nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒12‒11
sixteen papers chosen by

  1. Driving forces of different productivity models By Halkos, George; Bampatsou, Christina
  2. Health insurance coverage and firm performance: Evidence using firm level data from Vietnam By Yamada, Hiroyuki; VU, Manh Tien
  3. Effects of Labor Reallocation on Productivity and Inequality -- Insights from Studies on Transition By Svejnar, Jan; Tyrowicz, Joanna; van der Velde, Lucas
  5. The Conundrum of Profitability Versus Soundness For Banks by Ownership Type: Evidence from the Indian Banking Sector By Sreejata Banerjee and Malathi Velamuri; Malathi Velamuri; Malathi Velamuri
  6. Information Asymmetry and Market Power in the African Banking Industry By Boateng, Agyenim; Asongu, Simplice; Akamavi, Raphael; Tchamyou, Vanessa
  7. Measuring Plant Level Energy Efficiency and Technical Change in the U.S. Metal-Based Durable Manufacturing Sector Using Stochastic Frontier Analysis By Gale Boyd; Jonathan M. Lee
  8. Harmonised Standards and Firm Productivity: Difference-in-Differences Evidence By Vojtech Olbrecht
  9. Who Is Your Perfect Match? Educational Norms, Educational Mismatch and Firm Profitability By Kampelmann, Stephan; Mahy, Benoît; Rycx, Francois; Vermeylen, Guillaume
  10. How working capital management affects the profitability of Afriland First Bank of Cameroon? A case study By Piabuo, Serge Mandiefe
  11. The Production Function for Housing: Evidence from France By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  12. Efficiency in Elementary Education in Urban India: An exploratory Analysis using DEA By Brijesh C. Purohit
  13. Biased Technical Change and Economic Growth : The Case of Korea, 1970-2013 By Jeong, Sangjun
  14. Testing for Agglomeration Economies and Firm Selection in Spatial Productivity Differences: The case of Japan By KONDO Keisuke
  15. Evaluating the Performance of Alternative Municipal Water Tariff Designs: Quantifying the Trade‐offs between Equity, Economic Efficiency, and Cost Recovery By Nauges, Céline; Whittington, Dale
  16. Trade Liberalization, Selection and Technology Adoption with Vertical Linkages By Antonio Navas; Antonella Nocco

  1. By: Halkos, George; Bampatsou, Christina
    Abstract: In the present study, Data Envelopment Analysis (DEA) is used for the period spanning from 1980 to 2012 and for a total of 32 countries which are classified into four groups, according to their level of development (Developing, BRICS, Developed, G7). DEA allows us to measure technical efficiency under constant (CRS) and variable (VRS) returns to scale and also the Malmquist index and its components (TECHCH, EFFCH, PECH, SECH). Furthermore, we develop an order-α approach for the determination of partial frontiers. An output oriented model is applied. Labor and capital are used as inputs while the GDP index is used as output. Subsequently, energy is incorporated in the model as an additional input variable and CO2 emissions as undesirable output. A comparison of productivity indices as derived from the analysis, allows us to highlight the different levels of productivity before and after the integration of energy and CO2 emissions as additional variables, for each group of countries and therefore their sustainability gaps.
    Keywords: Data Envelopment Analysis; Malmquist Index; Order-α approach; Energy; CO2 emissions.
    JEL: O11 O57 Q0 Q01 Q4 Q43 Q5 Q50 R15
    Date: 2016–12
  2. By: Yamada, Hiroyuki; VU, Manh Tien
    Abstract: In literature, there is limited direct evidence regarding the effect of health insurance coverage on firm performance and worker productivity. In this paper, we study the impacts of health insurance on medium and large-scale domestic private firms’ performance and productivity in Vietnam, using a large firm level census dataset. We deploy propensity-score matching methods, and find statistically positive health insurance effects on both aggregate profit and profit per worker for both complying and non-complying medium and large-scale firms. Given the full sample results, we recommend an improvement in government monitoring as one of the important policy options to induce medium and large-scale firms to contribute to health insurance premiums for their employees.
    Keywords: Health insurance, Medium and large-scale firms, Propensity-score matching, Vietnam, Health insurance, Medium and large-scale firms, Propensity-score matching, Vietnam, D22, I13, I15, I18, O25
  3. By: Svejnar, Jan; Tyrowicz, Joanna; van der Velde, Lucas
    Abstract: From a theoretical perspective the link between the speed and scope of rapid labor reallocation and productivity growth or income inequality is ambiguous. Do reallocations with more flows tend to produce higher productivity growth? Does such a link appear at the expense of higher income inequality? We explore the rich evidence from earlier studies on worker flows in the period of massive and rapid labor reallocation, i.e. the economic transition from a centrally planned to a market-oriented economy in Central and Eastern Europe. We have collected over 450 estimates of job flows from the literature and used these inputs to estimate the short-run and long-run relationship between labor market flows, labor productivity and income inequality. We apply the tools typical for a meta-analysis to verify the empirical regularities between labor flows and productivity growth as well as income inequality. Our findings suggest only weak and short term links with productivity, driven predominantly by business cycles. However, data reveal a strong pattern for income inequality in the short-run - more churning during reallocation is associated with a level effect towards increased Gini indices.
    Keywords: job creation; job destruction; transition; Unemployment; worker flows
    JEL: D21 D24 D92 G21
    Date: 2016–11
  4. By: Francesco Aiello; Graziella Bonanno (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)
    Abstract: This study reviews the empirical literature on banking efficiency by conducting a meta-regression analysis. The meta-dataset consists of 1,661 observations retrieved from 120 papers published over the period 2000–2014. While the role of study design and method-specific characteristics of primary studies is evaluated, the focus concerns regulation in banking. The results are fourfold. First, parametric methods always yield lower levels of banking efficiency than nonparametric studies. Second, banking efficiency is higher in studies using the value-added approach rather than the intermediation method. Third, efficiency scores also depend on the journal’s ranking and on the number of observations and variables used in the primary papers. Finally, regulation matters: primary papers focusing on countries with a liberalized banking industry provide higher values for efficiency scores.
    Keywords: Banking, Frontier Models, Efficiency, Meta-analysis, Regulation, Study design
    JEL: C13 C14 C80 D24 G21 G28 L25 L43 K20
    Date: 2016–11
  5. By: Sreejata Banerjee and Malathi Velamuri (Madras School of Economics); Malathi Velamuri (Madras School of Economics); Malathi Velamuri (Visiting Faculty, Chennai Mathematical Institute)
    Abstract: Banks pursue profit like any business, but in their role as custodians of domestic savings, they are required to be cautious. Riskier but profitable advances may cause asset quality deterioration, thus affecting the longterm viability of the entity. Financial sector reforms in India from the early 1990s, have raised the level of competition for banks of different ownerships - public sector (PSB), old private banks, new private banks and foreign banks. We use panel data on 75 banks across the ownership spectrum, for the period 2000-13, to examine their performance vis-à-vis these two measures – profitability and soundness. We find evidence of significant heterogeneity in performance across ownership type. Overall, we find that there is a negative association between the profitability and soundness measures, though these effects vary by ownership type. PSBs’ business constrained by social outreach commitments perform comparatively worse. The smaller old private banks appear to be the strongest with dedicated client base despite the pressure of nonperforming assets have consistent profits reflected in the return on equity and return on assets. Foreign banks maintain high capital adequacy ratio and relatively higher return on assets. The results provide evidence that good human resource policy is vital for bank performance.
    Keywords: Profitability, Soundness, Ownership effectClassification-JEL: G21 ,G28, C 33
    Date: 2015–07
  6. By: Boateng, Agyenim; Asongu, Simplice; Akamavi, Raphael; Tchamyou, Vanessa
    Abstract: This study investigates the role of information sharing offices and its association with market power in the African banking industry. The empirical evidence is based on a panel of 162 banks from 42 countries for the period 2001-2011. Five simultaneity-robust estimation techniques are employed, namely: (i) Two Stage Least Squares; (ii) Instrumental Fixed effects to control for the unobserved heterogeneity; (iii) Instrumental Tobit regressions to control for the limited range in the dependent variable; (iv) Generalised Method of Moments (GMM) to control for persistence in market power and (v) Instrumental Quantile Regressions (QR) to account for initial levels of market power. The following findings have been established from non-interactive regressions. First, the effects of information sharing offices are significant in Two Stage Least Squares, with a positive effect from private credit bureaus. Second, in GMM, public credit registries increase market power. Third, from Quintile Regressions, private credit bureaus consistently increase market power throughout the conditional distributions of market power. Given that the above findings are contrary to theoretical postulations, we extended the analytical framework with interactive regressions in order to assess whether the anticipated effects can be established if information sharing offices are increased. The extended findings show a: (i) negative net effect from public credit registries on market power in GMM regressions and; (ii) negative net impacts from public credit registries on market power in the 0.25th and 0.50th quintiles of market power.
    Keywords: Financial access; Market power; Information asymmetry
    JEL: G20 G29 L96 O40 O55
    Date: 2016–09
  7. By: Gale Boyd; Jonathan M. Lee
    Abstract: This study analyzes the electric and thermal energy efficiency for five different metal-based durable manufacturing industries in the United States from 1987-2012 at the 3 digit North American Industry Classification System (NAICS) level. Using confidential plant-level data on energy use and production from the quinquennial U.S. Economic Census, a stochastic frontier regression analysis (SFA) is applied in six repeated cross sections for each five year census. The SFA controls for energy prices and climate-driven energy demand (heating degree days - HDD - and cooling degree days - CDD) due to differences in plant level locations, as well as 6-digit NAICS industry effects. A Malmquist index is used to decompose aggregate plant technical change in energy use into indices of efficiency and frontier (best practice) change. Own energy price elasticities range from -.7 to -1.0, with electricity tending to have slightly higher elasticity than fuel. Mean efficiency estimates (100 percent equals best practice level) range from a low of 32 percent (thermal 334 - Computer and Electronic Products) to a high of 86 percent (electricity 332 - Fabricated Metal Products). Electric efficiency is consistently better than thermal efficiency for all NAICS. There is no clear pattern to the decomposition of aggregate technical Thermal change. In some years efficiency improvement dominates; in other years aggregate technical change is driven by improvement in best practice.
    Date: 2016–01
  8. By: Vojtech Olbrecht (Department of Business Economics, Faculty of Business and Economics, Mendel university in Brno, Zemedelska 1, 613 00 Brno, Czech Republic)
    Abstract: One of the main objectives of the European Union is to enhance the competitiveness of companies within its Member States and that may be supported by further development of the Single Market. Introduction of harmonized standards for production of goods and services encourages companies to take advantage of the Single Market by reducing transaction costs. In other words, the EU is adjusting the economic and legal framework in which companies operate in order to remove existing barriers to its vision of a well-functioning Single Market. This paper researches the relationship between these changes and productivity of microeconomic agents – firms. The analysis uses a panel data regression model with difference-in-differences research design built on a sample of affected and unaffected firms as control groups to be able to extract effect caused by the regulation. The article provides evaluation of individual standards and states the direction of effect at each of those. It can be said that while some standards (mostly those with wide applicability) have a positive relation with productivity and some are insignificant. There can be found also one that has a robust significant negative correlation with productivity.
    Keywords: harmonised standards, productivity, difference-in-differences, law and economics, European Union, legislation
    JEL: K20 K33 O12 O24
    Date: 2016–12
  9. By: Kampelmann, Stephan (Free University of Brussels); Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Vermeylen, Guillaume (University of Mons)
    Abstract: We provide first evidence regarding the direct effect of educational norms and educational mismatch on the bottom line of firms across work environments. To do so, we use rich Belgian linked employer-employee panel data, rely on the methodological approach pioneered by Hellerstein et al. (1999), and estimate dynamic panel data models at the firm level. Our findings show an 'inverted L' profitability profile: undereducation is associated with lower profits, whereas higher levels of normal and overeducation are correlated with positive economic rents of roughly the same magnitude. The size of these effects is amplified in firms experiencing economic uncertainty or operating in high-tech sectors.
    Keywords: educational mismatch, productivity-wage gaps, linked panel data
    JEL: J21 J24
    Date: 2016–11
  10. By: Piabuo, Serge Mandiefe
    Abstract: The main objective of this study is to assess the effect of working capital management on the profitability of Afriland First Bank Cameroon. Time series data from 2002 to 2013 was extracted from the financial statement of the bank. Correlation analysis and ordinary least Square regression were used to determine how working capital affects profitability. The findings of this study show that working capital management effectively influences the performance of Afriland First Bank. The analysis revealed that customer deposits, the size of the bank, outstanding expenditure and return on assets all have a positive impact on bank profitability and are statistically significant while loan portfolio has a positive impact on bank performance but is statistically insignificant. On the other hand, reserves have a negative impact on bank profitability. Thus efficient management of working capital is prerequisite for growth and profitability of commercial banks in general and Afriland first Bank in particular.
    Keywords: Profitability , Working capital management, Return on assets
    JEL: G2 G21 G22 G24 G3 G31 G32
    Date: 2016–07–09
  11. By: Pierre-Philippe Combes (Université de Lyon - PRES Université de Lyon, ECON - Département d'économie - Sciences Po); Gilles Duranton (Department of Economics, Harvard University); Laurent Gobillon (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), CEPR - Center for Economic Policy Research - CEPR)
    Abstract: We propose a new nonparametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on the firstorder condition for profit maximisation with respect to nonland inputs by competitive house builders. For parcels of a given size, we compute housing by summing across the marginal products of nonland inputs. Differences in nonland inputs are caused by differences in land prices that reflect differences in the demand for housing across locations. We implement our methodology on newlybuilt singlefamily homes in France. We find that the production function for housing is reasonably well, though not perfectly, approximated by a CobbDouglas function and close to constant returns. After correcting for differences in user costs between land and nonland inputs and taking care of some estimation concerns, we estimate an elasticity of housing production with respect to nonland inputs of about 0.80.
    Keywords: housing,production function
    Date: 2016–11
  12. By: Brijesh C. Purohit (Madras School of Economics)
    Abstract: Increasing literacy in the Indian states is possible by increasing enrolments in elementary education. This study explores the later by primary and upper primary enrolments for nineteen major Indian states for the year 2012-13. Using a non-parametric approach, namely DEA, the results for urban primary and upper primary enrolments indicate that many of the states may be able to improve efficiency of input usage or maximize enrolments more efficiently provided that an adequate infrastructure could be expanded which keeps pace with rising population growths in the states. In rural areas an additional supportive input, namely, electricity supply for villages may also help in enhancing the objective of increasing elementary education in the states.
    Keywords: Efficiency; DEA; Education; IndiaClassification-JEL: C14 ; H52
    Date: 2015–08
  13. By: Jeong, Sangjun
    Abstract: This paper explores the pattern of technical change in the Korean economy from 1970 to 2013 and investigates its determinants. We use the Classical growth-distribution schedule to show that the labor-saving and capital-using pattern has predominated. For the rationale behind this Marx-biased technical change (“MBTC”), we focus on the relationship between technical change and real wage growth via the evolution of labor and capital productivity, and verify the historical direction of technical change against the rise and fall of the working class. Furthermore, we find that the deviation during the post-crisis period from the long-run trend of MBTC is not attributable to the vitality of new technological innovations, but rather the reflection of class dynamics over extracting productivity under weaker capital deepening. The results suggest that the recent deterioration of labor share and labor unions in Korea is closely associated with low incentive for technological progress, which contributes to prolonged stagnation.
    Keywords: growth-distribution schedule, Marx-biased technical change, labor productivity, capital productivity
    JEL: B51 N15 O33
    Date: 2016–11
  14. By: KONDO Keisuke
    Abstract: This study explores why firms, on average, are more productive in larger cities. One major explanation is that the higher firm productivity in larger cities is the result of agglomeration economies. However, recent studies have proposed an alternative mechanism of selection; namely, tougher competition in larger cities forces less-productive firms to exit and, as a result, more-productive firms operate in such locations. To distinguish agglomeration economies from firm selection, this study applies a newly suggested quantile approach to the Japanese manufacturing sector. Overall, the empirical results show that agglomeration economies, rather than stronger selection in larger cities, better explain spatial productivity differences in the Japanese manufacturing sector. The findings also show that benefits from agglomeration economies in this sector have decreased as interregional accessibility has increased.
    Date: 2016–11
  15. By: Nauges, Céline; Whittington, Dale
    Date: 2016–10
  16. By: Antonio Navas (Department of Economics, University of Sheffield); Antonella Nocco (University of Solento, Department of Management, Economics, Mathematics and Statistics)
    Abstract: Vertical linkages accounts for a large proportion of the volume of intermediate inputs used in an industry. This paper analyses the role played by vertical linkages on the effects of trade liberalization on technology adoption and their consequences on average productivity and welfare in a trade model with heterogeneous firms. We find that the strength of vertical linkages shapes the effects that trade liberalization produces on firms' survival and technology upgrading decisions, having an impact on the average productivity of the economy and, ultimately, on welfare.
    Keywords: trade liberalization, heterogeneity, selection, technology adoption, vertical linkages
    JEL: F1
    Date: 2016–12

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