nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒01‒22
fourteen papers chosen by

  1. Industrial Investments in Energy Efficiency: A Good Idea? By Mary Jialin Li
  2. Labour mobility through business visits as a way to foster productivity By Piva, Mariacristina; Tani, Massimiliano; Vivarelli, Marco
  3. Health-Damaging Inputs, Workers' Health Status and Productivity Measurement By Konstantinos Chatzimichael; Margarita Genius; Vangelis Tzouvelekas
  4. The domestic productivity effects of FDI in Greece: loca(lisa)tion matters! By Jacob A. Jordaan; Vassilis Monastiriotis
  5. An econometric investigation of the productivity gender gap in Mexican research, and a simulation study of the effects on scientific performance of policy scenarios to promote gender equality By Rivera Leon, Llorena; Mairesse, Jacques; Cowan, Robin
  6. A Tale of Two Sectors; Why is Misallocation Higher in Services than in Manufacturing? By Daniel A Dias; Christine J. Richmond; Carlos Robalo Marques
  7. Political influence, firm performance and survival By Sokolov, Vladimir; Solanko, Laura
  8. Debt and productivity: Evidence from rm-level data By Roger M. Gomis; Sameer Khatiwada
  9. Financial Inclusion, Bank Concentration and Firm Performance. By L. Chauvet; L. Jacolin
  10. Data Envelopment Analysis of systems with multiple modes of functioning By Lozano, Sebastián; Villa, Gabriel
  11. The Economic Impact of Changes in the Local Bank Presence By Iftekhar Hasan; Krzysztof Jackowicz; Oskar Kowalewksi; Lukasz Kozlowski
  12. New insights into the stochastic ray production frontier By Arne Henningsen; Matěj Bělín; Géraldine Henningsen
  13. Water use efficiency of agroforestry systensin irrigated agriculture By Thevs, Niels; Strenge, Eva; Aliev, Kumar; Baibagysov, Azim; Eraaliev, Maksat; Lang, Petra; Thomas, Frank
  14. What we talk about when we talk of Productivity By Vergés-Jaime, Joaquim

  1. By: Mary Jialin Li
    Abstract: Yes, from an energy-saving perspective. No, once we factor in the negative output and productivity adoption effects. These are the main conclusions we reach by conducting the first large-scale study on cogeneration technology adoption – a prominent form of energy-saving investments – in the U.S. manufacturing sector, using a sample that runs from 1982 to 2010 and drawing on multiple data sources from the U.S. Census Bureau and the U.S. Energy Information Administration. We first show through a series of event studies that no differential trends exist in energy consumption nor production activities between adopters and never-adopters prior to the adoption event. We then compute a distribution of realized returns to energy savings, using accounting methods and regression methods, based on our difference-in-difference estimator. We find that (1) significant heterogeneity exists in returns; (2) unlike previous studies in the residential sector, the realized and projected returns to energy savings are roughly consistent in the industrial sector, for both private and social returns; (3) however, cogeneration adoption decreases manufacturing output and productivity persistently for at least the next 7-10 years, relative to the control group. Our IV strategies also show sizable decline in TFP post adoption.
    Date: 2017–01
  2. By: Piva, Mariacristina (Universita’ Cattolica del Sacro Cuore, Piacenza, Italy); Tani, Massimiliano (UNSW Canberra, Australia, and IZA, Bonn); Vivarelli, Marco (UNU-MERIT, IZA, Bonn, and Universita’ Cattolica del Sacro Cuore, Piacenza, Italy)
    Abstract: The aim of this paper is to investigate the productivity impact of business visits, relative to traditional drivers of productivity enhancement, namely capital formation and R&D. To carry out the analysis, we combine unique and novel data on business visits sourced from the U.S. National Business Travel Association with OECD data on R&D and capital formation. The resulting unbalanced panel covers on average 16 sectors per year in 10 countries during the period 1998-2011 (2,262 observations). Our results suggest that mobility through business visits is an effective mechanism to improve productivity. The estimated effect is about half as large as investing in R&D, supporting viewing business visits as a form of long-term investment rather than pure consumption expenditure. In a nutshell, our outcomes support the need to recognise the private and social value of business mobility.
    Keywords: Business visits, labour mobility, knowledge, R&D, productivity
    JEL: O32 O33 O34 J24 D83
    Date: 2017–01–12
  3. By: Konstantinos Chatzimichael; Margarita Genius (Department of Economics, University of Crete, Greece); Vangelis Tzouvelekas (Department of Economics, University of Crete, Greece)
    Abstract: Since the seminal papers of Schultz (1961) and Becker (1962), a vast literature emerged analyzing the role of human capital on productivity growth rate. Using Griliches (1963, 1964) and Mincer (1974) theoretical developments, empirical research at a micro level concluded that indeed improvements in human capital account for significant gains in observed productivity rates among individual firms (e.g., Bartel and Lichtenberg,1987; Katz and Murphy, 1992). At the same time studies based on the endogenous growth model of Lucas (1988) and Romer (1986) attributed significant productivity improvements to human capital accumulation for a broad set of countries around the world (e.g., Hall and Jones, 1999; Bils and Klenow, 2000). A common ground throughout this literature, is that human capital is mainly determined by two factors: worker's educational level and health status. The intuition behind this assertion is simple. Formal or informal education decreases the marginal cost of acquiring production related information and the benefit of such information improves the allocative ability of firm workers. On the other hand, improved health status enhance workers' (skilled and unskilled) productivity by increasing their physical capacities, such as strength and endurance, as well as their mental capacities, such as cognitive functioning and reasoning ability. Another common feature of these empirical studies, is that they all assume that workers' health status is determined exogenously. Regardless the choice of variables used to proxy individual health status, this is assumed to be independent of working environment and production decisions made within the firm. The majority of empirical work commonly hypothesizes a strong relationship between nutritional intakes and wages to examine the effects of health on labor productivity mainly in rural areas in both developed and developing countries (Bliss and Stern, 1978; Deolalikar, 1988; Croppenstedt and Muller, 2000). A set of wage function estimates provides solid evidence that higher nutrition leads to increased productivity rates. This nutrition-productivity hypothesis is further confirmed by production function approaches using instrumental variables to correct for simultaneous equation bias (Strauss, 1986). Using different proxies for workers' health status, more recent micro-level research verifies the positive relationship between health variables and productivity for both skilled and unskilled workers (Strauss and Thomas, 1998; Schultz, 2002). However, empirical evidence worldwide rather suggests the opposite. In many sectors (if not all) workers' health status is not irrelevant to the workplace conditions and individual firm decisions. Evidence from medical studies indicates that health impairments account for 12-28 per cent productivity losses in construction sector (Meerding et al., 2005), while the relative figure in Information and Communications Technology (ICT) industry is 15 per cent (Hagberg et al., 2002). Further, according to the International Labour Organization (ILO), every year 160 billion workers suffer globally from illnesses due to work-related causes, while the relative total cost of these diseases accounts for approximately 4 per cent of world's GDP. According to a recent study by Eurostat (2010), about 8.6 per cent of the workers in the EU-27 face at least one work-related health problem in a period of 12 months, while the total time of lost work due to work-specific health impairments is approximately 367 million calendar days. There are two ways that workplace conditions are affecting workers' health status. First, the nature of working activities involved in firm production (e.g., construction sector) and second, the technological conditions that require the use of specific inputs that are at the same time hazardous for firm workers. Ensuring strict safety standards in a construction site (such as the height of handrails, shoring of trenches, and safe handling procedures) may reduce the adverse effects in workers health status from a potential accident. This is an instantaneous decision made by the firm (mostly imposed by the regulatory framework) and it's impact on individual productivity rates depends on the incidence of work accidents in the future. In terms of productivity improvements though, it is more important to analyze workers' health status when firms utilize specific inputs in their production process that are at the same time (directly or indirectly) harmful for individual workers, i.e., health-damaging inputs. This type of inputs entails a trade-off between firm production and workers' health status. This is particularly acute for hazards that do not have an immediate and recognizable effect. For instance pesticides materials in crop production, chemical substances in many manufacturing sectors, plastic or paint manufacturing, are all cases where health-damaging inputs are extensively used by firms posing serious health risks for their employees. In these sectors, workers seldom have perfect information about the health implications of their jobs and the use of this specific type of inputs. For many hazards, the true probabilities of being killed or getting ill are not known by anyone. Due to the retarded state of occupational medicine, even the underlying medical ramifications of different exposures to aspects of the workplace such as radiation, noise, high temperatures, and chemical vapors are little understood. This uncertainty is compounded by uncertainty with regard to the characteristics of the work situation, for example, the concentration of asbestos fibers in the air. Hence, in many instances safety application rules are not always followed by individual workers due either to improper firm management or lack of individual knowledge. Although the social cost of such health impairments might not be of the interest of the firms, the associated reductions in effective labor do matter for them since such reductions are accompanied by lower productivity rates. Hence, measuring the indirect effect of health-damaging inputs, through human capital deterioration, may indirectly enforce safety standards in working environments. If these productivity losses are important for individual firms, then indeed improving workers' knowledge or applying more effective management practices would result to significant gains for them. Along these lines, this paper contributes to the relevant literature by suggesting a theoretically consistent framework to analyze both the direct and the indirect effect of health-damaging inputs on total factor productivity growth. The decomposition framework is based on a primal approach requiring no assumptions about the structure of labor markets. It is applied to a panel of greenhouse producers from Western Crete, Greece observed during the 2003-07 cropping period. Due to the extensive use of chemical pesticides, farming is a particularly interesting example for measuring the adverse effects of health-damaging inputs on individual productivity rates. For measuring employees' health status, individual health indices are estimated using recently developed generalized propensity score (GPS) methods in a continuous treatment setting (Hirano and Imbens, 2004). To our knowledge this is the first attempt to construct an index of workers' health status that is endogenously determined, enabling the analysis of both direct and indirect effects of health damaging inputs on individual total factor productivity growth rates. Our empirical results may contribute to the ongoing debate for improving working conditions and reducing work-specific health impairments in many sectors.
    Keywords: Health-damaging inputs, Workers' health index, TFP growth, Greenhouse farms
    JEL: I12 I30 Q12 D24
    Date: 2017–01–11
  4. By: Jacob A. Jordaan; Vassilis Monastiriotis
    Keywords: FDI; agglomeration; regional externalities; spatial heterogeneity; Greece
    JEL: N0
    Date: 2016–12
  5. By: Rivera Leon, Llorena (UNU-MERIT); Mairesse, Jacques (UNU-MERIT, and CREST-ENSAE, France); Cowan, Robin (UNU-MERIT, and BETA, Université de Strasbourg, France)
    Abstract: This paper provides evidence on the existence and determinants of the publication productivity gender gap in Mexico at the individual level and on its consequences on the Mexican scientific system and productivity at disciplinary and aggregate levels. The paper specifies and performs a panel data econometric analysis based on a sample of Mexican researchers who are members of the National System of Researchers (SNI) of Mexico in the period 2002-2013. It corrects for a selectivity bias: the existence of periods with no (or low quality) publication, and endogeneity bias: the promotion to higher academic ranks. We define and implement counterfactual simulations to both effects, assess the magnitude of macro-impacts of existing gender gaps and illustrate the potential effects of a range of policy scenarios. The results show no significant gender gaps for an average SNI researcher. Moreover, when correcting for the endogeneity and selectivity biases, we find that the average female researcher in public universities is around 8% more productive than her male peers, with most of the observed productivity being explained by gender differentials in the propensity to have periods of no (or low) quality publication. We find that barriers to promotion to higher academic ranks are highest among females in public research centres. Our macro scenarios on promotion practices, selectivity, collaboration and age show that eliminating gender gaps would increase aggregate productivity by an average of 7% for university females and 9% for females in research centres.
    Keywords: scientific productivity, gender productivity puzzle, Mexico, economics of science, economics of gender
    JEL: C23 I23
    Date: 2016–12–21
  6. By: Daniel A Dias; Christine J. Richmond; Carlos Robalo Marques
    Abstract: Recent empirical studies document that the level of resource misallocation in the service sector is significantly higher than in the manufacturing sector. We quantify the importance of this difference and study its sources. Conservative estimates for Portugal (2008) show that closing this gap, by reducing misallocation in the service sector to manufacturing levels, would boost aggregate gross output by around 12 percent and aggregate value added by around 31 percent. Differences in the effect and size of productivity shocks explain most of the gap in misallocation between manufacturing and services, while the remainder is explained by differences in firm productivity and age distribution. We interpret these results as stemming mainly from higher output price rigidity, greater labor adjustment costs and more informality in the service sector.
    Keywords: Labor markets;Portugal;Services;Manufacturing sector;Capital;Developed countries;Total factor productivity;Econometric models;Misallocation, productivity, firm-level data, structural transformation, Gelbach decomposition
    Date: 2016–11–15
  7. By: Sokolov, Vladimir; Solanko, Laura
    Abstract: We examine how regional-level political influence affects firm financial performance and survival. Combining representative survey data on mid-sized manufacturing firms in Russia with official registry data, we find that politically influential firms exhibit higher profitability and retain larger financial investments than non-influential firms. At the same time, we find no association between regional political influence and access to bank lending. Most importantly, our empirical analysis suggests that the benefits of influence may be transient. Influential firms experienced significantly lower growth during our 2004–2010 sample period than non-influential firms. Moreover, influential firms had a significantly higher probability of going bankrupt after the 2008 global financial crisis than non-influential firms.
    JEL: D22 D72 G38
    Date: 2016–12–22
  8. By: Roger M. Gomis (Universitat Pompeu Fabra); Sameer Khatiwada (IHEID, Graduate Institute of International and Development Studies, Geneva and ILO Regional Office Bangkok)
    Abstract: There are relatively few studies that use micro data to shed light on the relationship between finance and economic growth – the few that exists show that there is a positive relationship between debt and future productivity growth. Meanwhile, several new macro-econometric studies have shown that there is a threshold of financial development above which finance negatively impacts growth – our paper contributes to this literature by examining whether this finding holds when we examine firm level data. Our data covers over 100 countries, both advanced and developing & emerging and spans close to 30 years (1986-2014). Our preliminary results are the following: i) firm level leverage is positively associated with productivity; ii) the strength of this association declines in employment of the firm; iii) there is diminishing returns to leverage in terms of its impact on productivity but we don’t see a threshold beyond which the returns drop; iv) aggregate leverage in a country has a negative effect on firm productivity, controlling for strength of institutions and level of economic and financial development in the country. Furthermore, given the potential issue of endogeneity, we examine the impact of leverage on expected and unexpected components of productivity – our results show that leverage is positively associated with the unexpected component of firm productivity, thus providing evidence against reverse causality.
    Keywords: total factor productivity (TFP), debt, finance and growth
    JEL: D24 G21 G30 O16 O40
    Date: 2017–01
  9. By: L. Chauvet; L. Jacolin
    Abstract: This study focuses on the impact of financial inclusion and bank concentration on the performance of firms in developing and emerging countries. Using firm-level data for a sample of 55,596 firms in 79 countries, we find that financial inclusion, i.e. the distribution of financial services across firms, has a positive impact on firm growth. This positive impact is magnified when bank markets are less concentrated, a proxy for more competition among banks. We also find that more competitive banks favor firm growth only at high levels of financial inclusion, while bank concentration is particularly favorable to foreign and state-owned firms, and increases firm growth for low levels of financial inclusion. In countries with limited financial deepening, the quality of the banking system (financial inclusion and bank competition) may be as important to promote firm performance as its overall size.
    Keywords: Financial inclusion, Bank concentration, Firm performance
    JEL: G10 O16 O50
    Date: 2016
  10. By: Lozano, Sebastián; Villa, Gabriel
    Abstract: Many systems can operate in different modes of functioning. Conventional Data Envelopment Analysis (DEA) would ignore that fact and consider instead that the system is a black box, paying attention just to the overall input consumption and output production. In this paper a more fine-grained approach is proposed consisting of explicitly modelling the different modes of functioning as specific processes and using the observed data on the input consumption and output production in each of the modes of functioning to infer the corresponding mode-specific technology. The system technology results from composing these mode-specific technologies according to the corresponding time allocations. The proposed approach allows computing efficient operating points for every mode of functioning, looking for improvements in the overall system performance. Two efficiency assessment DEA models are presented depending on whether the observed time allocation is maintained or the model is free to modify it.
    Keywords: efficiency assessment; multiple modes of functioning; DEA; mode-specific technology; time allocative efficiency
    JEL: C02 C6 C61 C67
    Date: 2016–10
  11. By: Iftekhar Hasan (Fordham University and Bank of Finland); Krzysztof Jackowicz (Kozminski University); Oskar Kowalewksi (IESEG School of Management (LEM-CNRS-UMR 9221)); Lukasz Kozlowski (Kozminski University)
    Abstract: The study analyses the economic consequences of changes in the local bank presence. Using a unique dataset of banks, firms, and counties in Poland over the period 2009-2014, we show that changes in local banking that increase the role of the relationship banking model are associated with improvements in local labour markets and easier access of SMEs to bank debt. Moreover, radical changes in the ownership structure of large commercial banks result in a more rapid new firm creation. Finally, we document that young companies’ performance is more sensitive to the instability of local banking markets.
    Keywords: local economic activity, SMEs, entrepreneurship, local banks
    JEL: G21 G32 R11
    Date: 2017–01
  12. By: Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen); Matěj Bělín (Center for Economic Research and Graduate Education, Economics Institute, Czech Republic); Géraldine Henningsen (Department of Management Engineering, Technical University of Denmark)
    Abstract: The stochastic ray production frontier was developed as an alternative to the traditional output distance function to model production processes with multiple inputs and multiple outputs. Its main advantage over the traditional approach is that it can be used when some output quantities of some observations are zero. In this paper, we briefly discuss—and partly refute—a few existing criticisms of the stochastic ray production frontier. Furthermore, we discuss some shortcomings of the stochastic ray production frontier that have not yet been addressed in the literature and that we consider more important than the existing criticisms: taking logarithms of the polar coordinate angles, non-invariance to units of measurement, and ordering of the outputs. We also give some practical advice on how to address the newly raised issues.
    Keywords: Stochastic Ray Production Frontier, Distance Function, Multiple Outputs, Primal Approach, Zero Output Quantities
    JEL: C13 C51 D22
    Date: 2017–01
  13. By: Thevs, Niels; Strenge, Eva; Aliev, Kumar; Baibagysov, Azim; Eraaliev, Maksat; Lang, Petra; Thomas, Frank
    Abstract: The selected paper presented at the IAMO Samarkand Conference
    Keywords: Land Economics/Use, Productivity Analysis,
    Date: 2016–11–03
  14. By: Vergés-Jaime, Joaquim
    Abstract: Newspapers and media in general talk frequently on productivity. As, for example, in terms of “.. the problem of our economy is that productivity is comparatively low/is-lagging-behind (and here the figure for a productivity index)”. Or “…There is a need for serious reforms be undertaken addressed to increase productivity, in order our economy become more competitive and so …”; or “..industry’s Unions and Employers Association agreed finally on an increase on salaries equal to the last year increase in productivity.” In any case, data on productivity levels –regarding an economic sector or a country- have last years become one familiar component in the media news and in socio-political debate. The problem is that those data on productivity (which usually are of labour productivity) do not talk us actually of productivity in the sense of personnel and organisations effectiveness, though this is the implicit meaning media and experts do transmit about. And, of course, those data are presented to us as an out-of-discussion ‘measure of productivity’, since the acknowledged source for them are some official statistics institution, national or international, as Eurostat –for the EU countries-, OECD, BLS (US), .. etc. . By way of example: According to Eurostat, the EU’s country with the highest labour productivity level in 2013 was Luxembourg: 163,9; and the following one in the ranking was Ireland (135,5). Quite below appear Germany (107), France (116) and Spain (111), for example. One certainly gets surprised by reading that Luxembourg workers are about 64% more efficient –producing much more goods o delivering much more services per-person- that their German counterparts. The above productivity differences, 163,9 vs. 107 are against all evidence. Or the above indexes do not refer actually to the common-knowledge concept of productivity stated before. Then, what do actually mean those ‘(labour) productivity indexes’ for such and such country? How are they in fact calculated by the statistical public agencies? The present notes, intended for being read also by non-professionals, try to clarify such questions. They start by presenting a summary on the way acaemics calculate the more frequently used productivity measures. And then, attention is driven to how their adaptations to sector (‘industry’) and whole-country level are calculated by statistics agencies. This allows finally to discuss and make clear the real meaning of these indexes. And so to prevent against their frequent misleading use and interpretation, which lead to distorted conclusions regarding the real world.
    Keywords: Productivity, sector-level productivity, country-level productivity, Labour productivity, Multi-factor productivity
    JEL: O47
    Date: 2017–01–16

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