nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒12‒04
seventeen papers chosen by

  1. The Effect of Bank Recapitalization Policy on Corporate Investment: Evidence from a Banking Crisis in Japan By Hiroyuki Kasahara; Yasuyuki Sawada; Michio Suzuki
  2. Productivity measurements for three countries of the Pacific Alliance and South Korea, 2008-2012 By Enrique Gilles; Javier Deaza; Alejandro Vivas
  3. Anatomy of Input Demand Functions for Indian Farmers across Regions By Shrabani Mukherjee; Kailash Chandra Pradhan
  4. The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy By Dan Andrews; Chiara Criscuolo; Peter N. Gal
  5. A note on the impact of multiple input aggregators in technical efficiency estimation By Aldanondo, Ana M.; Casasnovas, Valero L.
  6. Immigrants and Firms' Outcomes: Evidence from France By Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
  7. Recruiting for Small Business Growth: Micro-level Evidence By Gidehag, Anton; Lodefalk, Magnus
  8. Energy Efficiency in Transition Economies: A Stochastic Frontier Approach By Antonio Carvalho
  9. Limits to green revolution in rice in Africa: The case of Ghana: By Ragasa, Catherine; Chapoto, Anthony
  10. General Methods for Measuring Factor Misallocation By Thomas Schelkle
  11. Women on Board and Performance of Family Firms: Evidence from India By Jayati Sarkar; Ekta Selarka
  12. Determinants of Outsourcing in the Automobile Sector in India By Santosh K. Sahu; Ishan Roy
  13. Bank efficiency and regional growth in Europe: new evidence from micro-data By Belke, Ansgar; Haskamp, Ulrich; Setzer, Ralph
  14. The Production Function for Housing: Evidence from France By Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent
  15. Comparing apples to apples: A new indicator of research and development investment intensity in agriculture: By Nin-Pratt, Alejandro
  16. Effects of credit constraints on the productivity of small and medium-sized enterprises in Cameroon. By Mandiefe Piabuo, Serge; Menjo Baye, Francis; Chupezi Tieguhong, Julius
  17. Farm Profits and Adoption of Precision Agriculture By Schimmelpfennig, David

  1. By: Hiroyuki Kasahara (University of British Columbia); Yasuyuki Sawada (University of Tokyo); Michio Suzuki (University of Tokyo)
    Abstract: This article examines the effect of government capital injections into financially troubled banks on corporate investment during the Japanese banking crisis of the late 1990s. By helping banks meet the capital requirements imposed by Japanese banking regulation, recapitalization enables banks to respond to loan demands, which could help firms increase their investment. To test this mechanism empirically, we combine the balance sheet data of Japanese manufacturing firms with bank balance sheet data and estimate a linear investment model where the investment rate is a function of not only firm productivity and size but also bank regulatory capital ratios. We find that the coefficient of the interaction between a firm's total factor productivity measure and a bank's capital ratio is positive and significant, implying that the bank's capital ratio affects more productive firms. Counterfactual policy experiments suggest that capital injections made in March 1998 and 1999 had a negligible impact on the average investment rate, although there was a reallocation effect, shifting investments from low- to high-productivity firms.
    Date: 2016–11
  2. By: Enrique Gilles; Javier Deaza; Alejandro Vivas
    Abstract: This paper measures and compares total factor productivity changes using Hicks-Moorsteen Productivity indexes for five broad economic sectors, in South Korea and in three countries of the Pacific Alliance: Colombia, Chile and Mexico, during the period 2008-2012. We specify two models, one measuring output and inputs in levels and the other in per worker terms. We use panel data for years and countries. We find a more diverse pattern of productivity among the four countries, as well as among sectors, that the obtained from national figures (not sectoral). That is, national estimates of Total Factor Productivity veil different and interesting trends in productivity that occurs at the sectoral level and among countries.
    Keywords: Hicks-Moorsteen Index, Malmquist Productivity Index, Technological Change, Sectoralanalysis, Pacific Alliance, South Korea.
    JEL: O13 O14 O33 Q16
    Date: 2016–11–28
  3. By: Shrabani Mukherjee (Assistant Professor, Madras School of Economics); Kailash Chandra Pradhan (Madras School of Economics)
    Abstract: This study models the optimum use of production inputs and analyse the behaviour of input demand functions of agricultural production through restricted transcendental logarithm profit function for four different regions in India using rural economic and demographic survey (REDS) data. The Seemingly Unrelated Regression (SUR) method of estimation reveals that the level of productivity of farms is significantly influenced by output prices, inputs like labour, fertilizer, pesticides. The results of ownprice elasticities for the demand of variable inputs are negative and price elastic. Fertilizer prices and area planted had a significant impact on the profit function altogether. The effect of output prices in eastern region is larger. Whereas, wage rate and other input prices are more effective for other regions. The cross-price elasticities for input indicated imperfect complementary relationships among the inputs. A well designed input distribution policy can mitigate the problem of low factor productivity and lack of technological improvements in agriculture..
    Keywords: Agriculture, Restricted Translog Profit function, Input Demand, Seemingly Unrelated Regression, India Classification-C30, D61, I38
  4. By: Dan Andrews; Chiara Criscuolo; Peter N. Gal
    Abstract: In this paper, we aim to bring the debate on the global productivity slowdown – which has largely been conducted from a macroeconomic perspective – to a more micro-level. We show that a particularly striking feature of the productivity slowdown is not so much a lower productivity growth at the global frontier, but rather rising labour productivity at the global frontier coupled with an increasing labour productivity divergence between the global frontier and laggard (non-frontier) firms. This productivity divergence remains after controlling for differences in capital deepening and mark-up behaviour, suggesting that divergence in measured multi-factor productivity (MFP) may in fact reflect technological divergence in a broad sense. This divergence could plausibly reflect the potential for structural changes in the global economy – namely digitalisation, globalisation and the rising importance of tacit knowledge – to fuel rapid productivity gains at the global frontier. Yet, aggregate MFP performance was significantly weaker in industries where MFP divergence was more pronounced, suggesting that the divergence observed is not solely driven by frontier firms pushing the boundary outward. We contend that increasing MFP divergence – and the global productivity slowdown more generally – could reflect a slowdown in the diffusion process. This could be a reflection of increasing costs for laggard firms of moving from an economy based on production to one based on ideas. But it could also be symptomatic of rising entry barriers and a decline in the contestability of markets. We find the rise in MFP divergence to be much more extreme in sectors where pro-competitive product market reforms were least extensive, suggesting that policy weaknesses may be stifling diffusion in OECD economies.
    Keywords: firm dynamics, knowledge diffusion, productivity, regulation, technological change
    JEL: O43 O57 O30 O40 M13
    Date: 2016–12–02
  5. By: Aldanondo, Ana M.; Casasnovas, Valero L.
    Abstract: The results of an experiment with simulated data show that using multiple positive lineal aggregators of the same inputs instead of the original variables increases the accuracy of the Data Envelopment Analysis (DEA) technical efficiency estimator in data sets beset by dimensionality problems. Aggregation of the inputs achieves more than the mere reduction of the number of variables, since replacement of the original inputs with an equal number of aggregates improves DEA performance in a wide range of cases
    Keywords: Technical efficiency, Aggregation bias, Monte Carlo, DEA Estimator accuracy
    JEL: C14 C61 D20
    Date: 2016–01–25
  6. By: Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
    Abstract: In this paper we analyze the impact of an increase in the local supply of immigrants on firms’ outcomes, allowing for heterogeneous effects across firms according to their initial productivity. Using micro-level data on French manufacturing firms spanning the period 1995-2005, we show that a supply-driven increase in the share of foreign-born workers in a French department (a small geographic area) increased the total factor productivity of firms in that department. Immigrants were prevalently highly educated and this effect is consistent with a positive complementarity and spillover effects from their skills. We also find this effect to be significantly stronger for firms with low initial productivity and small size. The positive productivity effect of immigrants was also associated with faster growth of capital, larger exports and higher wages for natives. Highly skilled natives were pushed towards firms that did not hire too many immigrants spreading positive productivity effects to those firms too. Because of stronger effects on smaller and initially less productive firms, the aggregate effects of immigrants at the department level on average productivity and employment was small.
    JEL: E25 F22 J15 J61
    Date: 2016–11
  7. By: Gidehag, Anton (Örebro University School of Business); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: We examine the link between new employees in leading positions and subsequent productivity in small- and medium-sized (SME) enterprises. Managers and professionals are likely to possess important tacit knowledge. They are also in a position to influence the employing firm. Exploiting rich and comprehensive panel data for Sweden in the 2001-2010 period and employing semi-parametric and quasi-experimental estimation techniques, we find that newly recruited leading personnel have a positive and statistically significant impact on the productivity of the hiring SME. Interestingly, our results suggest that professionals with experience from international firms and enterprise groups contribute the most to total factor productivity. Overall, the findings suggest the importance of mobility of leading personnel for productivity-enhancing knowledge spillovers to SMEs.
    Keywords: recruitment; knowledge spillovers; firm growth; productivity; SME
    JEL: D22 D24 D83 J24 J62
    Date: 2016–10–31
  8. By: Antonio Carvalho (Centre for Energy Economics Research and Policy, Heriot-Watt University)
    Abstract: The paper outlines and estimates a measure of underlying efficiency in electricity consumption for an unbalanced panel of 28 transition economies and 5 Western European OECD countries in the period 1994-2007, by estimating a Bayesian Generalized True Random Effects (GTRE) stochastic frontier model that estimates both persistent and transient inefficiency. The properties of alternative GTRE estimation methods in small samples are explored to guide the estimation strategy. The paper analyses the behaviour of underlying efficiency in electricity consumption in these economies after accounting for time-invariant technological differences. After outlining the specific characteristics of the transition economies and their heterogeneous structural economic changes, an aggregate electricity demand function is estimated to obtain efficiency scores that give new insights for transition economies than a simple analysis of energy intensity. There is some evidence of convergence between the CIS countries and a block of Eastern European and selected OECD countries, although other country groups do not follow this tendency, such as the Balkans.
    Keywords: Electricity Consumption, Transition Economies, Energy Efficiency, Stochastic Frontier
    JEL: C23 Q49 P20
    Date: 2016–11
  9. By: Ragasa, Catherine; Chapoto, Anthony
    Abstract: This paper examines closely the constraints in productivity improvements and evaluates available rice technologies looking at the heterogeneity of irrigated and rainfed ecologies in 10 regions in Ghana. Employing yield response models, profitability analysis, and adoption models, results show various practices contribute to yield improvements in irrigated and rainfed systems including chemical fertilizer use, use of certified seed of improved varieties, transplanting, bunding, leveling, use of a sawah system, seed priming, and row planting. Evidence also shows that extension services on rice production are limited and that intensifying extension services can contribute to increases in rice yield.
    Keywords: productivity, fertilizer, subsidies, rice, green revolution, profitability, technology adoption, agricultural policies, farm inputs, food policies,
    Date: 2016
  10. By: Thomas Schelkle
    Abstract: The paper develops novel methods to measure the extend of factor misallocation. These rely on production functions being homogeneous, but not on specific parameterizations and partly not even on specific functional forms. This reduces the risk to incorrectly reject an efficient allocation. In an empirical application these general methods strongly reject an efficient capital and labor allocation across 473 six-digit U.S. manufacturing industries. Potential output gains of efficiently reallocating factors are between 22 and 64% of observed output. There is also evidence that misallocation increased substantially during the Great Recession with a sizeable contribution to the observed fall in manufacturing output.
    Keywords: Misallocation, factor allocation, test, bounds
    JEL: E23 D61 O11
    Date: 2016–11–28
  11. By: Jayati Sarkar (Madras School of Economics); Ekta Selarka (Assistant Professor, Madras School of Economics)
    Abstract: This paper provides evidence on the effect of women directors on the performance of family firms with a case study of India. Existing literature on the subject has primarily focused on widely held firms, notably in the US. Given that ownership structure and governance environment of family firms are distinctly different from those of non-family firms, the evidence on the relationship between women on board and firm performance in the context of widely held firms may not apply in the context of family firms. India provides an ideal setting for analyzing this question as the presence of family firms is pervasive and since 2013 India has instituted gender quotas on corporate boards. Using a data-set of 10218 firm year observations over a ten year period from 2005 to 2014 which spans the pre-quota and post-quota years, we find robust evidence that women directors on corporate boards positively impact firm value and that this effect increases with the number of women directors on board. However, we find that the positive effect of gender diversity on firm performance weakens with the extent to which the family exerts control through occupying key management positions on the board. In addition, women directors affiliated to the family have no significant effect on firm value, whereas - independent women directors do. Our results with respect to profitability are somewhat different; while as in the case of market value, women directors positively impact profitability with the positive effect driven by independent women directors, the effect does not vary with the extent of family control. Taken together, our results suggest that though gender diversity on corporate boards may positively impact firm performance in family firms in general, the extent of family control can have a significant bearing on this relationship. The findings from this study could be instructive for emerging economies like India in promoting gender-based quotas on corporate boards.
    Keywords: Board of Directors, gender diversity, promoter control, ownership, regulationClassification-JEL: G32, G34, G38
    Date: 2015–10
  12. By: Santosh K. Sahu (Assistant Professor, Madras School of Economics); Ishan Roy (Madras School of Economics, Chennai)
    Abstract: This study involves the determination of outsourcing based on the market structure technology imports and technical efficiency for the automotive sector in India. An important characteristic of this study is that it divides the automotive sector into two sub-sectors (1) the automobile ancillaries sectors, which provides the parts and are the upstream firms and (2) the automobile assemblers who assemble the automobile and sell them to the consumers. Our analysis confirms the fact that when the data is segregated in the two sectors, factors like technical efficiency of firms have opposite effect on the outsourcing tendencies.
    Keywords: Outsourcing, technology import, technical efficiency, automotive sector, India Classification- L10, L21, L22, L62
  13. By: Belke, Ansgar; Haskamp, Ulrich; Setzer, Ralph
    Abstract: This paper examines whether European regions which incorporate banks with a higher intermediation quality grow faster and are more resilient to negative shocks than its less efficient peers. For this purpose, we measure a bank's intermediation quality by estimating its pro t and cost efficiency while taking the changing banking environment after the financial crisis into account. Next, we aggregate the efficiencies of all banks within a NUTS 2 region to obtain a regional proxy for fi nancial quality in twelve European countries. Our results show that relatively more pro t efficient banks foster growth in their region. The link between fi nancial quality and growth is valid both in the pre-crisis and post-crisis period. These results provide evidence to the importance of swiftly restoring bank pro tability in euro area crisis countries through addressing high non-performing loans ratios and decisive actions on bank recapitalization. JEL Classification: G21, O16, O47, O52
    Keywords: bank efficiency, Europe, financial development, regional growth
    Date: 2016–11
  14. By: Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent
    Abstract: We propose a new non-parametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on the first-order condition for profit maximisation with respect to non-land inputs by competitive house builders. For parcels of a given size, we compute housing by summing across the marginal products of non-land inputs. Differences in non-land inputs are caused by differences in land prices that reflect differences in the demand for housing across locations. We implement our methodology on newly-built single-family homes in France. We find that the production function for housing is reasonably well, though not perfectly, approximated by a Cobb-Douglas function and close to constant returns. After correcting for differences in user costs between land and non-land inputs and taking care of some estimation concerns, we estimate an elasticity of housing production with respect to non-land inputs of about 0.80.
    Keywords: Housing; Production function
    JEL: R14 R31 R32
    Date: 2016–11
  15. By: Nin-Pratt, Alejandro
    Abstract: It has been apparent for more than a century that future economic progress in agriculture will be driven by the invention and application of new technologies resulting from expenditure in research and development (R&D) by governments and private firms. Nevertheless, it is conventional wisdom in the economic development literature that there is a significant underinvestment in agricultural R&D in developing countries. Evidence supporting this belief is provided, first by a vast literature showing returns on R&D expenditure to be so high as to justify levels of investment in multiples of those actually found, and second, from available data showing low research effort in developing countries as measured by the intensity ratio (IR), that is, the percentage of agricultural gross domestic product invested in agricultural R&D (excluding the for-profit private sector). This paper argues that the IR is an inadequate indicator to measure and compare the research efforts of a diverse group of countries and proposes an alternative index that allows meaningful comparisons between countries. The proposed index can be used to identify potential under-investors, determine intensity gaps, and quantify the R&D investment needed to close these gaps by comparing countries with similar characteristics. Results obtained using the new R&D intensity indicator with a sample of 88 countries show that the investment effort in developing countries is much higher than the one observed using the conventional IR measure. The new measure finds that countries like China, India, Brazil, and Kenya have similar levels of R&D intensity to those in the United States. To close the R&D intensity gap measured by the new index, developing countries will need to invest US$7.1 billion on top of the $21.4 billion invested on average during 2008–2011, an increase of 33 percent of total actual investment.
    Keywords: agricultural research, public expenditure, agricultural growth, economic growth, agricultural development,
    Date: 2016
  16. By: Mandiefe Piabuo, Serge; Menjo Baye, Francis; Chupezi Tieguhong, Julius
    Abstract: This paper assesses the determinants and effects of credit constraints on the productivity of small and medium-sized enterprises (SMEs) in Cameroon. Use is made of the Cameroon enterprise survey data collected by the World Bank in 2009 and an endogenous switching regression model. Results show that interest rates, size of enterprise, size of loan, size of collateral, maturity of loans and legal status of enterprises are major sources of credit constraints faced by SMEs. Results also indicate that medium enterprises are more credit constrained than small enterprises; meanwhile the effects of credit constraints affect small enterprises more than medium enterprises. Credit constrained firms have lower levels of productivity relative to unconstrained firms. These results have implications for the creation of credit bureaux, prudential stringency and rationalization of the Cameroon tax system.
    Keywords: Small and medium-sized enterprises, credit constraints, endogenous switching regression model, Cameroon tax system.
    JEL: C4 C40 D1 D53
    Date: 2015–06–22
  17. By: Schimmelpfennig, David
    Abstract: Precision agriculture (PA) and its suite of information technologies—such as soil and yield mapping using a global positioning system (GPS), GPS tractor guidance systems, and variable-rate input application—allow farm operators to fine-tune their production practices. Access to detailed, within-field information can decrease input costs and increase yields. USDA’s Agricultural Resource Management Survey shows that these PA technologies were used on roughly 30 to 50 percent of U.S. corn and soybean acres in 2010-12. Previous studies suggest that use of PA is associated with higher profits under certain conditions, but aggregate estimates of these gains have not been available. In this report, a treatment-effects model is developed to estimate factors associated with PA technology adoption rates and the impacts of adoption on profits. Labor and machinery used in production and certain farm characteristics, like farm size, are associated with adoption as well as with two profit measures, net returns and operating profits. The impact of these PA technologies on profits for U.S. corn producers is positive, but small.
    Keywords: Crop production information technologies, precision agriculture, variable-rate technology, soil tests, global positioning system maps, guidance systems., Agricultural and Food Policy, Crop Production/Industries, Production Economics,
    Date: 2016–10

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