nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒07‒16
seventeen papers chosen by

  1. Revisiting the Decomposition of Cost Efficiency for Non-homothetic Technologies: A Directional Distance Function Approach By Aparicio, Juan; Zofío, José L.
  2. Assessing primary care performance in Indonesia: An application of frontier analysis techniques By Firdaus Hafidz; Tim Ensor; Sandy Tubeuf
  3. Technology Adoption, Capital Deepening, and International Productivity Differences By Chaoran Chen
  4. Irrigation Practices, Water Effectiveness and Productivity Measurement By Konstantinos Chatzimichael; Dimitris Christopoulos; Spiro Stefanou; Vangelis Tzouvelekas
  5. Coherent diversification in corporate technological portfolios By Emanuele Pugliese; Lorenzo Napolitano; Andrea Zaccaria; Luciano Pietronero
  6. Economies of Scale and Governance of Library Systems: Evidence from West Virginia By Amir B. Ferreira Neto; Joshua Hall
  7. The impact of capital account liberalisation on productivity growth: the evidence from Poland since 1995 By Sulimierska, Malgorzata
  9. The Relationship between Economic Growth and Democracy: Alternative Representations of Technological Change By Kim, Nam-Seok; Heshmati, Almas
  10. Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks By Eric Sims; Andre Kurmann
  11. A Note on the Solow Growth Model with a CES Production Function and Declining Population By Sasaki, Hiroaki
  12. The Causal Impact of Social Connections on Firms' Outcomes By Eliason, Marcus; Hensvik, Lena; Kramarz, Francis; Nordstrom Skans, Oskar
  13. Calorie intake and income in China: New evidence using semiparametric modelling with generalized additive models By Simioni, Michel; Thomas-Agnan, Christine; Trinh, Thi Huong
  14. Secular trends in innovation and technological change By Frietsch, Rainer; Schubert, Torben; Neuhäusler, Peter
  15. Truncated Firm Productivity Distributions and Trade Margins By Coughlin, Cletus C.; Bandyopadhyay, Subhayu
  16. Mid-Sized Italian manufacturing firms: a panel data analysis on profitability By Migliardo, Carlo; Schilirò, Daniele
  17. Education, Governance, Trade and Distance: Impact on Technology Diffusion and the East Asia-Latin America Productivity Gap By Schiff, Maurice

  1. By: Aparicio, Juan; Zofío, José L.
    Abstract: In the early 1980’s Kopp and Diewert proposed the decomposition of cost efficiency into allocative and technical efficiency for parametric functional forms based on the radial approach initiated by Farrell. We show that such approach is only valid for homothetic technologies where the radial distance function can be correctly interpreted as a technical efficiency measure since allocative efficiency is independent of the output level and radial input reductions leave it unchanged. For the general case of non-homothetic technologies where optimal input demands depend on the output targeted by the firm, as does the inequality between marginal rates of substitution and market prices allocative inefficiency, we show that the correct definition of technical efficiency corresponds to the directional distance function. Indeed, its flexibility ensures that allocative efficiency is kept unchanged through movements in the input production possibility set when solving technical inefficiency, and therefore the associated cost reductions can be solely and rightly ascribed to technical engineering improvements. The new methodology to consistently decompose cost inefficiency, which generalizes the approach introduced by Kopp and Diewert as well as subsequent refinements, is illustrated resorting to simple examples of both homothetic and non-homothetic production functions.
    Date: 2017
  2. By: Firdaus Hafidz (Academic Unit of Health Economics, Leeds Institute of Health Sciences, University of Leeds); Tim Ensor (Leeds Institute of Health Sciences, University of Leeds); Sandy Tubeuf (Academic Unit of Health Economics, Leeds Institute of Health Sciences, University of Leeds)
    Abstract: Despite increased national health expenditure in health facilities in Indonesia, health outcomes remain low. The aim of our study is to examine the factors determining the relative efficiency of public primary care facilities. Using linked national data sources from facility-, households, and village-based surveys, we measure the efficiency of 185 primary care facilities across fifteen provinces in Indonesia with output oriented data envelopment analysis (DEA) and stochastic frontier analysis (SFA). Inputs include the number of doctors, midwife and nurses, and other staff while outputs are the number of outpatients and maternal child health patients. We run truncated regression in second stage DEA and one stage SFA analysis to assess contextual characteristics influencing health facilities performance. Our results indicate a wide variation in efficiency between health facilities. High-performing primary care facilities are in affluent areas. Primary care facilities located in urban areas, in Java and Bali Island, with high coverage of insurance scheme for the poor perform better than other geographical location.We find an inconclusive impact of quality of care, patient mix, and availability of inpatient services on efficiency. This paper concludes by highlighting the characteristics of primary care facilities that have the potential to increase efficiency.
    Keywords: Efficiency, Primary care facilities, frontier analysis, data envelopment analysis, stochastic frontier analysis, Indonesia
    JEL: C50 I10
    Date: 2017
  3. By: Chaoran Chen (University of Toronto)
    Abstract: Cross-country differences in capital intensity are larger in the agricultural sector than in the non-agricultural sector, indicating that rich and poor countries differ in agricultural technology adoption. I build a two-sector general equilibrium model featuring technology adoption in agriculture. As the economy develops, farmers gradually adopt a modern capital-intensive technology to replace the traditional labour-intensive technology, as is observed in the U.S. historical data. Using this model, I find that the technology adoption channel is key to accounting for low agricultural capital intensity and labour productivity in poor countries. In the model, measured aggregate factors – land endowment, economy-wide productivity, and barriers to investment – can explain 1.56-fold more in rich-poor agricultural productivity differences compared to a model without technology adoption. I further show that land market frictions in agriculture impede technology adoption and magnify productivity differences.
    Date: 2017
  4. By: Konstantinos Chatzimichael; Dimitris Christopoulos; Spiro Stefanou; Vangelis Tzouvelekas (Department of Economics, University of Crete, Greece)
    Abstract: This paper develops a consistent theoretical framework for measuring irrigation water effectiveness and its impact on productivity growth rates by assuming a smooth transition process from traditional to modern irrigation technologies among individual farmers.
    Keywords: irrigation technology adoption and diffusion, irrigation effectiveness, productivity growth, translog-transition model, greenhouse farms
    JEL: C41 O16 O33 Q25
    Date: 2017–07–08
  5. By: Emanuele Pugliese; Lorenzo Napolitano; Andrea Zaccaria; Luciano Pietronero
    Abstract: We study the relationship between firms' performance and their technological portfolios using tools borrowed from the complexity science. In particular, we ask whether the accumulation of knowledge and capabilities related to a coherent set of technologies leads firms to experience advantages in terms of productive efficiency. To this end, we analyzed both the balance sheets and the patenting activity of about 70 thousand firms that have filed at least one patent over the period 2004-2013. From this database it is possible to define a measure of the firms' coherent diversification, based on the network of technological fields, and relate it to the firms' perfomance in terms of labor productivity. Such a measure favors companies with a diversification structure comprising blocks of closely related fields over firms with the same breadth of scope, but a more scattered diversification structure. We find that the coherent diversification of firms is quantitatively related to their economic performance and captures relevant information about their productive structure. In particular, we prove on a statistical basis that a naive definition of technological diversification can explain labor productivity only as a proxy of size and coherent diversification. This approach can be used to investigate possible synergies within firms and to recommend viable partners for merging and acquisitions.
    Date: 2017–07
  6. By: Amir B. Ferreira Neto (West Virginia University, Department of Economics); Joshua Hall (West Virginia University, Department of Economics)
    Abstract: Public libraries are a billion dollar industry in the United States. We explore the institutional determinants of public library technical efficiency using data from West Virginia. We first document considerable cross-district variation in library efficiency. While the average library district in our sample is between 81% and 90% efficient depending upon the year and measure, there are many district-years that are under 50%. We then explain our technical efficiency measures as a function of institutional variables reflecting the type of district and sources of funding. We find consistent evidence that urban libraries are more inefficient, perhaps because they are too small to achieve sufficient economies-of-scale in production of library services. In addition, we find revenue from local sources is associated with reduced efficiency, contrary to what would be predicted by local public goods producer theory.
    Keywords: Data Envelopment Analysis, Efficiency, Government, Public Libraries
    JEL: H41 H76 I29
    Date: 2017–07
  7. By: Sulimierska, Malgorzata
    Abstract: This thesis investigates the relationship between the Capital Account Liberalization (CAL) process and changes in productivity in light of theoretical and empirical studies. It also presents a significant investigation into the nature and evolution of the capital control process, through a cross-country analysis and individual country analysis of Poland during the 1990s and the beginning of the 2000s. In addition, this thesis analyses the determinants of capital controls in the cross-countries analysis. Then, this thesis presents a profile of the Polish productivity distribution across manufacturing sectors, structure and level of the capital control process and sector characteristics, and an analysis of how these have changed over time. The empirical results are derived through an application of the best practices and techniques of productivity estimation on sector level data. Chapter 1 provides the description of key reforms in Poland and the structure of these thesis. Chapter 2, discusses strengths and weaknesses of various CAL measures and presents different trends of CAL measures. Chapter 3 employs selected CAL measures in a cross-county analysis, investigating the determinants of the CAL process. Chapter 4 analyses the trends of productivity in Poland. Chapter 5 analyses the CAL effect on manufacturing sector productivity by including sector financial dependence, sector investment and trade openness, and then compares this results with sectoral proxy for CAL measures. Chapter 6 concludes by discussing the results and provides a possible avenue for further research.
    Date: 2016–06
  8. By: Pasquale Tridico; Riccardo Pariboni
    Abstract: Over the last three decades, many advanced economies have experienced significant changes in their productive structures, with a decline in the share of workers in manufacture and a transition towards the service sector. This structural change can be considered as one of the main causes behind the poor performance of aggregate labour productivity. Moreover, these changes have been associated with a process of reforms in the labour market - i.e. an increase in labour flexibility and a reduction in employees’ protections - and a compression of the wage share. Our hypothesis is that these institutional and economic processes can also be harmful to labour productivity. We submit our hypotheses to empirical scrutiny. The results are as follows: the share of employment in manufacture is positively related to labour productivity. On the other hand, the share of employment in several service industries and labour flexibility negatively affect it.
    Keywords: Structural change, labour productivity, aggregate demand, welfare models
    JEL: L16 E24 J23 H53
    Date: 2017–07
  9. By: Kim, Nam-Seok; Heshmati, Almas
    Abstract: This study investigates the relationship between economic growth and democracy by estimating a nation’s production function specified as static and dynamic models using panel data. In estimating the production function, it applies a single time trend, multiple time trends and the general index formulations to the translog production function to capture time effects representing technological changes of unknown forms. In addition to the unknown forms, implementing the technology shifters model enabled this study to find possible known channels between economic growth and democracy. Empirical results based on a panel data of 144 countries observed for 1980-2014 show that democracy had a robust positive impact on economic growth. Credit guarantee is one of the most significant positive links between economic growth and democracy. The marginal effects of credit guarantee and foreign direct investment inflows are stronger in democratic countries than they are in non-democratic ones. In order to check the robustness of these results, a dynamic model constructed with a flexible adjustment speed and a target level of GDP is also tested. The results of this dynamic model also support the positive impacts of democracy on economic growth.
    Keywords: Economic growth,democracy,production function,single time trend,multiple time trends,general index,technology shifters,flexible adjustment speed,target level of GDP
    JEL: D24 O43 O47 P16
    Date: 2017
  10. By: Eric Sims (University of Notre Dame); Andre Kurmann (Drexel University)
    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. The results suggest that for all its improvements over a traditional Solow residual, Fernald's measure of technology may be confounded by systematic measurement error, potentially invalidating the main identifying restriction of the literature that productivity reacts to a news shock only with a lag. Building on the large empirical literature documenting the slow diffusion of new technologies, we propose an alternative identification that does not rely on this zero impact restriction and instead accounts for most of the unpredictable variation in TFP at long horizons. We interpret the resulting shock as news because it predicts sustained future productivity growth while simultaneously generating a strong impact response of technological innovation indicators and forward-looking information variables. The identification is robust to different measurement issues, including the revisions in Fernald's TFP series, and to whether news affects (true) productivity with a lag or not. When applied to U.S. data, the shock fails to generate comovement in the main macro aggregates and therefore does not constitute a main source of business cycle fluctuations. The shock nevertheless accounts for a large part of macroeconomic fluctuations at medium and longer horizons and generates sharp impact responses of inflation and asset prices.
    Date: 2017
  11. By: Sasaki, Hiroaki
    Abstract: This study investigates the relationship between per capita output growth and population growth using the Solow growth model when population growth is negative. When the Cobb-Douglas production function is used, the per capita output growth rate is positive even if the technological progress rate is zero. In contrast, when the CES production function is used, the per capita output growth rate is zero if the technological progress rate is zero.
    Keywords: Solow growth model; negative population growth; CES production function
    JEL: E13 E23 O41
    Date: 2017–07–07
  12. By: Eliason, Marcus; Hensvik, Lena; Kramarz, Francis; Nordstrom Skans, Oskar
    Abstract: The paper studies how social connections affect firm-level hiring decisions and performance. We use register data to characterize the social connections of firms' employees. For causal identification, we use displacements which create directed supply shocks towards the firms of the displaced workers' social connections. We make sure that our results are fully driven by these directed supply shocks. Results show that firms appear to prefer employed workers they are connected to over unconnected or unemployed workers when hiring. The employed and connected mostly go to high-productivity firms whereas the unemployed and unconnected tend to go to low-productivity firms. Strong connections - family, recent, durable, formed in small groups, between socially similar agents - matter the most. Displacements shocks cause connected firms, in particular low-productivity ones, to hire those workers they are connected to. Unconnected hires and separations are essentially unaffected. These supply shocks therefore cause the creation of additional jobs which increase firms' employment. In addition, we use these shocks to show that hiring connected workers has a positive causal impact on firm performance. These results are consistent with a stylized framework where connections reduce hiring frictions and where the firm-level possibility to hire connected workers is a function of changing outside options of these workers.
    Keywords: job creation; Job Displacement; job search; networks
    JEL: J23 J30 J60
    Date: 2017–07
  13. By: Simioni, Michel; Thomas-Agnan, Christine; Trinh, Thi Huong
    Abstract: Recent research on calorie intake and income relationship abounds with parametric models but usually gives inconclusive results. Our paper aims at contributing to this literature by using recent advances in the estimation of generalized additive models with penalized spline regression smoothing (GAM). These semi-parametric models enable mixing parametric and nonparametric functions of explanatory variables and enlarge the distribution of the response variable. The revealed performance test (Racine and Parmeter, 2014), supported by simulation data, shows that GAM models outperform the parametric models. Using data from CHNS in 2006, 2009 and 2011, we find a positive and statistically significant relationship between household calorie intake and household income for the poor. Then the impact of increasing income on calorie consumption slows down for the middle class and the rich. In addition, we find that income-calorie elasticities are generally small, ranging from 0.07 to 0.12.
    Keywords: Calorie intake and income; generalized additive models; CHNS data; revealed performance test; cross validation procedure.
    Date: 2017–07
  14. By: Frietsch, Rainer; Schubert, Torben; Neuhäusler, Peter
    Abstract: This paper deals with the question of changing relations between business R&D (BERD), patents and output measures like value added and productivity (macro level) as well as EBIT and market capitalization (micro level) to analyze long-term/secular effects of technological change at different levels. The results of the panel data reveal an increase of the patent numbers resulting from R&D expenditures. However, we also find a difference in the elasticities of BERD and patents between patent-intensive and non-patent-intensive sectors. In addition, the association between patents and labor productivity falls when all sectors are taken into account, implying decreasing contributions of technological progress to the productivity. Yet, the drivers are non-patent-intensive sectors, as we observe an increasing association of patents and labor productivity for patent-intensive sectors. The results of the enterprise panel data reveal similar results. The correlations between R&D and patents increased over the last 20 years, although it seems there is a concentration of R&D and patenting activities to a smaller amount of firms, which can partially be explained by the fact that research and development that is necessary for a single patent has become more and more expensive in the past years.
    Date: 2017
  15. By: Coughlin, Cletus C. (Federal Reserve Bank of St. Louis); Bandyopadhyay, Subhayu (Federal Reserve Bank of St. Louis)
    Abstract: A standard theoretical prediction is that average exports are independent of tariff rates when the underlying distribution of firm productivities is assumed to be the widely-used Pareto distribution. Assuming that the underlying distribution has no upper bound is undoubtedly inaccurate and produces theoretical results at odds with empirical results. In contrast, we show that upper-truncation of the Pareto distribution makes average exports rise with trade liberalization. This result is derived analytically, and is supported by simulations. We extend our analysis to the cases of lognormal and Fréchet distributions, which are also frequently used by trade economists. Our findings for lognormal and Fréchet distributions are qualitatively similar to the findings using the truncated Pareto.
    Keywords: Truncated probability distributions; Extensive and intensive margins of trade; Import tariff; Pareto; Lognormal; Fréchet.
    JEL: F1
    Date: 2017–07–07
  16. By: Migliardo, Carlo; Schilirò, Daniele
    Abstract: This paper aims to provide an empirical analysis concerning the different aspects of profitability of the Italian manufacturing firms of intermediate size, namely medium and medium-large size companies, for the period 2004-2010. It analyzes various aspects of firm profitability relating corporate structures, that is, capital structure, risk component, asset composition, and growth opportunities. The study investigates firm profitability by using econometric panel-data techniques, such as the system dynamic GMM estimator that assures the robustness of our empirical analysis. One of the main results of our investigation is that we find a significant and negative impact of capital structure (i.e. leverage and tangibility) and risk component on firm profitability.
    Keywords: Mid-sized Italian firms; profitability: panel data; GMM
    JEL: C23 G32 L2 L25 L6 L60
    Date: 2016–10
  17. By: Schiff, Maurice (World Bank)
    Abstract: This paper examines the impact of education, trade, governance and distance on technology diffusion and TFP in Latin America – specifically South America and Mexico (SAM) – and East Asia, over the 32 years preceding the Great Recession (1976–2007). Findings are: i) TFP rises with education, trade, governance (ETG) and trade's R&D content, and falls with distance to the (closest) North; ii) the East Asia – SAM education gap's impact equals that of trade plus governance; iii) an increase in SAM's ETG to East Asia's level raises TFP by over 100 percent and fully accounts for its TFP gap with East Asia; and iv) South America's TFP loss relative to Mexico due to its greater distance to 'US–Canada' (Europe and Japan) is 9.30 (0.02) percent.
    Keywords: East Asia and LAC, technology diffusion, productivity, education, trade, governance, distance
    JEL: F22 J61
    Date: 2017–06

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