-scale assumptions. This allows for a more flexible model that does not force the practitioners to choose the same returns-to-scale assumption for all the outputs (as it is the case for the standard DEA model). This simultaneous choice could be difficult to defend in several settings but it is surely the case when undesirable outputs are present in the production process, as demonstrated in our application. Next, we extend the methodology for multi-output producers by considering a dynamic context. We suggest a new productivity index which takes the form of a Malmquist Productivity Index. Finally, we also generalize the method of Cherchye et al (2008, 2013), based on a cost minimization condition, to a profit maximization condition. This establishes a novel DEA toolkit for profit efficiency assessments in situations with multiple inputs and multiple outputs. We apply this new model to the case of electricity plants.
    Keywords: data envelopment analysis; benchmarking; productivity index; undesirable outputs; profit and cost efficiency
    Date: 2016–11–03
  2. By: Seck, Abdoulaye
    Abstract: In a consistent effort to raise productivity and unlock the unrivaled economic and social potentials of the agricultural sector, the Senegalese government, as many of its African counterparts, has designed and implemented heavy subsidy programs, some of which targeting the use of inputs. This paper assesses the potential impact of fertilizer subsidy on farmers' productivity. Using a farm-level survey data from the Senegal River Valley, the paper develops a two-part methodology: first the data envelopment analysis is used to generate efficiency scores, and then the latter is related to the subsidy program using an endogenous treatment-regression model that accounts for potential endogeneity and self-selectivity issues. The results indicate that the subsidy programs seem to be working, as they appear to be associated with increased efficiency. The results also suggest ways to improve the effectiveness of the subsidy program as well as additional policy options to further unlock the agricultural potentials.
    Keywords: Fertilizer subsidy, efficiency, Senegal, Agricultural Finance, Land Economics/Use, Research and Development/Tech Change/Emerging Technologies, Q12, Q18,
    Date: 2016–09
  3. By: Njuki, Eric; Bravo-Ureta, Boris E.
    Abstract: Water and agriculture are inextricably linked. Within Africa, several water-related challenges exist that present numerous obstacles and have the potential to impede Africa’s continued economic growth. These include: the threat of climate change, as characterized by extreme weather events such as floods, and frequent and intense droughts; a multiplicity of trans-boundary water resources without a coherent arrangement on riparian rights; lack of sufficient water infrastructure for supply and delivery of the water resource; and lack of official data on water use that can be used to formulate good public policy. All these factors have served to increase water scarcity and to raise the competition for scarce water resources between the agricultural sector and other sectors of the economy, such as industry and urban households. A prerequisite to mitigating these challenges is the establishment of an integrated water management system that promotes water productivity and efficiency. Thus, the primary objective of this study is to highlight methods and techniques for evaluating agricultural water productivity and water use efficiency that are replicable, globally. For this purpose we construct a total factor productivity index using the General index proposed in O’Donnell (2016), thereafter we demonstrate how to decompose the partial productivity of water using U.S. agricultural data for the period 1960-2004.
    Keywords: Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2016–09
  4. By: Kiplimo, L.B.; Ngeno, V.
    Abstract: Amidst declining agricultural productivity, farm level efficiency and persistent food security problems in Africa, land fragmentation is emerging as a key empirical and policy question in the region. In this paper, a novel approach is used to estimate the effects of land fragmentation. Quantile Regression-Based Thick Frontier (TFA) is applied to show how the overall change in landholding affects production efficiency in production. Applying cross-sectional survey data from Kenya, the results showed that the least efficient group of maize farmers in Kenya were those with the small average land holding attaining a maximum output of 70% of the actual attainable output. In terms of scale of production, the least efficient group fall short by 58% compared to their large scale peers. This approach is semi-parametric requiring few assumptions with simplified figures easy for policy communication.
    Keywords: Land fragmentation, Quantile Regression-Based Thick Frontier Approach, Farm Level Eciency, Kenya, Crop Production/Industries, Land Economics/Use,
    Date: 2016–09
  5. By: Aboua, Christian
    Abstract: Using DEA model and cost-benefit analysis, this study analyzes resource efficiency and economic efficiency of 32 fish farms in the South-eastern Côte d'Ivoire. Results showed that the mean scores of technical and economic efficiency are respectively 0.575 and 0.553. There is a positive relationship between technical efficiency and economic efficiency, indicating that the farms that produce efficiently are likely to generate maximum revenue. Trained fish farmers using industrial food are the most technically and economically efficient, followed by untrained fish farmers with high level of experience who reformulate themselves their fish feed. The results of resource efficiency indicated that fish farms generate waste in the use of resources (feed, fingerling, water and land).On the other hand, the optimal management simultaneously to a minimization in the use of resources and maximization of production could help to increase production level of 16.18%. Finally, the cost-benefit analysis showed that, on average, fish farms achieve a positive gross and net margin. The results show the important role of governments in fish farmer’s access to feed and fingerlings. Promote and support research in the formulation of local feed available at lower costs; strengthen cooperation with private sector partners to enable extension and support services, to appropriate new production techniques and disseminated to farmers, are the main recommendations of the study.
    Keywords: Economic Efficiency, Resource Efficiency, Profitability, Fish farming, Côte d’Ivoire, Livestock Production/Industries, Resource /Energy Economics and Policy,
    Date: 2016–09
  6. By: David C. Maré (Motu Economic and Public Policy Research)
    Abstract: This study estimates differences in productivity (mfp) across New Zealand urban areas, with a focus on the size of Auckland’s productivity premium. The estimates are based on analysis of firm-level data from Statistics New Zealand’s Longitudinal Business Database. The methods used in the paper overcome some of the biases that arise in standard approaches to spatial productivity estimation - biases arising from imperfect competition, spatial price variation, firm heterogeneity, and labour-sorting across cities. Ignoring these factors leads to biased estimates of the Auckland’s relative productivity performance. The study also investigates industry differences in spatial productivity patterns.
    Keywords: Urban productivity; agglomeration; production function estimation; imperfect competition; input price variation
    JEL: D24 R30
    Date: 2016–11
  7. By: Raymond Mataloni (U.S. Department of Commerce); Kim Ruhl (New York University Stern School of Busi); Dylan Rassier (Bureau of Economic Analysis); Fatih Guvenen (University of Minnesota)
    Abstract: U.S. labor productivity growth has slowed considerably, falling from 2.2 percent per year in 2000–04 to 0.63 percent per year in 2004–07. This slowdown took place primarily in sectors that either produce or use information technology (IT) services. At about the same time, U.S. multinational enterprises (MNEs) were accumulating considerable overseas earnings that were not being repatriated to the United States, distorting the return to intangible investments made in the United States. In this paper we ask: To what extent is the mismeasurement of MNE production responsible for the measured slowdown in productivity growth? Our preliminary results show that adjusting for the overseas production shifting of U.S. MNEs has a significant impact on measured productivity, particularly in IT-related industries that are research-and-development intensive — the industries that Fernald (2014) finds most responsible for the aggregate productivity slowdown. In the R&D intensive industries, our adjustment adds 5.1 percentage points to cumulative labor productivity growth in 1973–2014, and in IT-related R&D intensive industries, the cumulative gain in labor productivity is 4.5 percentage points. Notably, most of our adjustment happens after 2004, the period in which unadjusted productivity slows down.
    Date: 2016
  8. By: Katungi, Enid; Larochelle, Catherine; Mugaboo, Josephat; Buruchara, Robin
    Abstract: This paper investigates the determinants of the decision to switch from cultivating bush to high yielding climbing beans and estimates the causal impact of adoption of climbing beans on productivity based a nationally representative sample of bean producing households. An endogenous switching regression model is used to account for the endogenous nature of adoption and accurately quantify the differences in productivity between climbing and bush bean technologies. Adoption of climbing bean varieties substantially increased over the past 15 years. Elevation, rainfall, and cropping systems are important determinants of adoption of climbing beans. Adoption of climbing beans increases productivity by 21 percent among adopters compared to 48 percent for non-adopters.
    Keywords: Rwanda, climbing bean, adoption, and productivity effects, Crop Production/Industries, Productivity Analysis,
    Date: 2016–09
  9. By: Bocher, Temesgen; Simtowe, Franklin
    Abstract: Groundnut growing is one of the major farming activities in Malawi, however, the extent of efficiency among the farming community has not been fully explored. This study analyzes the direct production efficiency by considering profit efficiency associated with groundnut production using stochastic profit frontier function and the inefficiency effect model specification. The results indicate that the profit efficiency in groundnut production ranges from 1% to 89% (mean of 45%). The relationship between efficiency and both farm and institutional characteristics was found to be significant. Efficiency appeared to be positively associated with farmer’s access to extension services (t=2.10), household size (t=1.78) and soil fertility (t=3.56), but associated negatively with distance to market (t=6.30) and size of land allocated to groundnut production (t=5.33). The implication of the results is that there is scope for increasing the production of groundnuts by about 50% by improving the access to extension, market and improving farm management.
    Keywords: Profit, efficiency, stochastic frontier, groundnuts, Malawi, Crop Production/Industries, Farm Management,
    Date: 2016–09
  10. By: Rycx, Francois (Free University of Brussels); Saks, Yves (National Bank of Belgium); Tojerow, Ilan (Free University of Brussels)
    Abstract: This paper is one of the first to estimate how the region in which an establishment is located affects its productivity, wage cost and cost competitiveness (i.e. its productivity-wage gap). To do so, we use detailed linked employer-employee panel data for Belgium and rely on methodological approaches from both Hellerstein and Neumark (1995) and Bartolucci (2014) to estimate dynamic panel data models at the establishment level. Our findings show that interregional differences in productivity and wages are significant but vanish almost totally, both in industry and services, when controlling for a wide range of covariates, establishment fixed effects and endogeneity. Thus, our results suggest that wage cost and productivity differentials are ceteris paribus relatively well aligned across regions.
    Keywords: regions, productivity, labour costs, linked panel data
    JEL: C33 J24 J31 R30
    Date: 2016–10
  11. By: Asfaw, Solomon; Carraro, Alessandro
    Abstract: The Farm Input Subsidy Program (FISP) in Malawi was introduced in 2005/06 season against the background of bad weather affecting production, prolonged food shortages and high input prices in the absence of soft farm input loans for smallholder farmers. The primary purpose of the program was to increase resource-poor smallholder farmers’ access to improved agricultural farm inputs to achieve food self-sufficiency and increased income through increased maize and legume production. This paper uses a recently released panel data of nationally representative sample households combined with geo-referenced climate and administrative data to analyze FISP targeting effectiveness and the program’s impact on a broad set of welfare outcome variables including consumption, caloric intake, marketed surplus and crop productivity, within a context of climate variability. Our study finds that Malawi’s FISP targeting needs to improve if the primary target is to reach resource-poor and climate-constrained households. Moreover, results show that the program is positively associated with household welfare, food security and productivity. Heterogeneity analysis also suggests that the program benefits households residing in areas characterized by higher climate variability, with a stronger impact for a larger level of treatment.
    Keywords: Farm Input Subsidy Program, program evaluation, targeting, climate change, Malawi, Africa, Agricultural Finance, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, O13, O22, Q18, Q54,
    Date: 2016–09
  12. By: Mensah, Amos; Brummer, Bernhard
    Abstract: Mango production and exports in Ghana have been increasingly volatile over the past years. After a successful take-off of the sector in the early 2000s, output and international market share decreased. In this study, the reasons for the lacklustre performance on the production side are considered using survey data from Ghana. Technical inefficiencies and technology gaps of smallholder mango producers are analysed. A metafrontier framework allows for separating production inefficiencies caused by bad agronomic and management practices from technology gaps. The results show that each production zone requires specifically targeted programs in order to improve technical efficiency.
    Keywords: Productivity, Technology Gaps, Ghana Mango Sector, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies,
    Date: 2016–09
  13. By: James Uguccioni, Andrew Sharpe and Alexander Murray
    Abstract: Canadian labour is more productive than ever before, but there is a pervasive sense among Canadians that the living standards of the 'middle class' have been stagnating. Indeed, between 1976 and 2014, median real hourly earnings grew by only 0.09 per cent per year, compared to labour productivity growth of 1.12 per cent per year. We decompose this 1.03 percentage-point growth gap into four components: rising earnings inequality; changes in employer contributions to social insurance programs; rising relative prices for consumer goods, which reduces workers' purchasing power; and a decline in labour's share of aggregate income. Our main result is that rising earnings inequality accounts for half the 1.03 percentagepoint gap, with a decline in labour's income share and a deterioration of labour's purchasing power accounting for the remaining half. Employer social contributions played no role. Further analysis of the inequality component reveals that real wage growth in recent decades has been fastest at the top and at the bottom of the earnings distribution, with relative stagnation in the middle. Our findings are consistent with a 'hollowing out of the middle' story, rather than a 'super-rich pulling away from everyone else' story.
    Keywords: Productivity, Wages, Income Distribution, Labour Productivity, Canada, Income, Inequality
    JEL: J24 J31 O38 O47 O51
    Date: 2016–11
  14. By: Riesgo, Laura; Louhichi, Kamel; Paloma, Sergio Gomez y
    Abstract: Fertilizer subsidy program is one of the most well-known and politically sensitive policies in Sub-Saharan countries. Countries such as Malawi, Nigeria, Ghana and Ethiopia are characterized by large funded fertilizer subsidy programs in recent years. Malawi, Ghana and Nigeria administer a targeted input subsidy program (e.g. fertiliser voucher program), while Ethiopia uses a universal subsidy program where the government imports fertilizer and distributes it among farmers at below-market price through the network of cooperative unions. These two programs, highly discussed in the literature, often raise a debate. This paper aims at contributing to this discussion by assessing the likely impacts of these two fertilizer subsidy programs (flexible and targeted programs) on the productivity and food security of Ethiopian smallholder farmers. A novel farm-household model, FSSIM-Dev (Farm System Simulator for Developing Countries), is used to test both programs as well as to assess their production, consumption and welfare effects on a nationally representative sample of farm households in Ethiopia.
    Keywords: Consumer/Household Economics, Food Security and Poverty,
    Date: 2016–09
  15. By: Desiere, Sam
    Abstract: This paper revisits the decades-old puzzle of the inverse productivity plot-size relationship (IR), which states that land productivity decrease with increasing plot size in developing countries. While most empirical studies about the IR define yields as self-reported production divided by plot size, this paper complements this approach with an alternative, objective method to estimate yields: crop cuts. Using crop cuts as proxy for yields, the IR in Ethiopia disappears, while the relationship is strong when yields are based on self-reported production. The inverse relationship is even reversed as there exists a weak, positive correlation between plot size and crop cuts. This implies that farmers systematically over report production on small plots and underreport it on larger ones. Our findings suggest that the IR is an artifact of systematic measurement error in self-reported production.
    Keywords: Consumer/Household Economics, Farm Management, Production Economics,
    Date: 2016–09
  16. By: Lundin, Erik (Research Institute of Industrial Economics (IFN))
    Abstract: I examine the effects of privatization, in the form of acquisitions, in the Swedish electricity distribution sector. As the majority of the distribution networks remained publicly owned, I use a synthetic control method to identify the effects on price and labor efficiency. In comparison to their synthetic counterparts, I find that the acquired networks increased labor efficiency by on average 18 percent, while no effect is found on the price. Thus, the evidence suggests substantial efficiency gains but that these are not fed through to consumer prices. Since each acquisition involved several bordering networks that were separately operated by each municipality prior to the acquisitions, I examine to what extent the efficiency gains are likely to be driven by increased economies of scale. Results suggest that the entire effect can be explained by increased economies of scale, questioning the causal effect of privatization per se.
    Keywords: Incentive regulation; Electricity distribution; Natural monopoly; Norm model regulation; Privatization; Acquisitions
    JEL: L33 L52 L94
    Date: 2016–11–03
  17. By: Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
    Abstract: This paper investigates the growth-enhancing effect of openness to trade and to migration by focusing on African countries. Relying on robust estimation techniques dealing with both endogeneity and omitted variables issues, our results put forward the importance of accounting for the type of the partner country. We find evidence that while trade between Africa and industrialized countries has a clear and robust positive impact on Africa’s standards of living, trade with developing countries fails to be growth-enhancing. Moreover, our findings show that migration has no significant effect on per capita income in Africa regardless of the partner. Finally, exploring the trade openness transmission channel, we establish that the growth-enhancing effect of Africa’s trade with industrialized countries mainly occurs through an improvement in total factor productivity..
    Keywords: Trade, International migration, Income per person, Africa.
    JEL: F22 F4 O4 O55
    Date: 2016
  18. By: Vanessa Alviarez (University of British Columbia, Sauder); Andrei A. Levchenko (University of Michigan and NBER); Javier Cravino (University of Michigan and NBER)
    Abstract: Using a large firm-level dataset, this paper studies multinational firmsÕ performance during the Great Recession. Foreign multinationals grew faster than local firms outside of the crisis, but slower during the crisis. Industry and size differences between domestic and foreign-owned firms account for much of this slowdown. However, multinationals from different countries performed differently during the crisis. The paper then assesses the role of multinationals in the global recession using a quantitative model. Had multinationalsÕ relative performance remained unchanged during the crisis, the median countryÕs aggregate growth would have been 0.12% higher, with a range of -0.13 to 0.5% across countries.
    Keywords: Great Recession, multinational firms
    JEL: F23 F44
    Date: 2016–11–11

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