nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒02‒19
seventeen papers chosen by

  1. Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency By Kempa, Karol; Haas, Christian
  2. Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks By Kurmann, André; Sims, Eric
  3. R&D and productivity in OECD firms and industries: A hierarchical meta-regression analysis By Ugur, Mehmet; Trushin, Eshref; Solomon, Edna; Guidi, Francesco
  4. Mobile information and communication technologies, flexible work organization and labor productivity: Firm-level evidence By Viete, Steffen; Erdsiek, Daniel
  5. Productive Efficiency and Ownership When Market Restructuring Affects Production Technologies By Astrid Cullmann; Maria Nieswand; Julia Rechlitz
  6. Harnessing net primary productivity data for monitoring sustainable development of agriculture: By Robinson, Nathaniel P.; Cox, Cindy M.; Koo, Jawoo
  7. Environmental regulation and sustainable competitiveness: Evaluating the role of firm-level green investments in the context of the Porter hypothesis By Weche Gelübcke, John P.; Stoever, Jana
  8. Intangible investment in the EU and US before and since the Great Recession and its contribution to productivity growth By Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia; Iommi, Massimiliano
  9. Regional Productivity Convergence: An Analysis of the Pulp and Paper Industries in U.S., Canada, Finland and Sweden By Jakir Hussain; Jean-Thomas Bernard
  10. Inverted-U relationship between R&D intensity and survival: Evidence on scale and complementarity effects in UK data By Ugur, Mehmet; Trushin, Eshref; Solomon, Edna
  11. An empirical analysis of mergers: Efficiency gains and impact on consumer prices By Bonnet, Céline; Schain, Jan Philip
  12. Capital Misallocation: Frictions or Distortions? By Joel M. David; Venky Venkateswaran
  13. The effects of financialisation and financial development on investment: evidence from firm-level data in Europe By Tori, Daniele; Onaran, Özlem
  14. Productivity puzzle? Financialization, inequality, investment in the UK By Onaran, Özlem; Tori, Daniele
  15. R&D Dynamics and Its Impact on Productivity and Export Demand in Swedish Manufacturing By Vuong, Van Anh; Maican , Florin; Orth, Matilda; Roberts, Mark
  16. Innovation output and state ownership: Empirical evidence from China's listed firms By Kou, Kou; Kroll, Henning
  17. Assessing the Competitiveness of the Portuguese Footwear Sector By Fábio Batista; José Eduardo Matos; Miguel Costa Matos

  1. By: Kempa, Karol; Haas, Christian
    Abstract: This paper uses a theoretical model with Directed Technical Change to analyse the observed heterogeneous energy intensity developments. Based on the empirical evidence on the underlying drivers of energy intensity developments, we decompose changes in aggregate energy intensity into structural changes in the economy (Sector Effect) and within-sector energy efficiency improvements (Efficiency Effect). We analyse how energy price growth and the relative productivity of both sectors affect the direction of research and hence the relative importance of the aforementioned two effects. The relative importance of these effects is determined by energy price growth and relative sector productivity that drive the direction of research. In economies that are relatively more advanced in sectors with low energy intensities, the Sector Effect dominates energy intensity dynamics given no or moderate energy price growth. In contrast, the Efficiency Effect dominates energy intensity developments in economies with a high relative technological level within their energy-intensive industries if moderate energy price growth is above a certain threshold. We further show that temporal energy price shocks might induce a permanent redirection of innovation activities towards sectors with low-energy intensities.
    JEL: O33 Q43 Q55
    Date: 2016
  2. By: Kurmann, André (School of Economics); Sims, Eric (University of Notre Dame & NBER)
    Abstract: This paper documents large revisions in a widely-used series of utilization-adjusted total factor productivity (TFP) by Fernald (2014) and shows that these revisions can materially affect empirical conclusions about the macroeconomic effects of news shocks. We propose an alternative identification that is robust to measurement issues with TFP, including the revisions in Fernald's series. When applied to U.S. data, the shock predicts sustained future productivity growth while simultaneously generating strong impact responses of novel indicators of technological innovation and forward-looking information variables. The shock does, however, not lead to comovement in macroeconomic aggregates as typically associated with business cycle fluctuations.
    Keywords: Total factor productivity; variable utilization; news shocks
    JEL: E22 E23 E32 O47
    Date: 2017–01–27
  3. By: Ugur, Mehmet; Trushin, Eshref; Solomon, Edna; Guidi, Francesco
    Abstract: The relationship between R&D investment and firm/industry productivity has been investigated widely following seminal contributions by Zvi Griliches and others from late 1970s onwards. We aim to providea systematic synthesis of the evidence, using 1253 estimates from 65 primary studies that adopt the so-called primal approach. In line with prior reviews, we report that the average elasticity and rate-of-return estimates are positive. In contrast to prior reviews, however, we report that: (i) the estimates are smaller and more heterogeneous than what has been reported before; (ii) residual heterogeneity remains high among firm-level estimates even after controlling for moderating factors; (iii) firm-level rates of return and within-industry social returns to R&D are small and do not differ significantly despite theoretical predictions of higher social returns; and (iv) the informational content of both elasticity and rate-of-return estimates needs to be interpreted cautiously. We conclude by highlighting the implications of these findings for future research and evidence-based policy.
    Keywords: R&D; Knowledge capital; Productivity; Meta-analysis
    Date: 2016–12
  4. By: Viete, Steffen; Erdsiek, Daniel
    Abstract: Mobile information and communication technologies (ICT) have started to diffuse rapidly in the business sector. This study tests for the complementarity between the use of mobile ICT and organizational practices providing workplace flexibility. We hypothesize that mobile ICT can create value if organizational practices grant employees appropriate autonomy over when, where and how to perform work-related tasks. Our data set comprises 1132 German service firms and provides information on the share of employees that have been equipped with mobile devices which allow for wireless internet access, such as notebooks, tablets and smartphones. Workplace flexibility is measured in terms of firms’ use of working from home arrangements, working time accounts, and trust-based working time. Within a production function framework, we find that the use of mobile ICT is associated with a productivity premium only in firms granting workplace flexibility by means of trust-based working time. Robustness checks suggest that our results are not driven by ICT-skill complementarity or by complementarity of mobile ICT with multiple alternative modern management practices.
    JEL: D22 L22 O33
    Date: 2016
  5. By: Astrid Cullmann; Maria Nieswand; Julia Rechlitz
    Abstract: While the link between the ownership and productive efficiency of firms has been discussed extensively, no consensus exists regarding the superiority of one or the other in non-competitive, regulated environments. This paper applies a flexibleproduction model to test for efficiency differences associated with ownership types while allowing the production to adapt to market restructuring over time. Our empirical setting is based on a new, rich micro dataset of electricity distribution firms operating between 2006 and 2012 in Germany, where the energy transition enforces the adjustment of energy infrastructure. First, our results show that electricity distribution system operators adapted their production technologies over time. Second, there is no empirical evidence that public firms operated any less efficiently than private firms. The empirical findings are relevant to the (re)municipalization debate, which appears to have exaggerated the dichotomy between public and private utilities’ efficiency.
    Keywords: Utilities, ownership, productivity, electricity distribution, Energiewende
    JEL: L94 L51 L98
    Date: 2017
  6. By: Robinson, Nathaniel P.; Cox, Cindy M.; Koo, Jawoo
    Abstract: This study was undertaken to assess the utility of remotely sensed net primary productivity (NPP) data to measure agricultural sustainability by applying a new methodology that captures spatial variability and trends in total NPP and in NPP removed at harvest. The sustainable intensification of agriculture is widely promoted as a means for achieving the Sustainable Development Goals (SDGs) and transitioning toward a more productive, sustainable, and inclusive agriculture, particularity in fragile environments. Yet critics claim that the 17 SDGs and 169 targets are immeasurable and unmanageable. We propose adoption of satellite-estimated, time-series NPP data to monitor agricultural intensification and sustainability, as it is one indicator potentially valuable across several SDGs. To illustrate, we present a unique monitoring framework and a novel indicator, the agricultural appropriation of net primary productivity (AANPP) and analyze spatial trends in NPP and AANPP across the continent of Africa. AANPP focuses on the proportion of total crop NPP removed at harvest. We estimate AANPP by overlaying remotely sensed satellite imagery with rasterized crop production data at 10-by-10-kilometer spatial resolution; we explore variation in NPP and AANPP in terms of food and ecological security. The spatial distribution of NPP and AANPP illustrates the dominance of cropping systems as spatial drivers of NPP across many regions in West and East Africa, as well as in the fertile river valleys across North Africa and the Sahel, where access to irrigation and other technological inputs are inflating AANPP relative to NPP. A comparison of 2000 and 2005 datasets showed increasing AANPP in African countries south of the Sahara—particularly in Mozambique, Angola, and Zambia—whereas NPP either held stable or decreased considerably. This pattern was especially evident subnationally in Ethiopia. Such trends highlight increasing vulnerability of populations to food and ecological insecurity. When combined with other indicators and time-series data, the significance of NPP and the capacity of spatially explicit datasets have far-reaching implications for monitoring the progress of sustainable development in a post-2015 world.
    Keywords: productivity, intensification, sustainable agriculture,
    Date: 2016
  7. By: Weche Gelübcke, John P.; Stoever, Jana
    Abstract: We investigate the impact of environmental regulation on firm performance and investment behavior. Exploiting the case of a German water withdrawal regulation that is managed on the state level, we analyze firms’ reactions to an increase in the water tax using a regression-adjusted difference-in-differences approach. We analyze the individual firm’s response to a change in environmental regulation, distinguishing between add-on and integrated environmental investments. This allows us to include intra-firm innovations into our analysis, which are likely to be of importance for increasing resource-efficiency. Our results show that the regulation in question shows no sign of affecting firms’ overall competitiveness. The results imply that the predicted negative impact of the regulation on firms’ economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth.
    JEL: O31 Q55 Q58
    Date: 2016
  8. By: Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia; Iommi, Massimiliano
    Abstract: This paper uses a new cross-country cross-industry dataset on investment in tangible and intangible assets for 18 European countries and the US. We set out a framework for measuring intangible investment and capital stocks and their effect on output, inputs and total factor productivity. The analysis provides evidence on the diffusion of intangible investment across Europe and the US over the years 2000-2013 and offers growth accounting evidence before and after the Great Recession in 2008-2009. Our major findings are the following. First, tangible investment fell massively during the Great Recession and has hardly recovered, whereas intangible investment has been relatively resilient and recovered fast in the US but lagged behind in the EU. Second, the sources of growth analysis including only national account intangibles (software, R&D, mineral exploration and artistic originals), suggest that capital deepening is the main driver of growth, with tangibles and intangibles accounting for 80% and 20% in the EU while both account for 50% in the US, over 2000-2013. Extending the asset boundary to the intangible assets not included in the national accounts (Corrado, Hulten and Sichel (2005)) makes capital deepening increases. The contribution of tangibles is reduced both in the EU and the US (60% and 40% respectively) while intangibles account for a larger share (40% in EU and 60% in the US). Then, our analysis shows that since the Great Recession, the slowdown in labour productivity growth has been driven by a decline in TFP growth with relatively a minor role for tangible and intangible capital. Finally, we document a significant correlation between stricter employment protection rules and less government investment in R&D, and a lower ratio of intangible to tangible investment.
    Keywords: productivity growth,intangible capital,sources of growth,national accounts
    JEL: O47 E22 E01
    Date: 2016
  9. By: Jakir Hussain (Department of Economics, University of Ottawa, Ottawa, ON); Jean-Thomas Bernard (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: In this paper we investigate the presence of productivity convergence in eight regional pulp and paper industries of U.S. and Canada over the period of 1971-2005. Expectation of productivity convergence in the pulp and paper industries of Canadian provinces and of the states of its southern neighbour is high since they are trading partners with fairly high level of exchanges in both pulp and paper products. Moreover, they share a common production technology that changed very little over the last century. We supplement the North-American regional data with national data for two Nordic countries, Finland and Sweden, which provides a scope to compare the productivity performances of four leading players in global pulp and paper industry. We find evidence in favour of the catch-up hypothesis among the regional pulp and paper industries of U.S. and Canada in our sample. The growth performance is at the advantage of Canadian provinces relative to their U.S. counterparts. However, it is not good enough to surpass the growth rates of this industry in the two Nordic countries.
    Keywords: TFP convergence, multilateral TFP index, pulp and paper industry, translog cost function
    JEL: C22 F33
    Date: 2017
  10. By: Ugur, Mehmet; Trushin, Eshref; Solomon, Edna
    Abstract: Existing evidence on the relationship between R&D intensity and firm survival is varied and often conflicting. We argue that this may be due to overlooking R&D scale effects and complementarity between R&D intensity and market concentration. Drawing on Schumpeterian models of competition and innovation, we address these issues by developing a formal model of firm survival and using a panel dataset of 37,930 of R&D-active UK firms over 1998–2012. We report the following findings: (i) the relationship between R&D intensity and firm survival follows an inverted-U pattern that reflects diminishing scale effects; (ii) R&D intensity and market concentration are complements in that R&D-active firms have longer survival time if they are in more concentrated industries; and (iii) creative destruction as proxied by median R&D intensity in the industry and the premium on business lending have negative effects on firm survival. Other findings concerning age, size, productivity, relative growth, Pavitt technology classes and the macroeconomic environment are in line with the existing literature. The results are strongly or moderately robust to different samples, stepwise estimations, and controls for frailty and left truncation
    Keywords: R&D; Innovation; Firm dynamics; Survival analysis
    Date: 2016–05–10
  11. By: Bonnet, Céline; Schain, Jan Philip
    Abstract: In this article, we extend the literature on merger simulation models by incorporating its potential synergy gains into structural econometric analysis. We present a three-step integrated approach. We estimate a structural demand and supply model, as in Bonnet and Dubois (2010). This model allows us to recover the marginal cost of each differentiated product. Then we estimate potential efficiency gains using the Data Envelopment Analysis approach of Bogetoft and Wang (2005), and some assumptions about exogenous cost shifters. In the last step, we simulate the new price equilibrium post merger taking into account synergy gains, and derive price and welfare effects. We use a homescan dataset of dairy dessert purchases in France, and show that for two of the three mergers considered, synergy gains could offset the upward pressure on prices post. Some mergers could then be considered as not harmful for consumers.
    Date: 2017
  12. By: Joel M. David; Venky Venkateswaran
    Abstract: We study a model of investment in which both technological and informational frictions as well as institutional/policy distortions lead to capital misallocation, i.e., static marginal products are not equalized. We devise an empirical strategy to disentangle these forces using readily observable moments in firm-level data. Applying this methodology to manufacturing firms in China reveals that adjustment costs and uncertainty have significant aggregate consequences but account for only a modest share of the observed dispersion in the marginal product of capital. A substantial fraction of misallocation stems from firm-specific distortions, both productivity/size-dependent as well as permanent. For large US firms, adjustment costs are relatively more salient, though permanent firm-level factors remain important. These results are robust to the presence of liquidity/financial constraints.
    JEL: E0 O11 O4
    Date: 2017–02
  13. By: Tori, Daniele; Onaran, Özlem
    Abstract: In this paper we estimate the effects of financialization on physical investment in selected western European countries using panel data based on the balance-sheets of publicly listed non-financial companies (NFCs) supplied by Worldscope for the period 1995-2015. We find robust evidence of an adverse effect of both financial payments (interests and dividends) and financial incomes on investment in fixed assets by the NFCs. This finding is robust for both the pool of all Western European firms and single country estimations. The negative impacts of financial incomes are non-linear with respect to the companies’ size: financial incomes crowd-out investment in large companies, and have a positive effect on the investment of only small, relatively more credit-constrained companies. Moreover, we find that a higher degree of financial development is associated with a stronger negative effect of financial incomes on companies’ investment. This finding challenges the common wisdom on ‘finance-growth nexus’. Our findings support the ‘financialization thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term stagnation in productivity.
    Keywords: Financialization; investment; non-financial sector; firm data; Europe; financial development;
    Date: 2017–01–01
  14. By: Onaran, Özlem; Tori, Daniele
    Abstract: According to econometric estimations using firm balance sheets of the publicly listed companies in the UK, in large non-financial corporations (NFCs), investment rate would have been 16% higher without the rise in financial payments, and 41% higher without the increasing financial incomes, and in the small NFCs, investment would have been 35% higher without the rise in financial incomes.
    Keywords: Financialization; Investment; Non-financial sector; Firm data; UK; productivity puzzle;
    JEL: C23 G31
    Date: 2017–01–01
  15. By: Vuong, Van Anh; Maican , Florin; Orth, Matilda; Roberts, Mark
    Abstract: In this paper we develop a structural empirical model that allows us to estimate the impact of R&D on firm profitability through two channels. In the first channel, R&D investment by the firm can impact the firm’s production efficiency and lower its marginal cost. This productivity channel raises the firm’s sales and profits in both the domestic and export market. The second channel is specific to exporting firms where R&D acts to increase the demand for the firm’s products in foreign markets. Using micro data for Swedish manufacturing firms from 2000-2010 we estimate the impact of R&D investment on the unobserved component of the firm’s productivity and export market demand. Our empirical results show that firm R&D investment has a statistically significant, positive effect on both the future productivity and the future export demand of the firm. For high-tech industries, we find that the impact of R&D investments on the demand shocks is twice as large as its impact on productivity. On the other hand, the impact of R&D investments on productivity in the low-tech industries is higher than on demand shocks.
    JEL: D22 F10 L60
    Date: 2016
  16. By: Kou, Kou; Kroll, Henning
    Abstract: China has experienced a surge in innovation output in which state-owned enterprises (SOE) play an essential role. Using panel data of Chinese listed firms, this paper examines the influence of the state ownership on innovation output at the firm level. Controlling for size, we analyse the effects of central and local government control on the number of firms' patent applications in different time periods. Doing so, standard assumptions on state ownership's inhibiting character are confirmed. However, we then qualify these finding by running separate models for different regions and sectors find that the impact of state-control on innovation performance depends on a number of conditions. More precisely, state control of firms has a negative impact on innovation output in particular in China's Northeast region and in mid-tech sectors whereas under other circumstances it does either not matter or can even exert a positive influence.
    Date: 2017
  17. By: Fábio Batista (GEE - Office for Strategy and Studies); José Eduardo Matos (GPEARI - Research and Economic Policy Division); Miguel Costa Matos
    Abstract: This paper aims to find a set of variables that explain the success of Portuguese footwear in a global market. The Portuguese footwear industry is a success story, thanks in no small part to exports. Using micro-level data from the universe of firms in the Portuguese footwear industry from 2004 through 2014, we find that financial health, wages, investments in tangible and intangible assets, labour productivity and diversity and persistence in the firm’s participation in export markets are positively related with a firm’s competitiveness.
    Keywords: Footwear, Exports, Competitiveness, Firm-level data.
    JEL: D22
    Date: 2017–02

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.