nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒08‒20
twelve papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Macro and Micro Dynamics of Productivity: From Devilish Details to Insights By Lucia S. Foster; Cheryl A. Grim; John Haltiwanger; Zoltan Wolf
  2. Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects By Fons-Rosen, Christian; Kalemli-Ozcan, Sebnem; Sørensen, Bent E; Villegas-Sanchez, Carolina; Volosovych, Vadym
  3. The Growth Disease at 50 – Baumol after Oulton By Jochen Hartwig; Hagen Krämer
  4. Impact of Foreign Tourists on Productivity in the Accommodation Industry: A panel data analysis By MORIKAWA Masayuki
  5. Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China By Cheng, Dong; Hu, Zhongzhong; Tan, Yong
  6. Firm Entry, Excess Capacity and Aggregate Productivity By Savagar, Anthony; Dixon, Huw David
  7. Directed Technological Change & Cross Country Income Differences: A Quantitative Analysis By Jerzmanowski, Michal; Tamura, Robert
  8. Real effects of bank capital regulations : Global evidence By Deli, Yota D.; Hasan, Iftekhar
  9. R&D Efficiency in High-Tech Firms in China By Lee, Sang-Ho; Chen, Zhao; Xu, Wei
  10. Matching efficiency and labour market heterogeneity in the United Kingdom By Pizzinelli, Carlo; Speigner, Bradley
  11. The profitability of banks in a context of negative monetary policy rates: the cases of Sweden and Denmark By Madaschi, Christophe; Nuevo, Irene Pablos
  12. Measurement error of global production By van Bergeijk, P.A.G.

  1. By: Lucia S. Foster; Cheryl A. Grim; John Haltiwanger; Zoltan Wolf
    Abstract: Researchers use a variety of methods to estimate total factor productivity (TFP) at the firm level and, while these may seem broadly equivalent, how the resulting measures relate to the TFP concept in theoretical models depends on the assumptions about the environment in which firms operate. Interpreting these measures and drawing insights based upon their characteristics thus must take into account these conceptual differences. Absent data on prices and quantities, most methods yield ``revenue productivity" measures. We focus on two broad classes of revenue productivity measures in our examination of the relationship between measured and conceptual TFP (TFPQ). The first measure has been increasingly used as a measure of idiosyncratic distortions and to assess the degree of misallocation. The second measure is, under standard assumptions, a function of fundamentals (e.g., TFPQ). Using plant-level U.S. manufacturing data, we find these alternative measures are (i) highly correlated; (ii) exhibit similar dispersion; and (iii) have similar relationships with growth and survival. These findings raise questions about interpreting the first measure as a measure of idiosyncratic distortions. We also explore the sensitivity of estimates of the contribution of reallocation to aggregate productivity growth to these alternative approaches. We use recently developed structural decompositions of aggregate productivity growth that depend critically on estimates of output versus revenue elasticities. We find alternative approaches all yield a significant contribution of reallocation to productivity growth (although the quantitative contribution varies across approaches).
    JEL: E24 L22 O4
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:23666&r=eff
  2. By: Fons-Rosen, Christian; Kalemli-Ozcan, Sebnem; Sørensen, Bent E; Villegas-Sanchez, Carolina; Volosovych, Vadym
    Abstract: We study the impact of foreign direct investment (FDI) on total factor productivity (TFP) of domestic firms using a new, representative firm-level data set spanning six countries. A novel finding is that firm-level spillovers from foreign firms to domestic companies can be significantly positive, non-existent, or even negative, depending on which sectors receive FDI. When foreign firms produce in the same narrow sector as domestic firms, the latter are negatively affected by increasing competition and positively affected by knowledge spillovers. We find that the positive spillovers dominate if foreign firms enter sectors where firms are "technologically close,'' controlling for the endogeneity of their entry decision into such sectors. Positive technology spillovers also affect firms in other sectors, if those sectors are technologically close to the sectors receiving FDI. Increasing FDI in sectors that are technologically close to other sectors boosts TFP of domestic firms by twice as much as increasing FDI by the same amount across all sectors.
    Keywords: competition; FDI; multinationals; selection; technology; TFP
    JEL: E32 F15 F36 O16
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:12205&r=eff
  3. By: Jochen Hartwig (Faculty of Economics and Business Administration, Chemnitz University of Technology, Germany); Hagen Krämer (Faculty of Management Science and Engineering, Karlsruhe University of Applied Sciences, Germany)
    Abstract: The year 2017 marks the 50th anniversary of William J. Baumol’s seminal model of ‘unbalanced growth’, which predicts the so-called ‘Growth Disease’, i.e., the tendency of aggregate productivity growth to slow down in the process of tertiarisation. In an important contribution published in 2001, however, Nicholas Oulton showed that the shift of resources to the service sector may raise rather than lower aggregate productivity growth if the service industries produce intermediate rather than final products. While Oulton’s reasoning is logically consistent, the question arises whether it is also valid from an empirical point of view. We use the 2011 release of EU KLEMS data to determine whether the shift of resources to services has raised or lowered aggregate productivity growth in the G7 countries.
    Keywords: Baumol’s Disease, productivity growth, EU KLEMS
    JEL: E24 O14 O41 O47 O57
    Date: 2017–07
    URL: http://d.repec.org/n?u=RePEc:tch:wpaper:cep010&r=eff
  4. By: MORIKAWA Masayuki
    Abstract: Recently, the number of foreign tourists visiting Japan has been rapidly increasing, and the overseas travel balance has drastically changed. By using micro panel data, this study empirically analyzes the effects of this increase on productivity in the accommodation industry. The novelty of this study is represented by the use of a physical productivity measure to document an unexplored channel through which service trade contributes to increasing the productivity in the domestic service industry. The estimation results show that an increase in the number of foreign guests significantly improves the measured total factor productivity (TFP) of the accommodation facilities, although the effect of foreign presence is quite heterogeneous across facilities.
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:eti:dpaper:17106&r=eff
  5. By: Cheng, Dong; Hu, Zhongzhong; Tan, Yong
    Abstract: This paper investigates the heterogeneous and time-varying effects of financial credits on firm-level export performance. Using a data set covering comprehensive Chinese manufacturing firms and employing a difference-in-differences approach, we find that financial credits improve firm-level exports and productivity more for firms switching from indirect to direct export than continuing indirect exporting firms. Further, we employ a difference-in-difference-in-differences approach and find that improvements in firm-level finance have larger positive impacts on firm export values in the post-WTO accession period, conditioning on the firm switching from indirect to direct exporting. The time-varying impact may suggest an export distortion in China before its WTO accession.
    Keywords: Financial Credits, WTO Accession, Indirect export, Direct Export, Difference-in-Differences
    JEL: F13 F14 G28
    Date: 2017–08–07
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:80657&r=eff
  6. By: Savagar, Anthony (University of Kent); Dixon, Huw David (Cardiff Business School)
    Abstract: Slow firm entry over the business cycle causes measured TFP to vary endogenously because incumbent firms bear shocks. Our main theorem states that imperfect competition and dynamic firm entry are necessary and sufficient conditions for these endogenous productivity fluctuations. The result focuses on the short-run absence of entry and incumbents' output response given this quasi-fixity. Quantitatively we show the endogenous productivity effect is as large as a traditional capital utilization effect.
    Keywords: dynamic entry, endogenous productivity, endogenous sunk costs, business stealing, business cycle, continuous time
    JEL: E32 D21 D43 L13 C62
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:cdf:wpaper:2017/8&r=eff
  7. By: Jerzmanowski, Michal; Tamura, Robert
    Abstract: Research aimed at understanding cross-country income differences finds that inputs of human and physical capital play a limited role in explaining those differences. However, most of this work assumes workers with different education levels are perfect substitutes. Does moving away from this assumption affect our conclusions about the causes of long run development? To answer this question we construct measures of skill-specific productivity and barriers to innovation for a large sample of countries over the period 1910-2010. We use a model of endogenous directed technological change together with a new data set on output and labor force composition across countries. We find that rich countries use labor of all skill categories more efficiently, however, in the absence or barriers to entry, poor countries would actually be more efficient at using low-skill labor. Our estimates imply that after 1950 the world technology frontier expanded much faster for college-educated workers than for those with lower skill sets. This technology diffused to many countries, allowing even poorer countries to experience relatively robust growth of high-skill-specific productivity. Their GDP growth failed to reflect that because of their labor composition; they have very few workers in the higher skilled category. Finally, we investigate the relative importance of factor endowments versus barriers to technology in explaining the current disparities of standards of living and find it to depend crucially on the value of the elasticity of substitution between skill-types. Under a lower value of 1.6, our model yields barrier estimates that are lower and relatively less important in explaining cross-country income differences: in this scenario physical and human capital account almost 70% of variance in 2010 GDP per worker in our sample. Using elasticity of 2.6, we find barriers that are higher and explain most of the variation in output. We provide some evidence that the higher value of elasticity is preferred.
    Keywords: endogenous directed technology, heterogeneous labor, cross country income differences
    JEL: E1 J0 O1
    Date: 2017–08–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:80582&r=eff
  8. By: Deli, Yota D.; Hasan, Iftekhar
    Abstract: We examine the effect of the full set of bank capital regulations (capital stringency) on loan growth, using bank-level data for a maximum of 125 countries over the period 1998-2011. Contrary to standard theoretical considerations, we find that overall capital stringency only has a weak negative effect on loan growth. In fact, this effect is completely offset if banks hold moderately high levels of capital. Interestingly, the components of capital stringency that have the strongest negative effect on loan growth are those related to the prevention of banks to use as capital borrowed funds and assets other than cash or government securities. In contrast, compliance with Basel guidelines in using Basel- and credit-risk weights has a much less potent effect on loan growth.
    JEL: G21 G28 E6 O4
    Date: 2017–08–12
    URL: http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_023&r=eff
  9. By: Lee, Sang-Ho; Chen, Zhao; Xu, Wei
    Abstract: Using firm-level data from Changzhou, one of the representative prefectural cities in the Yangzi River Delta in China, we investigate the performances of both internal and external R&D in high-tech firms. We find that, on average, high-tech firms with more internal R&D expenditure apply for more patents in terms of both the total number of patents and the number of invention patents. Internal R&D is the most efficient in foreign firms, followed by private firms and then followed by SOEs (state-owned enterprises). These findings highlight the importance of privatizing high-tech firms in China if the Chinese government intends to accelerate industrial upgrading and convert the pattern of “Made in China” into “Created in China.”
    Keywords: internal R&D; external R&D; high-tech firms; R&D performances
    JEL: D22 H76 L25
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:80734&r=eff
  10. By: Pizzinelli, Carlo (University of Oxford); Speigner, Bradley (Bank of England)
    Abstract: This paper investigates how compositional changes in the UK labour market affect the matching process between vacancies and job seekers. We augment a state space representation of the aggregate matching function with a measure of job seekers’ ‘search intensity’ that is recovered from micro-data on individual unemployment-to-employment transitions, in line with recent developments in the literature. The baseline results show that matching efficiency declined by around 15% between 1995 and 2010 but subsequently recovered by about 5 percentage points in the last six years. Compositional changes in the labour force that improved aggregate search intensity prior to the 2008 recession will tend to obscure the decline in aggregate matching efficiency unless controlled for properly. Considering broader definitions of job seekers that include marginally-attached workers and on-the-job searchers exacerbates the registered decline in matching efficiency. Changes in ‘recruiting intensity’ and the share of vacancies posted by different industries provide a potential explanation for some, but not all, of the initial fall in matching efficiency that preceded the 2007–08 recession. Finally, we quantitatively analyse how labour force heterogeneity and changes in matching efficiency have affected the shape and location of the UK Beveridge Curve.
    Keywords: Unemployment; labour heterogeneity; matching function; Beveridge Curve
    JEL: E24 E32 J64 J82
    Date: 2017–08–04
    URL: http://d.repec.org/n?u=RePEc:boe:boeewp:0667&r=eff
  11. By: Madaschi, Christophe; Nuevo, Irene Pablos
    Abstract: This paper looks at how the profitability of banks in Sweden and Denmark has evolved in the context of negative interest rates. Overall, it finds that profitability has continued to improve, even with negative monetary policy rates. Data and modelbased evidence confirm that the monetary policy transmission to bank lending rates has so far not been impaired, though they point to a downward stickiness in the bank deposit rate. Swedish and Danish banks rely mainly on wholesale funding to finance their activities, and the fall in wholesale funding costs has led to a significant decline in interest expenses, thereby bolstering the resilience of the net interest income margin. All in all, this has created the prerequisites for positive credit supply developments, and possible unintended consequences of negative monetary policy rates, such as a reduction in credit supply, have not materialised. However, according to Sveriges Riksbank and Danmarks Nationalbank, the prevailing low level of interest rates has aggravated financial stability risks stemming from the large exposure of the banking sector to the housing market in both economies, in a context of rapidly rising housing prices and the resultant growing indebtedness of the household sector. JEL Classification: E58
    Keywords: banks’ profitability, monetary policy pass-through
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbops:2017195&r=eff
  12. By: van Bergeijk, P.A.G.
    Abstract: This working paper discusses the need and possibility to report measurement error together with key (macroeconomic) statistics as shown by a case study of the real rate of growth of world GDP (Gross Planet Product). The IMF estimates for individual years since 1980 and continue to change when a new vintage of the World Economic Outlook data base is published (each year in October). The different vintages provide an indication of the extent of measurement error. According to two measures for measurement error the IMF data for Gross Planet product on average have an implicit minimal measurement error (IMME) of four percent and maximum ratio (MR) of eighteen percent. Even for long-term growth rates that are calculated over two decades growth rates have a substantial measurement error, namely an IMME of 1.7% and an MR of 8.0%. Measurement error of Gross Planet Product is thus economically and statistically significant and needs to be addressed in studies that analyse or use global production data. Measurement error in economics currently is significant, is not showing improvement over time and could be reported transparently without technical or budgetary problems.
    Keywords: measurement error, IMF, GDP, world production, implicit minimal measurement error, maximum ratio
    Date: 2017–08–08
    URL: http://d.repec.org/n?u=RePEc:ems:euriss:100849&r=eff

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