nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2016‒12‒18
eleven papers chosen by

  1. Using a spatial econometric approach to mitigate omitted variables in stochastic frontier models: An application to Norwegian electricity distribution networks By Orea, L.; Álvarez, I; Jamasb, T.
  2. Making a Motivated Manager: A Census Data Investigation into Efficiency Differences Between Franchisee and Franchisor-Owned Restaurants By Matthew Sveum; Michael Sykuta
  3. Revitalizing Indonesia’s manufacturing: the productivity conundrum By Mohammad Zulfan Tadjoeddin; Ilmiawan Auwalin; Anis Chowdhury
  4. The productivity slowdown puzzle of European countries: a focus on Italy By Germana Giombini; Francesco Perugini; Giuseppe Travaglini
  5. Picking up speed: Does ultrafast broadband increase firm productivity? By Richard Fabling; Arthur Grimes
  6. Nonparametric Identification and Estimation of Productivity Distributions and Trade Costs By Quang Vuong; Ayse Pehlivan
  7. The Efficiency of Australian Schools: A nationwide analysis using gains in test scores of students as outputs By Hong Son Nghiem; Ha Trong Nguyen; Luke B Connelly
  8. The Economic Impacts of Climate Change on Agriculture: Accounting for Time-invariant Unobservables in the Hedonic Approach By Ortiz-Bobea, Ariel
  9. Bullying as the main driver of low performance in schools: Evidence from Botswana, Ghana, and South Africa By Anton-Erxleben, Katharina; Kibriya, Shahriar; Zhang, Yu
  10. The Production Function for Housing: Evidence from France By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  11. Indonesia and China: Friends or Foes? Quality Competition and Firm Productivity By Lili Yan Ing; Miaojie Yu; Rui Zhang

  1. By: Orea, L.; Álvarez, I; Jamasb, T.
    Abstract: An important methodological issue for the use of efficiency analysis in incentive regulation of regulated utilities is how to account for the effect of unobserved cost drivers such as environmental factors. This study combines the spatial econometric approach with stochastic frontier techniques to control for unobserved environmental conditions when measuring firms’ efficiency in the electricity distribution sector. Our empirical strategy relies on the geographic location of the firms as a useful source of information that has previously not been explored in the literature. The underlying idea in our empirical proposal is to utilise variables from neighbouring firms that are likely to be spatially correlated as proxies for the unobserved cost drivers. We illustrate our approach using the data of Norwegian distribution utilities for the years 2004 to 2011. We find that the lack of information on weather and geographic conditions can likely be compensated with data from surrounding firms using spatial econometric techniques. Combining efficiency analysis and spatial econometrics methods improve the goodness-of-fit of the estimated models and, hence, more accurate (fair) efficiency scores are obtained. The methodology can also be used in efficiency analysis and regulation of other types of utility sectors.
    Keywords: Spatial econometrics, stochastic frontier models, environmental conditions, electricity distribution networks.
    JEL: D24 L51 L94
    Date: 2016–12–12
  2. By: Matthew Sveum; Michael Sykuta
    Abstract: While there has been significant research on the reasons for franchising, little work has examined the effects of franchising on establishment performance. This paper attempts to fill that gap. We use restricted-access US Census Bureau microdata from the 2007 Census of Retail Trade to examine establishment-level productivity of franchisee- and franchisor-owned restaurants. We do this by employing a two-stage data envelopment analysis model where the first stage uses DEA to measure each establishment’s efficiency. The DEA efficiency score is then used as the second-stage dependent variable. The results show a strong and robust effect attributed to franchisee ownership for full service restaurants, but a smaller and insignificant difference for limited service restaurants. We believe the differences in task programability between limited and full service restaurants results in a very different role for managers/franchisees and is the driving factor behind the different results.
    Keywords: Franchising, restaurants, data envelopment analysis, efficiency
    JEL: D23 D24 L83
    Date: 2016–01
  3. By: Mohammad Zulfan Tadjoeddin; Ilmiawan Auwalin; Anis Chowdhury
    Abstract: In light of continuing importance of the manufacturing sector, but declining dynamism, this paper investigates trends in productivity at firm levels. It finds that labour productivity has been either stagnant or falling in labour intensive manufacturing. The paper uses firm level cross-sectional and time series data and employs GMM techniques to estimate determinants of productivity. It finds that real wage is the most important variable that influences firm level productivity, followed by capital intensity. Contrary to the common perception, foreign ownership and export-orientation are not found to have statistically significant influence on firm level productivity. This finding is consistent for firms of all sizes – large, medium, small and micro. This implies that Indonesia can use wages policy, as Singapore did during the late 1970s-mid 1980s, to upgrade its manufacturing to higher value added activities.
    Keywords: manufacturing, productivity, firm-size, real wage, GMM
    JEL: E24 J24 J38 O14 O53
    Date: 2016
  4. By: Germana Giombini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo); Francesco Perugini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Giuseppe Travaglini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: With the end of the twentieth century and the beginning of the new millennium in many European countries, and especially those of the Southern Europe, a structural change in the way the economy grows took place. In this essay we use the growth accounting methodology to measure the contribution of different factors to economic growth in some European countries and in the U.S. and to isolate the determinants of the European slowdown during the Great Recession. The focus on Italy suggests that the slowdown of the Italian economy is structural and affects both the non-ICT and ICT sectors.
    Keywords: Institutions, Labour market Policies; Productivity; Competitiveness; Growth Accounting
    JEL: E24 E32 J60 O30
    Date: 2016
  5. By: Richard Fabling (Independent Researcher); Arthur Grimes (Motu Economic and Public Policy Research)
    Abstract: We estimate whether there are productivity gains from ultrafast broadband (UFB) adoption and whether any gains are higher when firms undertake complementary organisational investments. Using an IV strategy based on proximity to schools (that were targeted in the UFB roll-out), we find that the average effect of UFB adoption on employment and (labour and multifactor) productivity is insignificantly different from zero, even for firms in industries where we might expect the returns to UFB to be relatively high. Conversely, we find that firms making concurrent investments in organisational capital specifically for the purpose of getting more from their ICTs appear to experience higher productivity growth, at least in first-difference specifications. Firms making these joint (UFB-organisational) investment decisions are significantly more likely to report other positive outcomes from their ICT investments, consistent with the identified relationship with productivity being causal.
    Keywords: Ultrafast broadband adoption, fibre-to-the-door, productivity, organisational change, complementary investments
    JEL: D22 L23 O33
    Date: 2016–12
  6. By: Quang Vuong (New York University); Ayse Pehlivan (Bilkent University)
    Abstract: This paper studies the nonparametric identification and estimation of productivity distributions and trade costs in an Eaton and Kortum (2002) type model. Our identification and estimation strategy gains insights from the empirical auction literature, however, our methodology is novel since we face additional problems resulting from the nature of the trade data. Our methodology does not require data on prices which are usually quite hard to obtain and manages to identify the underlying structure by using disaggregated simple bilateral trade data consisting only of trade values and traded quantities. We recover destination-source-sector specific productivity distributions and trade costs nonparametrically. The fact that these productivity distributions and trade costs are both country and sector specific provides important insights about not only cross country differences but also differences across sectors. Moreover, it has now become a common tradition in models of international trade to use either Fréchet or Pareto distributions to represent the distribution of productivities. They provide great analytical convenience; however, recent studies show gains from trade estimates are very sensitive to these parametrizations. To quantify the welfare gains from trade and answer related policy questions, checking the validity of these parametrizations and analyzing how productivity distributions behave is very important.
    Date: 2016
  7. By: Hong Son Nghiem (Institute of Health and Biomedical Innovation, Queensland University of Technology); Ha Trong Nguyen (Bankwest Curtin Economics Centre, Curtin University); Luke B Connelly (Faculty of Health and Behavioural Sciences, The University of Queensland)
    Abstract: This study examines the efficiency of schools in Australia and its determinants using the gain in NAPLAN test scores of students in 6,774 schools in 2009-2011. The results show that, based on empirical input-output combinations, the growth of NAPLAN test scores in Australian schools could be improved by 64 per cent by learning from best practice, on average. At the primary level, Catholic and independent schools are less efficient than public schools. At the secondary school level, though, public schools are found to be less efficient than other (non-public) schools.
    Keywords: DEA, Australia, double bootstrap, gain of test scores
    JEL: I21 D24
    Date: 2016–03
  8. By: Ortiz-Bobea, Ariel
    Abstract: I propose a strategy of measuring the long-run economic impact of climate change on farmland values that tackles the elusive problem of time-invariant spatially-dependent unobservables in the hedonic approach. The strategy exploits that a county’s agricultural productivity is primarily influenced by its own climate, and the fact that climate assignment appears random conditional on average county-neighborhood characteristics. Results suggest that large impacts of climate change on US agriculture seem unlikely. Findings are robust to multiple checks and cannot be attributed to measurement error. Ignoring such confounders considerably overstates long-run climate change impacts on the sector.
    Keywords: Environmental Economics and Policy, Land Economics/Use, Q15, Q51, Q54, R21,
    Date: 2016–10
  9. By: Anton-Erxleben, Katharina; Kibriya, Shahriar; Zhang, Yu
    Abstract: Worldwide, at least 20% of students are regularly bullied in school. Research from developed countries has associated bullying with several negative outcomes, but little is known about the relationship between bullying and academic achievement, especially in developing countries. Here, data from three African countries participating in the 2011 Trends in Mathematics and Sciences Study and Progress in Reading and Literacy Study were analyzed, including 36,602 participants aged 12 to 16. Results show that bullying is pervasive in all three countries, is one of the root causes of low academic performance, and is more influential than other variables commonly associated with low achievement. This indicates that school violence must become a priority for international development and country level efforts in education.
    Keywords: School bullying, academic achievement, Africa
    JEL: I12 I20
    Date: 2016–12
  10. By: Pierre-Philippe Combes (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69131 Ecully, France ; Sciences Po, Economics Department, 28, Rue des SaintsPères, 75007 Paris, France); Gilles Duranton (Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, pa 19104, usa); Laurent Gobillon (PSE-CNRS, 48 Boulevard Jourdan, 75014 Paris, France)
    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
    JEL: R14 R31 R32
    Date: 2016
  11. By: Lili Yan Ing (Economic Research Institute for ASEAN and East Asia (ERIA), University of Indonesia); Miaojie Yu (Peking University); Rui Zhang (Peking University)
    Abstract: We define and measure “firm-product-destination-year-specific export quality” and investigate how quality competition from China affects Indonesian firm productivity in the domestic and export markets. Our results suggest that an increase in Chinese exported product quality by 10 percent will increase the productivity of Indonesian firms by 0.4 - 0.5 percent in Indonesia’s domestic market, and increase Indonesian exporters’ productivity by 2 percent in the export market. Where we limit our sample to exporters only, an increase in Chinese exported product quality will increase Indonesian firm productivity in the export market, but not in the domestic market. Our findings broaden the horizon through which firms could benefit from opening up to trade.
    Keywords: Quality, productivity, competition, firm-level study, China, Indonesia
    JEL: F1 F12 F13 F14
    Date: 2016–12

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