nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒05‒21
eleven papers chosen by

  1. The Causes and Costs of Misallocation By Diego Restuccia; Richard Rogerson
  2. Air Quality and Manufacturing Firm Productivity: Comprehensive Evidence from China By Fu, Shihe; Viard, Brian; Zhang, Peng
  3. A revised approach to productivity convergence in long-term scenarios By Yvan Guillemette; Alexandre Kopoin; David Turner; Andrea De Mauro
  4. Working Hours and Productivity By Collewet, Marion; Sauermann, Jan
  5. High growth firms in employment and productivity: dynamic interactions and the role of financial constraints? By Cristina Guillamón; Enrique Moral-Benito; Sergio Puente
  6. Tax Administration and Firm Performance; New Data and Evidence for Emerging Market and Developing Economies By Era Dabla-Norris; Florian Misch; Duncan Cleary; Munawer Khwaja
  7. Firm growth in Europe: An overview based on the COMPNET labour module By Cristina Fernández; Roberta García; Paloma Lopez-Garcia; Benedicta Marzinotto; Roberta Serafini; Juuso Vanhala; Ladislav Wintr
  8. Prices of High-Tech Products, Mismeasurement, and Pace of Innovation By David Byrne; Stephen Oliner; Daniel Sichel
  9. A Theory on the Economic Impacts of Immigration By Harashima, Taiji
  10. Does bank competition affect bank stability after the global financial crisis? By Shijaku, Gerti
  11. The local effects of an innovation: Evidence from the French fish market By Laurent Gobillon; Wolff Francois Charles

  1. By: Diego Restuccia; Richard Rogerson
    Abstract: Why do living standards differ so much across countries? A consensus in the development literature is that differences in productivity are a dominant source of these differences. But what accounts for productivity differences across countries? One explanation is that frontier technologies and best practice methods are slow to diffuse to low income countries. The recent literature on misallocation offers a distinct but complementary explanation: low income countries are not as effective in allocating their factors of production to their most efficient use. We provide our perspective on three key questions. First, how important is misallocation? Second, what are the causes of misallocation? And third, beyond the direct cost of lower contemporaneous output, are there additional costs associated with misallocation? A summary of our answers is as follows. Misallocation appears to be a substantial channel in accounting for productivity differences across countries, but the measured magnitude of the effects depends on the approach and context. Researchers have not yet found a dominant source of misallocation; instead, many specific factors seem to contribute a small part of the overall effect. Beyond the static cost of misallocation, we believe that the dynamic effects of misallocation on productivity growth are significant and deserve much more attention going forward.
    Keywords: misallocation, productivity, distortions, establishments, heterogeneity.
    JEL: O1 O4 O5 E0 E1
    Date: 2017–05–10
  2. By: Fu, Shihe; Viard, Brian; Zhang, Peng
    Abstract: We provide comprehensive estimates of air pollution’s effect on short-run labor productivity for manufacturing firms in China from 1998 to 2007. An emerging literature estimates air pollution’s effects on labor productivity but only for small groups of workers of particular occupations or sets of firms to ensure causality. To provide more comprehensive estimates necessary for policy analysis, we estimate effects for all but some small firms (90% of manufacturing output in China) and capture all channels by which pollution influences productivity. We instrument for reverse causality between pollution and output using thermal inversions. Our causal estimates imply that a one
    Keywords: air pollution; productivity; environmental costs and benefits; firm competitiveness
    JEL: D62 Q51 Q53 R11
    Date: 2017–04–20
  3. By: Yvan Guillemette; Alexandre Kopoin; David Turner; Andrea De Mauro
    Abstract: The paper describes revisions to the trend labour efficiency component of the production function underpinning long-term economic scenarios. The main goal of the revision is to add more policy and institutional determinants in the equation to enrich the scenarios that can be constructed. In the proposed equation, equilibrium trend labour efficiency depends on a broad measure of the quality of institutions and governance (the World’s Bank rule of law indicator), human capital (based on average years of schooling attainment), product market regulation (PMR), openness to trade adjusted for country size, the stability of the macroeconomic framework (based on inflation and its variance), income inequality (based on GINI coefficients) as well as domestic and global research and development (via accumulated stocks of R&D). Apart from the innovation effects, the sizes of the other effects are jointly estimated in a conditional convergence framework with a sample of about 120 countries, without the use of country fixed effects. Rule of law and openness are also estimated to influence the speed of convergence toward the long-term equilibrium.
    Keywords: conditional convergence, development, long-term model, long-term scenarios, openness, productivity, projections, rule of law, TFP, trend labour efficiency
    JEL: C53 O43 O47
    Date: 2017–05–18
  4. By: Collewet, Marion (CORE, Université catholique de Louvain); Sauermann, Jan (SOFI, Stockholm University)
    Abstract: This paper studies the link between working hours and productivity using daily information on working hours and performance of a sample of call centre agents. We exploit variation in the number of hours worked by the same employee across days and weeks due to central scheduling, enabling us to estimate the effect of working hours on productivity. We find that as the number of hours worked increases, the average handling time for a call increases, meaning that agents become less productive. This result suggests that fatigue can play an important role, even in jobs with mostly part-time workers.
    Keywords: working hours, productivity, output, labour demand
    JEL: J23 J22 M12 M54
    Date: 2017–04
  5. By: Cristina Guillamón (Banco de España); Enrique Moral-Benito (Banco de España); Sergio Puente (Banco de España)
    Abstract: Using a panel of Spanish firms over the period 2002-2012, we investigate the interactions between high growth episodes in terms of size and productivity. We find that high growth in productivity (size) increases the likelihood of high growth in size (productivity). However, the effect from size to productivity is smaller than the effect from productivity to size. We also explore the potential role of firm-level financial constraints using information from the Central Credit Register (CIR) of Banco de España. Our results indicate that credit constraints hamper high growth episodes in terms of both size and productivity.
    Keywords: keyword, high-growth firms, high-impact firms, productivity, panel firm-level data
    JEL: L25 L11 D24 C23
    Date: 2017–05
  6. By: Era Dabla-Norris; Florian Misch; Duncan Cleary; Munawer Khwaja
    Abstract: Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration. From a policy perspective, we provide evidence that countries can reap growth and productivity dividends from improvements in tax administration that lower compliance costs faced by firms.
    Date: 2017–04–14
  7. By: Cristina Fernández; Roberta García; Paloma Lopez-Garcia; Benedicta Marzinotto; Roberta Serafini; Juuso Vanhala; Ladislav Wintr
    Abstract: This paper illustrates the main features of the Labour Module of the CompNet dataset which provides indicators of firm growth over the period 1995-2012 across 17 EU (13 euro area) countries and 9 macro-sectors. It also includes information on a large set of micro-aggregated characteristics of firms growing at different speed such as their financial position and labour and total factor productivity. The paper shows that during the Great Recession the share of shrinking firms sharply increased in countries under stress, while firm growth slowed down in non-stressed countries. In the former, the construction sector suffered the most, while in the latter manufacturing and services related to transportation and storage were mainly affected, possibly as a result of the trade collapse. While we find that, all else equal, more productive firms had a higher probability of growing, the process of productivity-enhancing reallocation was muted during the Great Recession.
    Keywords: Firm-level data, Firm growth, Job creation.
    JEL: J23 L11 L25
    Date: 2017–05
  8. By: David Byrne; Stephen Oliner; Daniel Sichel
    Abstract: Two recent papers have made compelling cases that mismeasurement of prices of high tech products cannot explain the slow pace of labor productivity growth that has prevailed since the mid-2000s. Does that result indicate that mismeasurement of high-tech products has limited implications for patterns of economic growth? The answer in this paper is “no.” We demonstrate that the understatement of price declines for high-tech products in official measures has a dramatic effect on the pattern of MFP growth across sectors. In particular, we show that correcting this mismeasurement implies faster MFP growth in high-tech sectors and slower MFP advance outside the high-tech sector. If MFP growth is taken as a rough proxy for the pace of innovation, our results suggest that innovation in the tech sector has been more rapid than the rate that would be inferred from official statistics (and less rapid outside high-tech). These results deepen the productivity puzzle. If the pace of innovation in high-tech sectors has been more rapid than indicated by official statistics, then it is perhaps even more puzzling that overall labor productivity growth has been so sluggish in recent years.
    JEL: E01 E22 E24 L63 L86 O3 O33 O4 O41
    Date: 2017–04
  9. By: Harashima, Taiji
    Abstract: The standard view on the economic impact of immigration has been criticized for its inability to solve the “immigration policy puzzle.” It also has a problem in that the “net” income of heterogeneous workers is equalized. These problems arise because the standard view generally depends on a production function in which the elasticity of substitution between heterogeneous workers is constant. This paper constructs an alternative production function in which the elasticity of substitution between heterogeneous workers is not constant and is instead based on a model of total factor productivity. The alternative view presented based on this production function indicates that an “open door” policy is not necessarily economically optimal for host countries under some conditions
    Keywords: Immigration; Immigration policy; Production function
    JEL: D24 E23 E24 F22 F62 F66 F68
    Date: 2017–05–05
  10. By: Shijaku, Gerti
    Abstract: This paper addresses the dynamic relationship between competition and bank stability in Albanian banking system during the period 2008 - 2015. To this purpose, we construct a proxy for bank competition as referred to the Boone indicator. We also calculated the Lerner index and the efficient adjusted Lerner index, as well as the profit elasticity index and the Herfindahl–Hirschman Index. The main results provide support for the “competition – stability” view – that lower degree of market power sets banks to less overall risk exposure. The results further show that increasing concentration will have a larger impact on bank’s fragility. Similar, bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. We also used a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability, but find no supportive evidence.
    Keywords: Bank Fragility, Competition, Boone and Lerner indicator, Panel Data, GMM.
    JEL: C26 C32 E32 E43 G21 H63
    Date: 2016–11–17
  11. By: Laurent Gobillon (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Wolff Francois Charles (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes, INED - Institut national d'études démographiques)
    Abstract: In this paper, we investigate the effect on quality, quantity and prices of an innovative fishing gear introduced for a subsample of vessels on a single wholesale fish market in France. Estimations are conducted using transaction data over the 2009-2011 period during which the innovation was introduced. Using a difference-in-differences approach around the discontinuity, we find that for the treated the innovation has a large effect on quality (29.2 percentage points) and prices (23.2 percentage points). A shift in caught fish species is observed and new targeted species are fished very intensively. We also quantify the treatment effect on the treated market from aggregate market data using factor models and a synthetic control approach. We find a sizable effect of the innovation on market quality which is consistent with non-treated vessels adapting their fishing practices to remain competitive. The innovation has no effect on market quantities and prices.
    Keywords: fish,innovation,product quality,product prices,discontinuity,difference in differences,synthetic controls,factor models
    Date: 2017–01–10

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