nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒08‒27
eleven 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. Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China By Loren Brandt; Jessica Leight; Diego Restuccia; Tasso Adamopoulos
  3. ICT and resilience in times of crisis: Evidence from cross-country micro moments data By Bertschek, Irene; Polder, Michael; Schulte, Patrick
  4. On the Relationship Between Quality and Productivity: Evidence from China's Accession to the WTO By Haichao Fan; Yao Amber Li; Stephen R. Yeaple
  5. How do Tax Incentives A ect Investment and Productivity? Firm-Level Evidence from China By Yongzheng Liu; Jie Mao
  6. Mining Surplus: Modeling James A. Schmitz's Link Between Competition and Productivity By Jeremy Greenwood; David Weiss
  7. Annex I and non-Annex I countries’productive performance revisited using a generalized directional distance function under a metafrontier framework: Is there any convergence-divergence pattern for technology gaps? By Kounetas, Kostas; Zervopoulos, Panagiotis
  8. Local linkages: The interdependence of foreign and domestic firms By Kate Hynes; Yum K. Kwan; Anthony Foley
  9. The Effects of Exporting on Labour Productivity: Evidence from German Firms By Johannes Schwarzer
  10. Empowerment, adaptation, and agricultural production evidence from Niger By Wouterse, Fleur Stephanie
  11. What drives export market shares? It depends! An empirical analysis using Bayesian Model Averaging By Konstantins Benkovskis; Benjamin Bluhm; Elena Bobeica; Chiara Osbat; Stefan Zeugner

  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 funda- mentals (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).
    Date: 2017–01
  2. By: Loren Brandt (University of Toronto); Jessica Leight (Williams College); Diego Restuccia (University of Toronto); Tasso Adamopoulos (York University)
    Abstract: We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity in China by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). We show that selection can substantially amplify the static misallocation effect of distortionary policies by affecting occupational choices that worsen the distribution of productive units in agriculture.
    Date: 2017
  3. By: Bertschek, Irene; Polder, Michael; Schulte, Patrick
    Abstract: ICT-intensive firms are often found to have a better performance than their non-ICTintensive counterparts. Along with investing in ICT capital they have to adapt their production and business processes in order to reap the potentials implied by the use of ICT. Are these firms also more resilient in times of crisis? We study this question by exploiting a novel and unique data set from the Microments Database. Covering 12 countries, 7 industries and the period from 2001 to 2010, the data allow us to distinguish between ICT-intensive and non-ICT-intensive firms within industries. We find evidence that indeed during the crisis in 2008 and 2009, ICT-intensive firms were hit less hard with respect to their productivity. This holds in particular for firms from service industries. Moreover, ICT-intensive firms were also more successful in introducing process innovations during that period which could explain their better productivity performance compared to non-ICT intensive firms.
    Keywords: ICT,innovation,productivity,economic crisis,resilience,meso-level data
    JEL: H12 J24 O31 O47
    Date: 2017
  4. By: Haichao Fan; Yao Amber Li; Stephen R. Yeaple
    Abstract: This paper presents an analysis of the effect of China's entry into the WTO on the quality choices of Chinese exporters in terms of their outputs and their inputs. Using highly disaggregated firm-level data, we show that the quality upgrading made possible by China's tariff reductions was concentrated in the least productive Chinese exporters. These firms, which had been laggards in terms of quality prior to the tariff reduction, were the most aggressive in increasing the quality of their exports and their inputs and in redirecting their exports toward high income markets where demand for high quality goods is strong. Our empirical results are consistent with a simple model featuring scale effect and non-Hicks' neutral productivity that disproportionately affects the efficiency with which firms use intermediate inputs. This latter feature does not appear in workhorse models of firm heterogeneity and endogenous quality choice which provide a distorted view of the impact of trade liberalization on quality upgrading.
    JEL: F1 F10 F14 O3
    Date: 2017–08
  5. By: Yongzheng Liu (School of Finance, Renmin University of China); Jie Mao (Department of Public Finance and Taxation, School of International Trade and Economics, University of International Business and Economics)
    Abstract: China initiated a critical value-added tax reform in 2004. Completed in 2009, it introduced permanent tax credit for firms' investment in fixed assets. We use a quasi-experimental design and a unique firm-level dataset covering all sizes of firms across a broad range of sectors and regions between 2005 and 2012, to test whether the reform promoted firms' investment and productivity. We estimate that on average, the reform raised investment and productivity of the treated firms relative to the control firms by 8.8 percent and 3.7 percent, respectively. We also show that the positive effects tend to be strengthened for firms with financial constraints.
    Date: 2017–08
  6. By: Jeremy Greenwood (University of Pennsylvania); David Weiss (Tel Aviv University)
    Date: 2017–08
  7. By: Kounetas, Kostas; Zervopoulos, Panagiotis
    Abstract: Countries rapid economic growth, energy consumption and anthropogenic emissions (GHGs) in the atmosphere are creating serious environmental problem on both global and local scales -. This is while compiled evidence about the relationship between climate change/global warming and the amount of GHG released is present (IEA, 2010). In advance, it is generally accepted that countries production processes, should seriously, take into account environmental sustainability principles and targets. In recent years, there have been a series of studies using a directional distance function dealing with environmental efficiency with the aim of measuring the ability of decision making units (i.e regions, firms, industries, countries) to produce more with less impact on the environment. A scarcity of empirical studies appears concerning the estimation of directional distance function under a metafrontier framework. In this paper we employ a balanced panel of 103 countries from 1995-2011 to shed light on the idiosyncratic performance of countries participating in two distinct different groups (Annex I and non-Annex I) using a generalized directional distance function independent of the direction vector length -. The non-parametric metafrontier framework - used in this study, as a first stage of analysis, is exploited to account for the heterogeneity between countries participating in our sample. In the second stage, a convergence-divergence hypothesis has been examined for the technology gaps estimated for each period. Our findings reveal significant patterns between countries’ individual performance.
    Keywords: Metafrontier; Generalized Distance Function; Technology gaps; Annex-I countries
    JEL: D24 Q0 Q4
    Date: 2017–07–15
  8. By: Kate Hynes; Yum K. Kwan; Anthony Foley
    Abstract: This paper investigates the interdependence of foreign and domestic firms’ local linkage decisions and the extent to which they respond differently to variations in export intensity and productivity originating from each of the two groups of firms. Our empirical analysis, based on Irish data, uncovers an interesting asymmetric pattern in the local linkage dynamics of foreign and domestic firms. We find that local linkages of domestic firms tend to evolve independently of their foreign counterpart, and that they react almost instantaneously to exogenous events such as increases in export intensity or productivity. Local linkages of foreign firms, by contrast, react gradually to exogenous events and the impact works through the reverberating dynamics of the lagged linkages of both foreign and domestic firms. The Irish experience is instructive to policymakers in emerging markets who are naturally interested in the best way to maximize the value of FDI, in terms of benefits the latter brings about for sustainable economic development.
    Keywords: Local linkages; Multinationals; Foreign direct investment; Emerging markets
    JEL: F23 L22
    Date: 2017–06
  9. By: Johannes Schwarzer (Council on Economic Policies)
    Abstract: We revisit the "self-selection vs. learning-by-exporting (LBE)" debate with new evidence on a large panel of German firms of all economic sectors up to the 3-digit NACE level, between 1993-2014, and shed new light on the channels that foster export-induced productivity gains. In line with previous results, we find substantial pre-export differences in productivity between future exporters and domestic firms. Nevertheless, these pre-export differences remain constant over time and we find strong evidence against a conscious self-selection effect, in which firms would actively engage in increasing their productivity in temporal proximity to starting to export. In contrast, we find strong support for the learning-by-exporting hypothesis in both the manufacturing and the services sector. However, the learning effect is not progressive and more short-lived in the latter than in the former. We explain the different sectoral performances with significant differences in access to foreign markets, which is substantially lower and more concentrated within few firms in services. Furthermore, we show that across sectors, the size of the LBE effect depends on the level of within-sector competition. In line with basic microeconomic theory, productivity gains are higher for entrants into exporting, which operate in relatively uncompetitive domestic sectors, pointing to an important competitiveness channel for productivity gains. Our results suggest that the services sector offers the largest scope for productivity gains through trade policies aiming at facilitating market access.
    Date: 2017–02
  10. By: Wouterse, Fleur Stephanie
    Abstract: Located at the heart of West Africa, Niger is a landlocked country with three-quarters of its territory covered by the Sahara Desert. Niger’s climate is mostly arid, and it is one of the least developed countries in the world. The vast majority of its population lives in rural areas, and the country is strongly dependent on agriculture. Agriculture is predominantly rainfed and yields rely on one rainy season. Although productivity in Niger has shown a positive trend, agriculture has been strongly affected in recent decades by several crises partly or entirely due to extreme weather events. Farmers pursue a number of strategies in the face of climatic (and nonclimatic) stressors including soil and water conservation methods such as barriers, terracing, and planting pits, and their adaptive capacity is deemed critical for estimating the economic impact of climate change. An understanding of climate change adaptation processes at the farm household level is therefore crucial to the development of well-designed and targeted mitigation policies. In this study, we use new data from Niger and regression analysis to study climate change adaptation through the digging of zaї pits and food production and the role of human capital measures therein. We find that adaptation is influenced by the perception that the frequency of droughts has increased and by the availability of financial resources and household labor. Adaptation is also influenced by educational attainment—both formal and Koranic school education. Adaptation of zaї pits is found to play an important role in food productivity. Our counterfactual analysis reveals that even though all households would benefit from adaptation, the effect is found to be significantly larger for households that actually did adapt relative to those that did not, indicating that the prospects of closing the productivity gap through encouraging adaptation in less well-endowed households are limited.
    Keywords: smallholders, empowerment, regression analysis, land management, soil water conservation methods,
    Date: 2017
  11. By: Konstantins Benkovskis (Bank of Latvia); Benjamin Bluhm (European Central Bank); Elena Bobeica (European Central Bank); Chiara Osbat (European Central Bank); Stefan Zeugner (European Commission)
    Abstract: What drives external performance of countries? This is a recurring question in academia and policy. The factors underlying export growth are receiving great attention, as countries struggle to grow out of the crisis by increasing exports and as protectionist discourses take foot again. Despite decades of debates, it is still unclear what the drivers of external performance are and, importantly, which ones policy makers can influence. We use Bayesian Model Averaging in a panel setting to investigate the drivers of export market shares of 25 EU countries, considering a wide range of traditional indicators along with novel ones developed within the CompNet. We find that export market share growth is linked to different factors in the old and new EU Member States, with one exception: for both groups, competitive pressures from China have strongly affected export performance since the early 2000s. In the case of the old EU Member States, investment, the quality of institutions and liquidity available to firms also appear to play a role. For the new EU Member States, labour and total factor productivity are particularly important, while inward FDI matters more than domestic investment. Price competitiveness does not seem to play a very important role in either set of countries: relative export prices do show correlation with export performance for the new EU Member States, but only when they are adjusted for quality. Our results point to the importance of considering the "exporting stage" of a country when discussing export-enhancing policies.
    Keywords: export shares, competitiveness, Bayesian Model Averaging
    JEL: C23 C51 F14 O52
    Date: 2017–08–10

This nep-eff issue is ©2017 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.