nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒06‒18
nineteen papers chosen by

  1. Green Agricultural Productivity Growth and Convergence in sub-Saharan Africa By F. Djoumessi, Yannick
  2. Estimating the Impact of Crop Diversity on Agricultural Productivity in South Africa By Cecilia Bellora; Élodie Blanc; Jean-Marc Bourgeon; Eric Strobl
  3. Financial Frictions and the Great Productivity Slowdown By Romain A Duval; Gee Hee Hong; Yannick Timmer
  4. "Internet and enterprise productivity: evidence from Latin America" By Juan Jung; Enrique López-Bazo; Matteo Grazzi
  5. Total Factor Productivity Convergence in German States since Reunification: Evidence and Explanations By Burda, Michael C; Severgnini, Battista
  6. The effects of financialisation and financial development on investment: evidence from firm-level data in Europe By Daniele Tori; Özlem Onaran
  7. Non-Work at Work, Unemployment and Labor Productivity By Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
  8. "On the regional impact of broadband on productivity: the case of Brazil" By Juan Jung; Enrique López-Bazo
  9. Analyzing short-run and long-run causality between FDI flows, labour productivity and education in Pakistan By Serfraz, Ayesha
  10. "Countercyclical Labor Productivity: The Spanish Anomaly" By Borja Jalón; Simón Sosvilla-Rivero; José A. Herce
  11. Trading with China; Productivity Gains, Job Losses By JaeBin Ahn; Romain A Duval
  12. The Effects of Scientists and Engineers on Productivity and Earnings at the Establishment Where They Work By Erling Barth; James C. Davis; Richard B. Freeman; Andrew J. Wang
  13. North-South Trade, Technology Diffusion and Productivity Growth: Are Small States Different? By Schiff, Maurice; Wang, Yanling
  14. Dutch Disease Resistance: Evidence from Indonesian Firms By James Cust; Torfinn Harding; Pierre-Louis Vezina
  15. Do Remittances Promote Labor Productivity Growth in Mexico? An Empirical Analysis, 1970-2014. By Miguel D. Ramirez
  16. The short-run effects of Knowledge intensive greenfield FDI on new domestic entry By Sara Amoroso; Bettina Mueller
  17. South-South FDI: Is it really different? By Görg, Holger; Gold, Robert; Hanley, Aoife; Seric, Adnan
  18. Global economic growth and agricultural land conversion under uncertain productivity improvements in agriculture By Bruno Lanz; Simon Dietz; Tim Swanson
  19. Does Inter-municipal Cooperation promote efficiency gains? Evidence from Italian Municipal By Massimiliano Ferraresi; Giuseppe Migali; Leonzio Rizzo

  1. By: F. Djoumessi, Yannick
    Abstract: This study analyzes the dynamics of green agricultural productivity growth through SSA countries. As subsidiary objectives: (i) to estimate efficiency levels of agricultural production system in SSA countries (ii) to estimate green agricultural productivity index through SSA countries (iii) and then to determine path nature of the green agricultural productivity index trough time and SSA countries. The methodology used to assess the degree of convergence in output per worker is based on the cointégration analysis, which recognizes that labour productivity is generally a non-stationary time series and convergence is a gradual process. First of all, we consider a decomposition of the growth in labour (green) productivity in terms of (1) efficiency change (2) technical change (3) (physical) capital accumulation and (4) growth in human capital. Then, a semi-parametric approach will be used to construct the best production practice frontier for a sample of SSA, and compute Malmquist productivity indexes and their decomposition into the underlying productivity components for each country. Finally, we will assess the individual contribution of the various components to the convergence in labour productivity.
    Keywords: convergence, green productivity, Malmquist index, Sub-Saharan Africa
    JEL: Q16
    Date: 2016–08–11
  2. By: Cecilia Bellora; Élodie Blanc; Jean-Marc Bourgeon; Eric Strobl
    Abstract: Crop biodiversity has the potential to enhance resistance to strains due to biotic and abiotic factors and to improve crop production and farm revenues. To investigate the effect of crop biodiversity on crop productivity, we build a probabilistic model based on ecological mechanisms to describe crop survival and productivity according to diversity. From this analytic model, we derive reduced forms that are empirically estimated using detailed field data of South African agriculture combined with satellite derived data. Our results confirm that diversity has a positive and significant impact on crop survival odds. We show the consistency of these results with the underlying ecologic and agricultural mechanisms.
    JEL: Q15 Q57
    Date: 2017–06
  3. By: Romain A Duval; Gee Hee Hong; Yannick Timmer
    Abstract: We study the role of financial frictions in explaining the sharp and persistent productivity growth slowdown in advanced economies after the 2008 global financial crisis. Using a rich cross-country, firm-level data set and exploiting quasi-experimental variation in firm-level exposure to the crisis, we find that the combination of pre-existing firm-level financial fragilities and tightening credit conditions made an important contribution to the post-crisis productivity slowdown. Specifically: (i) firms that entered the crisis with weaker balance sheets experienced decline in total factor productivity growth relative to their less vulnerable counterparts after the crisis; (ii) this decline was larger for firms located in countries where credit conditions tightened more; (iii) financially fragile firms cut back on intangible capital investment compared to more resilient firms, which is one plausible way through which financial frictions undermined productivity. All of these effects are highly persistent and quantitatively large—possibly accounting on average for about a third of the post-crisis slowdown in within-firm total factor productivity growth. Furthermore, our results are not driven by more vulnerable firms being less productive or having experienced slower productivity growth before the crisis, or differing from less vulnerable firms along other dimensions.
    Date: 2017–05–31
  4. By: Juan Jung (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Enrique López-Bazo (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Matteo Grazzi (Competitiveness, technology and innovation division - Inter-American Development Bank, 1300 New York Avenue, NW 20577 Washington DC, USA.)
    Abstract: This paper tests three hypotheses regarding the link between internet and firm productivity: i) internet adoption and use constitute a source of productivity growth for firms in Latin America, ii) the intensity of its use also matters, and iii) the link between the new technologies and productivity levels is not uniform over the whole productivity distribution. The evidence in this paper fills the gap of scarce and fragmented literature focused on Latin America, and is aligned with previous research for more developed regions which has generally recognized that Information and Communication Technologies (ICTs) have radically changed how modern business are conducted, benefitting firm performances through several channels, such as increasing the efficiency of internal processes, expanding market reach or increasing innovation. Our findings suggest that low-medium productive firms benefit more from an expansion in internet adoption and use, in comparison with the most productive ones. If this evidence is supposed to reflect long-term effects, then public policies oriented to massify internet adoption and promote internet use intensively will surely contribute to reduce inequalities of enterprise’s productivity levels, promoting a level playing field among Latin American firms, something especially relevant for the most unequal region of the world.
    Keywords: ICT, Internet, Productivity, firms, Latin America JEL classification:D22, O31, O33, O54.
    Date: 2017–05
  5. By: Burda, Michael C; Severgnini, Battista
    Abstract: A quarter-century after reunification, labor productivity in the states of eastern Germany continues to lag systematically behind the West. Persistent gaps in total factor productivity (TFP) are the proximate cause; conventional and capital-free measurements confirm a sharp slowdown in TFP growth after 1995. Strikingly, eastern capital intensity, especially in industry, exceeds values in the West, casting doubt on the embodied technology hypothesis. TFP growth is negatively associated with rates of investment expenditures. The stubborn East-West TFP gap is best explained by low concentration of managers, low startup intensity and the distribution of firm size in the East rather than R&D activities.
    Keywords: Development accounting; German reunification; productivity; regional convergence
    JEL: D24 E01 E22 O33 O47
    Date: 2017–06
  6. By: Daniele Tori (Open University); Özlem Onaran
    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. Furthermore, 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, financial development, firm-level data, Europe
    JEL: C23 D22 G31
    Date: 2017–06
  7. By: Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
    Abstract: We use the American Time Use Survey (ATUS) 2003-2012 to estimate time spent in non-work on the job. Non-work is substantial and varies positively with local unemployment. Time spent in non-work conditional on any positive amount rises, while the fraction of workers reporting positive values declines with unemployment. Both effects are economically important, and are consistent with a model in which heterogeneous workers are paid efficiency wages. That model correctly predicts the relationship between the incidence of non-work and unemployment benefits in state data linked to the ATUS, and is consistent with estimated occupational differences in non-work incidence and intensity, as well as the cyclical behavior of aggregate labor productivity.
    Keywords: efficiency wages; labor productivity; non-work; time use
    JEL: E24 J22
    Date: 2017–06
  8. By: Juan Jung (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Enrique López-Bazo (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.)
    Abstract: This paper analyses the incidence of broadband on regional productivity in Brazil, intending to find out if the economic impact is uniform across all territories of the country. The possibility of performing a regional approach, instead of the usual country-level analysis, means an opportunity to disentangle the economic impact of broadband at territories which share a common institutional and regulatory framework as are the regions inside a country. Results suggest that the impact of broadband on productivity is positive although not uniform across regions. On the one hand, it seems to depend on connection quality and network effects. Faster download speed and critical-mass accounting for network externalities in the region enhance the economic impact of broadband. On the other hand, higher productivity gains are estimated for the less developed regions. The fact that the less productive regions in Brazil seem to be benefiting more from broadband may suggest that it can constitute a factor favoring regional convergence in the country.
    Keywords: Broadband, Information and Communication Technologies, Regional Productivity. JEL classification: O33, O47, R11.
    Date: 2017–05
  9. By: Serfraz, Ayesha
    Abstract: FDI inflows play a very important role in increasing the productivity of factors of production through the channel of technology transfer and establishment of MNCs. This study empirically analyzes the causal relationship, for both short and long run, between FDI inflows, labor productivity and education in case of Pakistan using time series data from 1971-2016. The present study concentrates only on labor productivity since Pakistan is a labor abundant country using laborintensive techniques of production. The innovative aspect of this study lies in its proxy measure of education and econometric techniques employed for carrying out empirical analysis. For measuring impact of education, government spending on education as percent of GDP has been used whereas for empirical analysis, it uses the latest test for measuring causality i.e., Breitung-Candelon Granger Causality test in frequency domain (both old and new versions) along-with the traditional approach of Johansen Cointegration test for analyzing long run relationship. Two separate models have been constructed. Model 1 is based on measuring bi-variate causality between FDI inflows and labor productivity whereas, model 2 checks bivariate causality between education and labor productivity. The main reason for measuring separate effects of two variables on labor productivity depends on the argument that education increases labor productivity if it is accessible to common man but this is not the case in Pakistan since Government of Pakistan is allocating very small amounts to education sector and therefore productivity does not increase. But FDI inflows lead to an increase in productivity by providing training to labor converting them into human resource though in this case MNCs hire already educated workers and polish them by imparting new skills in them. Both versions of BC test, i.e., Breitung and Candelon (2006), and Breitung and Schreiber (2016), suggest a univariate causality running from FDI to labor productivity only, whereas Johansen Cointegration approach suggests a long run relationship. Therefore government of Pakistan must give proper attention to education sector in order to gain maximum benefits from FDI inflows.
    Keywords: FDI Inflows,Labor Productivity,Education,Pakistan
    Date: 2017
  10. By: Borja Jalón (University Complutense of Madrid); Simón Sosvilla-Rivero (Complutense Institute for International Studies, Universidad Complutense de Madrid; 28223 Madrid, Spain.); José A. Herce (University Complutense of Madrid and International Financial Analysts (AFI).)
    Abstract: The cyclical pattern of labor productivity has been a subject of discussion in the economic literature for long time with important theoretical implications. Many authors point out the role of labor market institutions as determinants of the cyclical pattern. For these authors, the loss of procyclicality experimented in the United States since the mid-1980s could be explained by decrease of rigidities in labor market. Following the literature, this paper explores the role of labor regulation by analyzing the case of Spain, which has gone in a few years from a strongly procyclical pattern to a counterciclycal one. Our results suggest that the high rigidity in wages and the great flexibility in labor, related to the temporary workers after the 1984 legislative reform, is the main cause of the countercyclical pattern of the Spanish labor productivity. Our findings are in line with previous papers highlighting the crucial influence of labor market institutions over the cyclical pattern.
    Keywords: Business cycle, labor productivity, labor regulation, multifactor productivity. JEL classification:E32, J30, K31, O47.
    Date: 2017–06
  11. By: JaeBin Ahn; Romain A Duval
    Abstract: We analyze the impact on productivity in advanced economies of fast-growing trade with China between the mid-1990s and late-2000s, separately identifying the export and import channels. We use country-sector-level data for 18 advanced economies and, similar to Autor, Dorn, and Hanson (2013), exploit exogenous variation in trade with China in a given country-sector by instrumenting imports from (exports to) China in a given country-sector with the average imports from (exports to) China in the same sector in other advanced economies. Our estimates point to large productivity gains from trading with China—the (exogenous) rise of China in global trade may have increased the level of total factor productivity by about 1.9 percent, or 12.3 percent of the overall increase over the sample period, in the median country-sector. By contrast, using a similar empirical strategy, we find adverse employment effects of Chinese imports in exposed country-industries, consistent with previous studies. Taken together, these findings point to large gains from free trade, while underscoring the scope for a more active policy role in redistributing them, particularly by easing workers’ transition between jobs and industries.
    Date: 2017–05–23
  12. By: Erling Barth; James C. Davis; Richard B. Freeman; Andrew J. Wang
    Abstract: This paper uses linked establishment-firm-employee data to examine the relationship between the scientists and engineers proportion (SEP) of employment, and productivity and labor earnings. We show that: (1) most scientists and engineers in industry are employed in establishments producing goods or services, and do not perform research and development (R&D); (2) productivity is higher in manufacturing establishments with higher SEP, and increases with increases in SEP; (3) employee earnings are higher in manufacturing establishments with higher SEP, and increase substantially for employees who move to establishments with higher SEP, but only modestly for employees within an establishment when SEP increases in the establishment. The results suggest that the work of scientists and engineers in goods and services producing establishments is an important pathway for increasing productivity and earnings, separate and distinct from the work of scientists and engineers who perform R&D.
    JEL: D24 J21 J31 O3
    Date: 2017–06
  13. By: Schiff, Maurice; Wang, Yanling
    Abstract: The economies of small developing states tend to be more fragile than those in large ones. This paper examines this issue in a dynamic context by focusing on the impact of education and North-South trade-related technology diffusion (NRD) on TFP growth in small and large states in the South. The main findings are: i) TFP growth increases with NRD, education and the interaction between the two; ii) the impact of NRD, education and their interaction on TFP growth in small states is over three times that for large countries; and iii) the greater TFP growth loss in small states has two brain drain-related causes: a substantially greater sensitivity of TFP growth to the brain drain, and brain drain levels that are much higher in small than in large states.
    Keywords: Technology Diffusion,Trade,Productivity Growth,Education
    JEL: F22 J61
    Date: 2017
  14. By: James Cust; Torfinn Harding; Pierre-Louis Vezina
    Abstract: Oil and gas extraction may lead to the Dutch disease, i.e. the crowding ot of the manufacturing sector due to rising wages when labor is drawn to the expanding extraction and services sectors. In this paper we exploit the fact that oil and gas discoveries contain an element of chance as well as oil price fluctuations to capture random variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls cause wage growth but that the firm exit rate is unaffected. Firms’ output and labor productivity increase along with wages suggesting where firms are able to respond to booming local demand, and raise productivity in response to upward wage pressures, they can overcome the crowding-out effects from resource windfalls.
    Keywords: Dutch disease, firm level, Indonesia, manufacturing firms, oil and gas
    JEL: O13 O14 Q32
    Date: 2017
  15. By: Miguel D. Ramirez (Department of Economics, Trinity College)
    Abstract: This paper investigates remittance flows to Mexico during the 1980-2014 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single- and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2014 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic
    Keywords: Error-correction model, FDI inflows, Gregory-Hansen cointegration single-break test, Gross fixed capital formation, Johansen Cointegration test, KPSS no unit root test, Lee-Strazicich two-break unit root test, remittance flows, and Zivot-Andrews single-break unit root
    JEL: C10 F01
    Date: 2017–06
  16. By: Sara Amoroso (European Commission - JRC); Bettina Mueller (Centre for European Economic Research (ZEW))
    Abstract: Existing evidence on the impact of foreign direct investment on domestic economies remains ambiguous. Positive technology spillovers of foreign investment may be outweighed by negative crowding out effect due to increased competition. In this paper, we employ a unique country/sector-level data set to investigate the impact of what is considered the best type of foreign investment greenfield knowledge intensive FDI on domestic entry. Our results suggest that, in the short run, this type of FDI is positively related to the entry rate in the host country, if the domestic sector is either dynamic, or highly R&D intensive. These sectors may be respectively characterized by lower entry costs, which encourage a trial and error learning business approach, and by a higher level of absorptive capacity which increases the chance of technology transfer.
    Keywords: foreign direct investments; knowlwdge spillovers; new firm entry
    Date: 2017–04
  17. By: Görg, Holger; Gold, Robert; Hanley, Aoife; Seric, Adnan
    Abstract: We compare the performance of Northern and Southern multinationals in Sub-Saharan Africa, and contrast it with local firms in the host country. Employing unique firm level data for 19 Sub-Saharan African countries, we show that firms receiving FDI outperform domestic ones, while the origin of the foreign investor is of minor importance. We use three different definitions of "South" to compare Northern and Southern FDI. Overall, we do not find strong differences in terms of firm productivity growth between Northern and Southern FDI, irrespective of how the latter is defined. However, we find that employment growth is generally higher for firms receiving FDI from other African investors as compared to Northern FDI, and they also receive more technology transfer from their parent company abroad.
    Keywords: South-South FDI,productivity,performance differences,Africa
    JEL: F23 O14
    Date: 2017
  18. By: Bruno Lanz; Simon Dietz; Tim Swanson
    Abstract: We study how stochasticity in the evolution of agricultural productivity interacts with economic and population growth at the global level. We use a two-sector Schumpeterian model of growth, in which a manufacturing sector produces the traditional consumption good and an agricultural sector produces food to sustain contemporaneous population. Agriculture demands land as an input, itself treated as a scarce form of capital. In our model both population and sectoral technological progress are endogenously determined, and key technological parameters of the model are structurally estimated using 1960-2010 data on world GDP, population, cropland and technological progress. Introducing random shocks to the evolution of total factor productivity in agriculture, we show that uncertainty optimally requires more land to be converted into agricultural use as a hedge against production shortages, and that it significantly affects both optimal consumption and population trajectories.
    Keywords: Agricultural productivity; Economic growth; Endogenous innovations; Environmental constraints; Food security; Global population; Land conversion; Stochastic control
    JEL: O11 O13 O31 J11 C61 Q16 Q24
    Date: 2017–05
  19. By: Massimiliano Ferraresi (European Commission - DG JRC Directorate I Competences - Modelling, Indicators and Impact Evaluation Unit); Giuseppe Migali (Lancaster University Management School); Leonzio Rizzo (Università di Ferrara)
    Abstract: Inter-municipal cooperation is a widespread phenomenon among municipalities as a way to provide local public services, exploit economies of scale and internalise externalities. While the determinants driving the decision to cooperate have been deeply analyzed in the literature, little is known about possible efficiency gains. We test their existence in terms of local public expenditures reductions by investigating the Italian experience of Municipal Unions. We exploit unique administrative data on 335 municipalities located in the Emilia Romagna region, for the period 2001-2011. Using a difference-in-differences approach combined with matching models, we find that being in a Municipal Union reduces the total per capita current expenditures by around 5%. The effect is robust, persistent and increasing up to nine years after entrance. Furthermore, joining a Municipal Union does not reduce the level of local public services. Hence, the Municipal Union is an effective tool that allows municipalities to gain efficiency.
    Keywords: Municipal Union cooperation, public expenditure, difference-in-differences, matching
    JEL: H71 H72 C23

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