nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒02‒26
fourteen papers chosen by

  1. Estimation of Technical Change and TFP Growth Based on Observable Technology Shifters By Heshmati, Almas; Rashidghalam, Masoomeh
  2. An Alternative Specification for Technical Efficiency Effects in a Stochastic Frontier Production Function By Satya Paul; Sriram Shanker
  3. Short notice, big difference? The effect of temporary employment on firm competitiveness across sectors By Romina R. Giuliano; Stephan Kampelmann; Benoît Mahy; François Rycx
  4. European banks’ technical efficiency and performance: do business models matter? The case of European co-operatives banks By E. Avisoa
  5. Sectoral Cognitive Skills, R&D, and Productivity: A Cross-Country Cross-Sector Analysis By Sasso, Simone; Ritzen, Jo
  6. Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks By André Kurmann; Eric Sims
  7. The Stolypin Reform and Agricultural Productivity in Late Imperial Russia By Paul Castaneda Dower; Andrei Markevich
  8. Optimal capital, regulatory requirements and bank performance in times of crisis: Evidence from France By O. de Bandt; B. Camara; A. Maitre; P. Pessarossi
  9. An Empirical Analysis of Mergers: Efficiency Gains and Impact on Consumer Prices By Bonnet, Céline; Schain, Jan Philip
  10. Growth and survival of the `fitter'? Evidence from US new-born firms By Giovanni Dosi; Emanuele Pugliese; Pietro Santoleri
  11. Rebalancing Turkey’s Growth by Improving Resource Allocation and Productivity in Manufacturing By Aslihan Atabek; Dan Andrews; Rauf Gonenc
  12. The drivers of revenue productivity: a new decomposition analysis with firm-level data By di Mauro, Filippo; Mion, Giordano; Stöhlker, Daniel
  13. Employment and productivity growth in Tanzania’s service sector By Mia Ellis; Margaret McMillan; Jed Silver
  14. Assessing the Efficiency Costs of Vietnam's ‘Missing’ Small and Medium Sized Enterprises: A Panel Data Investigation By Trung Dang Le and Paul Shaffer

  1. By: Heshmati, Almas (Jönköping University, Sogang University); Rashidghalam, Masoomeh (University of Tabriz)
    Abstract: This paper models and estimates total factor productivity (TFP) growth parametrically. The model is a generalization of the traditional production model where technology is represented by a time trend. TFP growth is decomposed into unobservable technical change, scale economies and observable technology shifter index components. The empirical results are based on an unbalanced panel data at the global level for 190 countries observed over the period 1996-2013. A number of exogenous growth factors are used in modeling four technology shifter indices to explore development infrastructure, finances, technology and human development determinants of TFP growth. Our results show that unobservable technical changes remain the most important component of TFP growth. The observable technology indices-based component is lower than the simple unobserved time trend model based one. By comparing the performance of the time trend and technology index models in terms of TFP growth rates, we arrive at the conclusion that the technology index model predicts a more realistic picture of the TFP growth pattern as compared to the traditional time trend model. Our results also indicate that technical change and TFP growth are negative across country groups and years in the technology index model influenced by the global economic crisis.
    Keywords: technical change, total factor productivity growth, technology indicators, technology shifters
    JEL: C33 C43 D24 O33 O47 O50
    Date: 2016–12
  2. By: Satya Paul; Sriram Shanker
    Abstract: This paper proposes an alternative specification for technical efficiency effects in a stochastic production frontier model. The proposed specification is distribution free and thus eschews one-sided error term present in almost all the existing inefficiency effects models. The efficiency effects are represented by the standard normal cumulative distribution function of exogenous variables which ensures the efficiency scores to lie in a unit interval. An empirical exercise based on widely used Philippines rice farming data set illustrates the simplicity and usefulness of the proposed model.
    Keywords: Non-linear least squares; Standard normal cumulative distribution function; Technical efficiency
    JEL: C51 D24 Q12
    Date: 2017–02
  3. By: Romina R. Giuliano; Stephan Kampelmann; Benoît Mahy; François Rycx
    Abstract: This paper is one of the first to examine how the use of fixed-term employment contracts (FTCs) affects firm competitiveness (i.e. productivity, wages and profits) while controlling for key econometric issues such as time-invariant unobserved workplace characteristics, endogeneity and state dependence. We apply dynamic panel data estimation techniques to detailed Belgian linked employer-employee data covering all years from 1999 to 2010. Results show that the effects of FTCs on firm competitiveness vary across sectors: while temporary employment is found to enhance productivity and profits in (labour-intensive) services, this is not the case in manufacturing and construction.
    Keywords: Fixed-term contracts; productivity; wages; profits; linked panel data; sectors
    JEL: D24 J24 J31 M12
    Date: 2017–02–23
  4. By: E. Avisoa
    Abstract: This paper analyses the technical efficiency of European co-operative banks compared to European commercial banks from 2006 to 2014. For this we use the B-convexity method, an innovative approach in frontier efficient models estimation, to measure banks’ technical efficiency; we also analyse the influence of certain variables on the level of efficiency. Our findings show that: a) a principal component analysis indicates that cooperative banks’ balance sheet are oriented towards lending activities while commercial banks are more oriented towards securities and derivatives activities; b) on average, the technical efficiency of the banks in our sample significantly decreased between 2007 and 2009, before recovering markedly between 2010 and 2012 and stabilizing over the period 2013-2014; c) there is no significant difference in technical efficiency between European cooperative banks and commercial banks, although we observe a slight superiority of commercial banks; d) French cooperative banks have higher levels of technical efficiency than their European peers; and (e) technical efficiency is positively impacted by the banks’ size, suggesting that large banks tend to have higher technical efficiency than smaller banks. This is in line with a trend towards concentration to improve technical efficiency in the European banking sector.
    Keywords: European banking; cooperative banks; technical efficiency; B-convexity; non-parametric frontier approach.
    JEL: C14 C67 G21 G30
    Date: 2016
  5. By: Sasso, Simone (Maastricht University); Ritzen, Jo (IZA and Maastricht University)
    Abstract: We focus on human capital measured by education outcomes (skills) and establish the relationship between human capital, R&D investments, and productivity across 12 OECD economies and 17 manufacturing and service industries. Much of the recent literature has relied on school attainment rather than on skills. By making use of data on adult cognitive skills from the Programme for the International Assessment of Adult Competences (PIAAC), we compute a measure of sectoral human capital defined as the average cognitive skills in the workforce of each country-sector combination. Our results show a strong positive relationship between those cognitive skills and the labour productivity in a country-sector combination. The part of the cross-country cross-sector variation in labour productivity that can be explained by human capital is remarkably large when it is measured by the average sectoral skills whereas it appears statistically insignificant in all our specifications when it is measured by the mere sectoral average school attainment. Our results corroborate the positive link between R&D investments and labour productivity, finding elasticities similar to those of previous studies. This evidence calls for a focus on educational outcomes (rather than on mere school attainment) and it suggests that using a measure of average sectoral cognitive skills can represent a major step forward in any kind of future sectoral growth accounting exercise.
    Keywords: sectoral cognitive skills, productivity, R&D, human capital, knowledge stock
    JEL: I21 J24 O47
    Date: 2016–12
  6. By: André Kurmann; Eric Sims
    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.
    JEL: E22 E23 E32 O47
    Date: 2017–02
  7. By: Paul Castaneda Dower (Florida International University); Andrei Markevich (New Economic School)
    Abstract: We study the effect of improvements in peasants’ land tenure, launched by the 1906 Stolypin reform, on agricultural productivity in late Imperial Russia. The reform allowed peasants to obtain land titles and consolidate separated land strips into single allotments. We find that consolidations increased land productivity. If the reform had been fully implemented, it would have doubled grain production in the empire. We argue that an important factor determining the positive impact on productivity is a decrease in coordination costs, enabling peasants to make independent production decisions from the village commune. In contrast, the titling component of the reform decreased land productivity and we present evidence that transaction costs explain this short-run decline.
    Keywords: land tenure, peasant commune, Stolypin reform, Russia
    JEL: N43 N53 O43 Q15
    Date: 2017–02
  8. By: O. de Bandt; B. Camara; A. Maitre; P. Pessarossi
    Abstract: The recent implementation of the Basel III framework has re-ignited the debate around the link between capital, performance and capital requirements in the banking sector. There is a dominant view in the earlier empirical literature in favor of a positive effect of capital on banking performance. Using panel data gathered for the supervision of French banks, we also find evidence of the beneficial effect of higher capital, but try to go one step further by distinguishing between regulatory and voluntary capital. Using a two-step estimation procedure, taking advantage of the variability of data since the crisis, and controlling for many factors (risk, asset composition, etc), we show that voluntary capital, i.e. capital held by banks irrespective of their regulatory requirements, turns out to be the sole component of capital that positively affects performance, as measured by the return on asset (ROA). In contrast, the effect of regulatory capital on the ROA appears insignificant, indicating that over the 2007-2014 period increasing capital requirements have not been detrimental to banking performance in France.
    Keywords: Bank capital; Performance; ROA, Capital requirements; Financial crisis.
    JEL: G01 G21 G28 G32
    Date: 2016
  9. 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: 2017–02
  10. By: Giovanni Dosi; Emanuele Pugliese; Pietro Santoleri
    Abstract: We examine market selection mechanisms and their strength for a representative cohort of US new independent firms. In particular, we explore whether and how effectively markets reward newly-born firms according to their `fitness' in terms of both labour productivity and profitability. Our analysis yields puzzling results in contrast with canonical industry dynamics models. First, we find that selection on differential growth is mainly related to productivity while profitability plays a negligible role. Second, in contrast with the growth of the fitter principle, selection appears to be driven by changes in firms' relative productivity. Third, we explore how new firms' relative fitness affects their growth performance in different sectors. Our results reveal that market selection operates quite differently across them with higher incidence for new-born firms in services, low-tech and less concentrated sectors. Fourth, concerning selection via exit, our results support the survival of the fitter principle with respect to productivity, while relative profitability does not seem to exert any significant effect on survival probabilities. However, the contribution of firm relative `fitness' to the total firm exit rates variation appears to be modest.
    Keywords: market selection, replicator dynamics, new firm growth, survival, Shapley decomposition
    Date: 2017–02–21
  11. By: Aslihan Atabek; Dan Andrews; Rauf Gonenc
    Abstract: Turkey’s manufacturing sector has expanded considerably but not efficiently and competitively enough. This paper documents the drivers of its recent growth and diversification, and the factors that have held it back. It documents its segmentation and the outsized tail of poorly performing firms, which undermines aggregate productivity growth. Low productivity eases job creation in the short term, but undermines it in the long run and holds back improvements in living standards because of competitiveness losses. A core of well-performing firms (“frontier firms”) is not growing at full potential because of shortcomings in the policy framework. Intermediary (“follower”) firms sustain competition and deliver jobs, but tend to fall behind in productivity. Lower productivity units (“laggards”), which employ a large share of the low-skilled majority of the working age population, survive mostly thanks to the incomplete enforcement of rules and regulations. The resulting stalemate requires a coherent strategy of “systemic upgrading” of the business environment. This would enable all firms to operate in compliance with the law and on a level-playing field, under supportive regulations, taxation and innovation incentives. All firms could then achieve stronger productivity gains and the most promising firms could grow faster. At the same time, a credible flexicurity system needs to be put in place that facilitates adjustment in the labour market while protecting those affected by structural change.
    Keywords: Turkey, Growth, Productivity, Structural change, Taxation, Labour markets, Informality
    JEL: J2 J3 O1 O4 O5
    Date: 2017
  12. By: di Mauro, Filippo; Mion, Giordano; Stöhlker, Daniel
    Abstract: This paper aims to derive a methodology to decompose aggregate revenue TFP changes over time into four different components – namely physical TFP, mark-ups, quality and production scale. The new methodology is applied to a panel of EU countries and manufacturing industries over the period 2006-2012. In summary, patterns of measured revenue productivity have been broadly similar across EU countries, most notably when we group them into stressed (Italy, Spain and Slovenia) and non-stressed countries (Belgium, Finland, France and Germany). In particular, measured revenue productivity drops for both groups by about 6 percent during the recent crisis. More specifically, for both stressed and non-stressed countries the drop in revenue productivity was accompanied by a substantial dip in the proxy we use for TFP in quantity terms, as well as by a strong reduction in mark-ups. Demand also suffered a conspicuous decline. Our results suggest that non-stressed countries seem to enjoy a stronger recovery in terms of fundamentals like quantity TFP, demand and mark-ups than stressed countries. Yet, their overall performance in terms of revenue TFP recovery does not necessarily align with the above analysis which is due to some possible deterioration in the resource reallocation, signalled in our framework from the lower covariance between the two components we split revenue TFP. JEL Classification: E32, O47, D24
    Keywords: decomposition: production function estimation, demand, markups, productivity
    Date: 2017–02
  13. By: Mia Ellis; Margaret McMillan; Jed Silver
    Abstract: Despite Tanzania’s rapid recent growth, the vast majority of employment creation has been in informal services. This paper addresses the role that different subsectors of formal and informal services have played in Tanzania’s growth. It finds that subsectors such as trade services contribute significantly to employment despite their relatively low productivity, while subsectors such as business and transportation services display higher productivity and improve the environment for other firms to operate.The paper also acknowledges the role of high-performing small and medium-sized service firms and the tourism sector in contributing further to Tanzania’s growth and structural change.
    Keywords: services, informal sector, economic growth, structural change, Tanzania, tourism
    Date: 2017
  14. By: Trung Dang Le and Paul Shaffer
    Abstract: This article investigates whether there are efficiency costs associated with the pronounced rightward skew in the firm size distribution, or Vietnam's ‘missing small and medium size enterprise (SMEs)’, drawing on panel data analysis of firm growth and survival. Specifically, it examines if factor allocation biases with respect to credit, preferable treatment of state owned enterprises, barriers to entry into export markets and economies of scale are important determinants of growth rates and survival probabilities of small, medium and large-sized firms. Overall, findings on the earlier variables do not support the view that there are large efficiency costs associated with Vietnam's ‘missing SMEs’. Together with other results in the literature with do not find significant equity costs associated with Vietnam's ‘missing SMES’, these findings raise questions about policy initiatives in support of SMEs in Vietnam, such as the National SME Support program, in particular, through improved access to credit.
    Keywords: firm survival, firm growth, SMEs, panell data, Vietnam
    Date: 2017–02–16

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