nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒02‒12
twenty papers chosen by

  1. Land Misallocation and Productivity By Diego Restuccia; Raül Santaeulàlia-Llopis
  2. Productivity Measurement in the Public Sector: Theory and Practice By Diewert, W. Erwin
  3. Imports, supply chains, and firm productivity By Carol Newman; John Rand; Finn Tarp
  4. Industries without smokestacks in Uganda and Rwanda By John Spray; Sebastian Wolf
  5. Gender Differentials and Determinants of Female- Male Holders Revenue Efficiency during the implementation of the GTP plan in Ethiopia: A Panel Data Study By Contreras, Sandra
  6. The Production Function for Housing: Evidence from France By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  7. Relative Winners and Losers from Efficiency Spillovers in Africa with Policy Implications for Regional Integration By Glass, Anthony J.; Kenjegalieva, Karligash; Ajayi, Victor; Adetutu, Morakinyo; Sickles, Robin C.
  8. Knowledge Composition, Jacobs Externalities and Innovation Performance in European Regions By Antonelli, Cristiano; Crespi, Francesco; Mongeau, Christian; Scellato, Giuseppe
  9. Non-structural and Structural Models in Productivity Analysis: Study of the British Isles during the 2007-2009 Financial Crisis By Gong, Binlei; Sickles, Robin C.
  10. Working Paper 247 - Credit constraints and farm productivity: Micro-level evidence from smallholder farmers in Ethiopia By AfDB AfDB
  11. The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck? By Murat Ungor; Tarek M. Harchaoui
  12. The Rebound Effect in Swedish Heavy Industry By Amjadi, Golnaz; Lundgren, Tommy; Persson, Lars; Zhang, Shanshan
  13. The Spatial Efficiency Multiplier and Random Effects in Spatial Stochastic Frontier Models By Glass, Anthony J.; Kenjegalieva, Karligash; Sickles, Robin C.; Weyman-Jones, Thomas
  14. Financing and performance of female-owned firms in Middle Eastern and African Economies By Mina Baliamoune-Lutz; Stefan Lutz
  16. What Makes Cities More Productive?: gglomeration economies and the role of urban governance: Evidence from 5 OECD Countries By Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
  17. Industrial clusters: The case for Special Economic Zones in Africa By Carol Newman; John Page
  18. Decentralization in Heterogeneous Regions: A Biased Technological Change Approach By Feder, Christophe; Kataishi, Rodrigo Ezequiel
  19. The power of productivity: an assessment of UK firms and factors contributing to productivity enhancement By Alexander Grous
  20. Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier By Jess Benhabib; Jesse Perla; Christopher Tonetti

  1. By: Diego Restuccia; Raül Santaeulàlia-Llopis
    Abstract: Using detailed household-level data from Malawi on physical quantities of outputs and inputs in agricultural production, we measure total factor productivity (TFP) for farms controlling for land quality, rain, and other transitory shocks. We fi that operated land size and capital are essentially unrelated to farm TFP implying substantial factor misallocation. The aggregate agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor of 3.6-fold. We directly link factor misallocation to severely restricted land markets as the vast majority of land is allocated by village chiefs and not marketed. In particular, the output gain from reallocation are 2.6 times larger for farms with no marketed land than for farms that only operate marketed land.
    Keywords: misallocation, land, Productivity, agriculture, Malawi, micro data
    JEL: O1 O4
    Date: 2017–02
  2. By: Diewert, W. Erwin
    Abstract: In many sectors of the economy, governments either provide various goods and services at no cost or at highly subsidized prices. It is usually possible to measure the quantities of these government sector outputs and inputs as well as input prices but the problem is how to estimate the corresponding output prices. Once meaningful output prices have been estimated, the measurement of productivity growth using index numbers can proceed in the usual manner. This chapter suggests three possible general methods for measuring public sector output prices and quantities. If little or no information on the quantity of nonmarket outputs produced is available, then the method recommended in the System of National Accounts 1993 must be used, where aggregate output growth is set equal to aggregate input growth. If information on nonmarket public sector outputs is available then the second general method sets the missing output prices equal to the unit costs of producing each output while the third general method uses purchaser’s valuations to determine the missing output prices. Specific measurement issues in the health and education sectors are discussed. Similar output and productivity measurement issues arise in the regulated sectors of an economy since regulated producers are forced to provide services at prices that are not equal to marginal or average unit costs. Finally, the problems associated with measuring capital services are discussed. The focus of the chapter is on the use of index number methods to measure the Total Factor Productivity of production units in the public and regulated sectors.
    Keywords: Measurement of output, input and productivity, nonmarket sector, health, education, regulated industries, cost functions, marginal cost prices, techni
    Date: 2017–02–02
  3. By: Carol Newman; John Rand; Finn Tarp
    Abstract: This paper explores the relationship between imports and firm productivity, focusing on imported intermediates. Using firm-level data on over 20,000 manufacturing firms in Viet Nam, we find evidence for competition-induced productivity gains from trade. We show that gains in intermediate sectors spill-over to downstream sectors such that firms using more inputs from import-intensive sectors experience higher productivity gains. The evidence indicates that the main source of spill-over is better quality, domestically produced inputs. Ignoring the gains from trade through this mechanism may significantly underestimate the impact of trade on productivity.
    Keywords: imports, supply chains, productivity, Viet Nam
    Date: 2016
  4. By: John Spray; Sebastian Wolf
    Abstract: We use unique high-frequency Government of Uganda and Government of Rwanda tax administration datasets to map the characteristics of ‘industries without smokestacks’ in East Africa. First, we find firm size appears to be crucial for successful industries without smokestacks in services and agro-processing. Second, we find that firms do not need to be active in the external economy themselves to achieve high levels of productivity, but that strong links to external sector actors are more common among more productive firms. Third, all industries with high levels of labour productivity rely heavily on imported inputs, though this is more pronounced in the manufacturing sector. We then identify the role of cross-sector spillovers in economic performance. We find that all of the top ten most interconnected sectors of the economy are either in manufacturing or services. We show that growth in output and productivity in these sectors is a strong indicator of overall economic growth. Finally, we show that sales and employment spillovers from foreign direct investment are most likely to occur in the manufacturing sector.
    Keywords: economic growth, industry, firm size, tax administration data, Uganda, Rwanda
    Date: 2017
  5. By: Contreras, Sandra
    Abstract: In Ethiopia, the participation of women in agriculture is high, women farmers provide around 50 percent of the total labor time required for crop production in most parts of the country (Ahmed, 2013). Even though, the presence of the women in the agriculture sector in Ethiopia is very significant in numbers, a 2014 World Bank report affirms that female farmers benefit less from economic growth because they are less productive than their male counter parts. According to the report the gender productivity gap in Ethiopia is one of the highest in sub-Sahara Africa (World Bank 2014). Therefore, the need to have a closer look to the female holder farms, to locate the sources of inefficiency in hopes to contribute to the alleviation of the poverty conditions that the country faces by improved economic performance. The hypothesis I test in the paper is that in Ethiopia, women are more efficient than men in terms of revenue efficiency in absence of price discrimination in the markets. This study used a two-stage performance assessment across 581 farm holders’ information obtained from the comparable Living Standard Measurement Study-Integrated Surveys (LSMS-ISA) from 2011-2012 and 2013-2014. In the first stage of the study, the revenue efficiency scores, and scale efficiency scores of female and male headed households were calculated by using Data Envelop Analysis (DEA). In the second stage we employed a Panel Tobit Analysis to identify possible determinants of the farms’ inefficiency by including in the model variables related to the farmers' personal characteristics, farms’ characteristics, households’ characteristics, and managerial characteristics.
    Keywords: gender, revenue efficiency analysis, international development, myth about gender issues in Ethiopia, Ethiopia GTP plan, International Development, Production Economics,
    Date: 2017–02–04
  6. By: Pierre-Philippe Combes (IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - UCBL - Université Claude Bernard Lyon 1 - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - Université de Lyon - ENS Lyon - École normale supérieure - Lyon); Gilles Duranton (Wharton School, University of Pennsylvania - University of Pennsylvania [Philadelphia]); Laurent Gobillon (PSE - Paris School of Economics)
    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: production function,housing
    Date: 2016
  7. By: Glass, Anthony J. (Loughborough University); Kenjegalieva, Karligash (Loughborough University); Ajayi, Victor (Loughborough University); Adetutu, Morakinyo (Nottingham Trent University); Sickles, Robin C. (Rice University and Loughborough University)
    Abstract: Studies that have analyzed the efficiency of developing countries have estimated non-spatial frontier models. We extend this approach by accounting for spatial dependence among African countries. In particular, we estimate a spatial Durbin stochastic production frontier model. We also make novel use of the efficiency scores from our spatial model to suggest a direction for regional integration policy for Africa that policy makers can consider. A previous suggestion to promote regional integration in Southern Africa has been to use South Africa as a regional integration hub and to encourage other countries in the region to improve economic links with the hub. We continue with this line of enquiry and although we conclude that there are currently no African countries that are ideal candidates to be a regional integration hub, we suggest three other countries that policy makers may consider using as hubs in the future. We therefore suggest that it would be prudent to consider implementing policies to expedite the readiness of these countries to act as integration hubs.
    JEL: C23 O19 O47 O55
    Date: 2016–11
  8. By: Antonelli, Cristiano; Crespi, Francesco; Mongeau, Christian; Scellato, Giuseppe (University of Turin)
    Abstract: This paper analyses the role of the composition of the regional stock of knowledge in explaining innovation performance. The paper provides three main contributions. First, it investigates the relevance of Jacobs knowledge externalities in characterizing the technological capabilities at the regional level. Second, it applies the Hidalgo-Hausmann (HH) methodology to analyze knowledge composition by looking at patent data of 214 regions, located in 27 state members of the European Union (EU) during the years 1994- 2008. Third, it econometrically assesses the role of knowledge base composition in a knowledge generation function. The results of the empirical analysis confirm that the characterization of regional knowledge base through the HH indicators provides interesting information to understanding its composition and to qualify it as a provider of the Jacobs knowledge externalities that account for the dynamics of regional innovative performance.
    Date: 2016–07
  9. By: Gong, Binlei (Zhejiang University); Sickles, Robin C. (Rice University)
    Abstract: The paper reviews and provides an extension of the benefits and drawbacks of the non-structural Stochastic Frontier Analysis (SFA) paradigm, as well as other number index-based procedures that we will utilize in the analysis. We then compare SFA with two structural models: the Pakes McGuire Model (PMM) (Pakes, Gowrisankaran and McGuire 1993) and the Midrigan and Xu Model (MXM) (Midrigan and Xu 2014). All three methods are used to estimate changes in firm-level productivity in the British Isles before and after the 2007-2009 financial crisis under the canonical single production assumption. The empirical results indicate that overall productivity was not impacted to any substantial degree by the financial crisis, according to both SFA and the PMM. However, the productivity loss estimated by MXM due to financial friction from the recession was substantial.
    JEL: C23 D22 D24 G01 G31 L60
    Date: 2016–12
  10. By: AfDB AfDB
    Date: 2017–02–06
  11. By: Murat Ungor (Department of Economics, University of Otago, New Zealand); Tarek M. Harchaoui (Faculty of Economics and Business, Global Economics & Management, Nettelbosje, the Netherlands)
    Abstract: The remarkable growth spurt reported by the Sub-Saharan African (SSA) economy since the mid-1990s offers the opportunity to revisit the narrative of its economic development experience. We investigate whether the SSA economy has initiated a gradual process of convergence which reverses the long-term fall so far behind the U.S. frontier. Our framework begins with a top-down approach that performs a nested development accounting exercise. This aggregate analysis complements a bottom-up approach that tracks the sectoral origins of the SSA aggregate relative labor productivity performance. The application of this framework to a representative sample of the SSA economy over the 1970-2010 period suggests the following set of results. After one-quarter of a century of falling behind the U.S. level of real income per capita, the SSA economy observed a swift turnaround towards the end of the 1990s, yet without showing any sign of catch-up. Second, parallel to favorable demographic developments, SSA reports a startling relative labor productivity gap which accounts for much of its relative income per capita gap. Third, the use of the concept of cognitive skills reveals that human capital considerations have worsened o_ over time, making total factor productivity no longer the biggest part of the story underlying relative labor productivity differences. Fourth, the sectoral evidence points to the coexistence of headwinds (negative within- and reallocation-effects) and tailwinds (between-effects) which tend to cancel out each other, thus preventing SSA aggregate economic performance to get anywhere closer to the world frontier even during the growth spurt period.
    Keywords: Convergence; productivity; capital formation; structural change
    JEL: N10 O47 O55 O57
    Date: 2016–01
  12. By: Amjadi, Golnaz (CERE and the Department of Economics, Umeå University); Lundgren, Tommy (CERE and the Department of Economics, Umeå University); Persson, Lars (CERE and the Department of Economics, Umeå University); Zhang, Shanshan (CERE and the Department of Forest Economics, SLU)
    Abstract: Energy efficiency improvement (EEI) benefits the climate and matters for energy security. The potential emission and energy savings due to EEI may however not fully materialize due to the rebound effect. In this study, we measure the size of rebound effect for the two energy types fuel and electricity within the four most energy intensive sectors in Sweden – pulp and paper, basic iron and steel, chemical, and mining. We use a detailed firm-level panel data set for the period 2000-2008 and apply Stochastic Frontier Analysis (SFA) for measuring the rebound effect. We find that both fuel and electricity rebound effects do not fully offset the potential for energy and emission savings. Furthermore, we find 2 CO intensity and fuel and electricity share as the two main determinants of rebound effect in Swedish heavy industry. Our results seems to imply that it matters both to what extent and where to promote EEI, as the rebound effect varies between sectors as well as between firms within sectors.
    Keywords: Energy efficiency improvement; Rebound effect; Stochastic Frontier Analysis
    JEL: D22 Q40
    Date: 2017–01–31
  13. By: Glass, Anthony J. (Loughborough University); Kenjegalieva, Karligash (Loughborough University); Sickles, Robin C. (Rice University and Loughborough University); Weyman-Jones, Thomas (Loughborough University)
    Abstract: We extend the emerging literature on spatial frontier models in three respects. Firstly, we account for latent heterogeneity by developing a maximum likelihood random effects spatial autoregressive (SAR) stochastic frontier model. Secondly, to analyze the finite sample properties of a spatial stochastic frontier model we develop a Monte Carlo experimental methodology which we then apply. Thirdly, we introduce the concept of the spatial efficiency multiplier and show that the efficiency benchmark for a productive unit from the structural form of a spatial stochastic frontier model differs from the efficiency benchmark from the reduced form of the model.
    JEL: C23 C51 D24 Q10
    Date: 2016–11
  14. By: Mina Baliamoune-Lutz (University of North Florida, Coggin College of Business, 1 UNF Drive, Jacksonville, FL 32224, USA.); Stefan Lutz (European Management School (EMS), Professorship for Economics, Rheinstrasse 4N, Mainz, 55116, Germany.)
    Abstract: Empirical evidence suggests that lack of access to financing is a major constraint to performance by female-owned firms in most countries. Firm performance, financing structure, and constraints have been well explored for firms in developed economies but this is not the case for firms in developing economies, especially in Africa and the Middle-East. Largely due to lack of data availability, existing literature on African firms has presented some survey-based evidence on firm performance and financing structures while detailed financial evidence is lacking. This paper aims at filling this research gap. We identify female-owned firms and examine the impact of ownership structure on financing and firm performance. We use cross-sectional financial data covering 25,500 companies in the Middle East and Africa for the years 2006 to 2014. Our results reveal a clear, but perhaps surprising, gender-specific pattern.
    Keywords: Gender, Ownership, Firm profitability, Financing structure, MENA, Africa, FDI, Globalization.
    JEL: F20 J16 L22 M10
    Date: 2017–02
  15. By: Gautam, Tej K.; Bhatta, Dependra
    Abstract: The factors considered in using irrigation as a production strategy in Nepal has been different from many countries mainly because of geographical diversity, water availability and investment constraint. This paper identifies the factors affecting irrigation technology adoption among the farmers in Nepal using household survey data 2011. We use a multinomial logit model to estimate variables affecting multiple irrigation technology (tube-well, canal and pond) adoptions in which sociodemographic information, land holding, access to credit, and geographical factors are major explanatory variables. Preliminary results show that education, land holding size, access to credit, and geographic factors have a higher impact on tube-well irrigation technology adoption. Additionally, productivity of major crops found to increase substantially in irrigated land. The impact of shallow tube-well is much greater in plain compared to other modes of irrigation in plain and hilly regions. Findings from this study should provide insights to producers and policy makers in identifying opportunities for utilizing and investing in more efficient irrigation technology
    Keywords: Irrigation technology, shallow tube well, water, farming, multinomial logit, Crop Production/Industries, Production Economics, Resource /Energy Economics and Policy, Q12, Q25,
    Date: 2017–02
  16. By: Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
    Abstract: This paper estimates agglomeration benefits across five OECD countries, and represents the first empirical analysis that combines evidence on agglomeration benefits and the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multi-country setting is supported through the use of a new internationally-harmonised definition of cities based on economic linkages rather than administrative boundaries. In line with the literature, the analysis confirms that city productivity increases with city size but finds that cities with fragmented governance structures tend to have lower levels of productivity. This effect is mitigated by the existence of a metropolitan governance body. Comment rendre les villes plus productives? : Economies d’agglomération et rôle de la gouvernance urbaine: une étude sur 5 pays de l’OCDE Cet article teste l’existence d’économies d'agglomération dans cinq pays de l’OCDE. Ce papier est la première analyse empirique prouvant l’existence d’économies d’agglomération et l’impact des différentes structures de gouvernance sur la productivité, tout en neutralisant l’effet d’appariement sélectif des individus entre les différentes villes (différentes villes attirent des individus au profil différent). L’utilisation d’une nouvelle définition harmonisée des aires urbaines fondée sur les liens économiques plutôt que sur les frontières administratives garantit la comparabilité des résultats entre les pays. A l’instar de la littérature sur le sujet, cette analyse confirme que la productivité dans les agglomérations urbaines augmente avec la population (taille de l’agglomération), mais conclut que la « fragmentation » de leur gouvernance induit des niveaux de productivité plus faibles. Cet effet négatif d’une gouvernance fragmentée semble atténué par l’existence d’une entité de coopération métropolitaine (par exemple, une communauté d’agglomération).
    Keywords: agglomeration economics, cities, governance, productivity
    JEL: H73 R12 R23 R50
    Date: 2017–02–08
  17. By: Carol Newman; John Page
    Abstract: Firms tend to cluster in close geographic proximity to each other to benefit from reduced transport costs, shared inputs, and productivity spillovers due to learning and technology transfers. Evidence from low-income countries suggests that such agglomeration economies may be substantial in endogenously formed clusters. This raises the question of whether spatial industrial policies can be designed to facilitate clustering. In this paper, we consider the case for creating Special Economic Zones (SEZs) in Africa. We document at the country level the state of current SEZ programmes and the policy measures in place for their promotion. We give an overview of the evidence on their success and provide a set of policy recommendations to improve SEZs performance.
    Keywords: agglomeration, Special Economic Zones, spatial industrial policy, Africa
    Date: 2017
  18. By: Feder, Christophe; Kataishi, Rodrigo Ezequiel (University of Turin)
    Abstract: Regional heterogeneity plays a determinant role in both the decentralization and the biased technological change literature. Merging these perspectives, this paper offers a novel approach on how productivity of firms can be affected by public policies within centralized and decentralized political systems. The contribution of this paper is to develop a theoretical model that introduces the biased technological change concept instead of the traditional Total Factor Productivity (TFP) to evaluate policy outcomes. By doing so, we find that public policies may not always have the expected effect in terms of effciency. In our model, productivity and effciency will depend on the level of regional heterogeneity, the inter-regional spillovers and the relative amount of regional endowments. In particular, our point argues that if there is regional heterogeneity but no inter-regional spillovers a centralized policy can be effcient and that if regions are homogeneous in the presence of inter-regional spillovers, a decentralized strategy can be effcient too. Last, we find that there are cases that may reach no effcient outcomes, regardless the political system.
    Date: 2017–01
  19. By: Alexander Grous
    JEL: L81
    Date: 2016–12
  20. By: Jess Benhabib; Jesse Perla; Christopher Tonetti
    Abstract: We study how innovation and technology diffusion interact to endogenously determine the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption creates a spread between the best and worst technologies concurrently used to produce similar goods. The balance of adoption and innovation determines the shape of the distribution; innovation stretches the distribution, while adoption compresses it. Whether and how innovation and diffusion contribute to aggregate growth depends on the support of the productivity distribution. With finite support, the aggregate growth rate cannot exceed the maximum growth rate of innovators. Infinite support allows for “latent growth”: extra growth from initial conditions or auxiliary stochastic processes. While innovation drives long-run growth, changes in the adoption process can influence growth by affecting innovation incentives, either directly, through licensing excludable technologies, or indirectly, via the option value of adoption.
    JEL: O14 O30 O31 O33 O40
    Date: 2017–01

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