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on Efficiency and Productivity |
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Issue of 2017‒03‒26
fourteen papers chosen by |
| By: | Subhash C. Ray (University of Connecticut); Abhiman Das (Indian Institute of Management); Kankana Mukherjee (Babson College) |
| Abstract: | This study uses Data Envelopment Analysis to examine the efficiency of 536 branches of a major Indian public sector bank across four large metropolitan cities. Unlike previous papers on branch banking in India we model branch operations following the production approach and introduce several methodological extensions to account for the product mix of branches in creating the efficient cost frontier. Our results indicate that there is significant labor cost inefficiency in the operations of the branches. Overall Chennai branches are the most efficient both with respect to their metro specific best-practice frontier as well as the grand frontier. While deposit oriented branches in Kolkata are considerably efficient with respect to their metro specific frontier, branches of other orientations perform quite poorly. Across the three types of labor, attaining efficiency in the number of clerks would have the highest impact in terms of cost savings. |
| Keywords: | Data envelopment analysis; Indian banking; Labor-cost efficiency; Indivisible outputs and inputs |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2017-04&r=eff |
| By: | Falk, Martin; Hagsten, Eva |
| Abstract: | This paper investigates the efficiency of ski lift companies across different climate zones in a group of countries based on establishment data. By a joint estimation of the stochastic frontier production and efficiency equations, the results indicate that ski areas in subarctic climate zones are far more efficient than their counterparts in warmer zones. Presence of a large local market and elevation of the ski area are factors not relevant for efficiency. Output of ski lift operators (companies) increases with the length of ski runs, number of ski lifts, share of slopes covered by snowmaking facilities and availability of fast lifts. Productivity is also significantly higher for ski lift companies owned by a large conglomerate. |
| Keywords: | technical efficiency, stochastic frontier production function, ski lift companies, climate zones, ownership |
| JEL: | L11 L25 L9 L92 R40 |
| Date: | 2017–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77517&r=eff |
| By: | Alserda, G.A.G.; Bikker, J.A.; van der Lecq, S.G. |
| Abstract: | Pension funds’ operating costs come at the cost of benefits, so it is crucial for pension funds to operate at the lowest cost possible. In practice, we observe substantial differences in costs per member for Dutch pension funds, both across and within size classes. This paper discusses scale inefficiency and X-inefficiency using various approaches and models, based on a unique supervisory data set, which distinguishes between administrative and investment costs. Our estimates show large economies of scale for pension fund administrations, but modest diseconomies of scale for investment activities. We also found that many pension funds have substantial X-inefficiencies for both administrative and investment activities. The two kinds of inefficiency differ across types of pension funds. Therefore, most pension funds should be able to improve their cost performance, and hence increase pension benefits. |
| Date: | 2017–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:98480&r=eff |
| By: | Juan Carlos Conesa; Pau S. Pujolas |
| Abstract: | Total Factor Productivity’s (TFP) growth during the 2002-2014 period in Canada has been only 0.16%. This figure is substantially smaller than that of the U.S. during the same period (1.33%), or for Canada during the 1970-2002 period (1.45%). We perform multiple counterfactual exercises to show that the lack of TFP growth cannot be accounted for by measurement issues in, nor misallocation of, factors of production. However, despite the lack of TFP growth Canada has experienced sustained income growth because on a prolonged period of appreciation of the terms of trade. In fact, computing TFP using real Gross Domestic Income (instead of real GDP) reveals a very similar performance in terms of productivity growth between Canada and the U.S., with productivity growth falling in 2002-2014 relative to 1970-2002 in both economies. |
| JEL: | E01 E24 O47 F43 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2017-04&r=eff |
| By: | Hala Abou-Ali; Reham Rizk (British University) |
| Abstract: | This paper assesses the impact of informality on household enterprise performance in terms of productivity and size of output. Furthermore, it pinpoints informality determinants with respect to different types of obstacles that impede their growth. The analysis uses the ELMPS 2012 data and finds that a firm’s age and an entrepreneur’s education level have a significant impact on the likelihood of belonging to the informal sector. Moreover, mobile enterprises, agricultural sector and household savings increase the probability of belonging to the informal sector. In sum, the results support the argument that informality has a deterrent impact on the level of productivity and the value of output of household enterprise in Egypt. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:916&r=eff |
| By: | Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón |
| Abstract: | Using Spanish firrm-level data, we estimate productivity effects of spillovers from foreign multinationals to domestic firms in both manufacturing and service sectors. We find evidence of a positive productivity effect from multinationals on domestic firms operating in the same industry. Analyzing inter-industry linkages, we find evidence consistent with positive productivity spillovers from forward linkages (i.e., from suppliers to buyers) and negative productivity spillovers from backward linkages (i.e., from buyers to suppliers). Our main results hold when analyzing differences between multinational and domestic firms, and for periods of economic growth and recession, although some differences arise. Interestingly, we find evidence supporting a positive role of spillovers during the last recession period. |
| Keywords: | Multinational firms, FDI, spillovers, economic recession. |
| JEL: | F23 L53 O31 O33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77348&r=eff |
| By: | Nesma Ali (Universiti Paris-Est, France.); Boris Najman |
| Abstract: | This paper investigates the effect of the competition stemmed from informal firms on formal firms productivity in Egypt. Using the World Banks Enterprise Surveys, we update the two-step methodology of Guiso et al. (2004) to build a regional indicator of informal competition intensity. Our estimation reports a positive effect of this indicator on formal firms productivity that remains valid to the instrumental variable approach and to multiple robustness check. This result is subject to factors accounting for the characteristics of the firm and is segmented by formal firms size. We also identify informal firms cost advantage as the main channel through which this effect occurs. Our results call on the importance of tax reforms and effective regulation to be implemented in Egypt. |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1025&r=eff |
| By: | Kavitha P (Indian Institute of Management Kozhikode); Pankaj Kumar Baag (Indian Institute of Management Kozhikode) |
| Abstract: | Banks are one of the mediums of implementing Government schemes that facilitate easy access to capital for small businesses and entrepreneurs. We for the first time analyze the bank’s efficiency in implementing a government scheme that promotes entrepreneurship. We empirically study the relative technical and scale efficiency of 42 Indian banks including a comparative efficiency between private and public sector banks in providing loans under the Pradhan Mantri MUDRA Yojana PMMY scheme launched by the Government of India to promote entrepreneurship and facilitate easy access to capital for small and micro units including the start-ups under the scheme using data on the number of loans sanctioned and amount of loan disbursed under the scheme as on March 2016. We have used the Data Envelope Analysis (DEA) - a non-parametric technique for measuring the relative efficiencies of the Indian banks. We found that while Indian banks have been less efficient in implementing the PMMY, in comparison the public sector banks are more efficient in providing loans under the scheme and providing loans to start-ups under the scheme than the private sector banks. The study implies that the banks’ efficiency scores give the policy makers a better picture of their relative performances it takes into account the differences in size, branch network, back end technology and profitability unlike the number of loans sanctioned. The efficiency levels provide information to the policy makers on how many more loans can be sanctioned by each bank with their existing resources. The lower efficiency of private sector banks mandates separate and stricter norms for implementation of PMMY for private banks. |
| Keywords: | Bank Efficiency, Entrepreneurship, DEA, Government scheme, Start-up |
| JEL: | G21 L26 C14 M13 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:206&r=eff |
| By: | ANNE MARIE KNOTT; CARL VIEREGGER |
| Abstract: | Since Schumpeter, there has been a lively debate regarding the optimal firm size for innovation. Empirical results have settled into a puzzle: R&D spending increasing with scale, while R&D productivity decreases with scale. Thus large firms appear irrational. We propose and test two alternative resolutions of the puzzle: 1) that it arises from measurement problems, and 2) that firm size endogenously drives R&D strategy, and that the returns to R&D strategies depend on scale. To test both propositions we use recently available NSF BRDIS survey data of firms R&D practices (strategies) as well as a broader measure of R&D productivity. Using the broader measure, we find that both R&D spending and R&D productivity increase with scale—thus offering one resolution to the puzzle. We further find that while large firms and small firms differ in the types of R&D they conduct, there is no type whose returns decrease in scale—there are merely types for which the small firm penalty is less severe. Thus Schumpeter appears to be correct--large firms are the major engine of growth, they both spend more in aggregate than small firms, and are more productive with that spending. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:16-20r&r=eff |
| By: | Calogero Guccio (Department of Economics and Business, University of Catania); Anna Mignosa (Department of Economics and Business, University of Catania); Ilde Rizzo (Department of Economics and Business, University of Catania) |
| Abstract: | n Italy, public state libraries are multi-product organizations providing divisible services to the public and preserving ancient books of great historical relevance for future generations. So they may undertake different production activities for conservation and use, which together construct a network. This paper shows the importance of considering multi-process interactions in evaluating the overall performance of public state libraries and focuses on library operations and its sub-processes. It uses a network two-stage Data Envelopment Analysis (DEA) approach to examine the relationship between the libraries’ basic inputs, intermediate measures and final outputs. The main result is that Italian public state libraries generally perform better in the first stage of conservation, but score poorly in the second stage of use. Therefore, policy advices to improve the decision-making process are derived. |
| Keywords: | OR in service industries; libraries; cultural heritage; efficiency; network service model. |
| JEL: | D24 Z11 Z18 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cue:wpaper:awp-04-2017&r=eff |
| By: | Dmitriy Stolyarov (University of Michigan) |
| Abstract: | This paper develops a new measure of after-tax rate of return on aggregate wealth and uses it in estimating the structural relationship between the long-run interest rate and productivity growth rate. The structural approach allows use of parameter estimates in constructing projections for the interest rate on U.S. Treasury securities. Results indicate that the long-run interest rate rises slightly more than one for one with productivity growth rate. The projected real interest rate on 10-year US government bonds is in the 1.5-2.0 percent range under intermediate assumptions on future productivity growth and trends in the world interest rate. |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp357&r=eff |
| By: | Joan Hamory Hicks; Marieke Kleemans; Nicholas Y. Li; Edward Miguel |
| Abstract: | Recent research has pointed to large gaps in labor productivity between the agricultural and non-agricultural sectors in low-income countries, as well as between workers in rural and urban areas. Most estimates are based on national accounts or repeated cross-sections of micro-survey data, and as a result typically struggle to account for individual selection between sectors. This paper contributes to this literature using long-run individual-level panel data from two low-income countries (Indonesia and Kenya). Accounting for individual fixed effects leads to much smaller estimated productivity gains from moving into the non-agricultural sector (or urban areas), reducing estimated gaps by over 80 percent. Per capita consumption gaps between non-agricultural and agricultural sectors, as well as between urban and rural areas, are also close to zero once individual fixed effects are included. Estimated productivity gaps do not emerge up to five years after a move between sectors, nor are they larger in big cities. We evaluate whether these findings imply a re-assessment of the current conventional wisdom regarding sectoral gaps, discuss how to reconcile them with existing cross-sectional estimates, and consider implications for the desirability of sectoral reallocation of labor. |
| JEL: | J43 O13 O15 R23 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23253&r=eff |
| By: | Riadh Brini; Hatem Jemmali (University of Sousse) |
| Abstract: | In this paper, we first seek a robust methodology for the estimation of the relative public spending efficiency of eleven Middle East and North Africa (MENA) countries over the period 1996-2011. Using the non-parametric Data Envelopment Analysis (DEA), we estimate relative efficiency scores for the four main disaggregated accounts of public spending: administration, health, education and infrastructure. Then, the Tobit regression model is used in the second part of the paper to determine the impact of governance and political and economic factors on public spending efficiency. The results mainly show that Jordan is the most efficient in public spending on administration, education and health, and Tunisia on infrastructure; while Libya, Algeria and Yemen are relatively less efficient in public spending on administration and health. Moreover, the results indicate that political stability, trade freedom and economic growth have a positive effect on public spending efficiency. Nevertheless, voice and accountability negatively affect the efficiency of public spending. |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:947&r=eff |
| By: | Merle Ederhof; Venky Nagar; Madhav Rajan |
| Abstract: | A central premise of management accounting is that including the cost of unused capacity in product costs can distort these costs and misguide users. Yet, there is little large-scale empirical evidence on the materiality of the cost of unused capacity. This study uses a confidential Census sample of 151,900 U.S. manufacturing plants from 1974-2011 to investigate the impact of separating the cost of unused capacity. We find that excluding the cost of unused capacity increases operating profit margins by approximately 26 percent. This order of magnitude is economically significant, and is pervasive across industries and over time. In additional analyses, we find that separating the cost of unused capacity largely smooths the time-series variation in unitized product costs and profit margins. Our finding of higher mean and lower variation of adjusted margins should be of considerable interest to both investors and managers. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-26&r=eff |