nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒09‒17
nine papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Allocative efficiency of UK firms during the Great Recession By Florian Gerth
  2. Measuring highway efficiency : A DEA approach and the Malquist index By Sarmento, Joaquim Miranda; Renneboog, Luc; Verga-Matos, Pedro
  3. Bolder Disinvestment or Better Performance Contracts? Which Way Forward for India's State-Owned Enterprises. By Chhibber, Ajay; Gupta, Swati
  4. Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects By Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym (V.) Volosovych
  5. Aggregate Uncertainty and Sectoral Productivity Growth: The Role of Credit Constraints By Sangyup Choi; Davide Furceri; Yi Huang; Prakash Loungani
  6. Operational and economic efficiency analysis of public hospitals in Greece By George Fragkiadakis; Michael Doumpos; Constantin Zopounidis; Christophe Germain
  7. Firm Efficiency, Foreign Ownership and CEO Gender in Corrupt Environments By Jan Hanousek; Anastasiya Shamshur; Jiri Tresl
  8. Bank Credit Allocation and Sectorial Concentration in Mexico: Some Empirical Evidence By Ramos Francia Manuel; García-Verdú Santiago
  9. Average Pay in Banks: Do Agency Problems and Bank Performance Matter? By Harkin, Sean M.; Mare, Davide S.; Crook, Jonathan N.

  1. By: Florian Gerth
    Abstract: This paper argues that the fall and persistently low level of UK Total Factor Productivity (TFP) following the Great Recession was caused by the turnover (entry and exit) of firms, rather than by resource misallocation between firms within industries. I conduct a misallocation exercise employing the Hsieh and Klenow (2009) and the Olley and Pakes (1996) methods using the FAME microlevel dataset that contains more than 9 million firms within the UK over the 2006 - 2014 period. The main findings are that, first, service sector TFP drops far more than manufacturing TFP and therefore drives the fall and long-lasting depression in aggregate productivity. Second, within-industry misallocation cannot account for the drop in TFP. Third, the entry and exit of firms both contribute to the decline in aggregate TFP while the entry of firms has a larger negative effect on TFP than the exit of firms. And fourth, the pattern of within-industry misallocation and firm dynamics is the same for the manufacturing and the service sector.
    Keywords: Great Recession in the UK; Factor Misallocation; FAME dataset
    JEL: D24 E13 E32 L11
    Date: 2017–09
    URL: http://d.repec.org/n?u=RePEc:ukc:ukcedp:1714&r=eff
  2. By: Sarmento, Joaquim Miranda; Renneboog, Luc (Tilburg University, School of Economics and Management); Verga-Matos, Pedro
    Abstract: A growing concern exists regarding the efficiency of public resources spent in transport infrastructures. In this paper, we measure the efficiency of seven highway projects in Portugal over the past decade by means of a data envelopment analysis and the Malmquist productivity and efficiency indices. We distinguish between technical and technological efficiency and find that most highways face a reduction over time in both types of efficiency. This reduction is mainly due to an increase in operating and maintenance costs, follow-up investments, and a decline in traffic. Some highways only experience a reduction in technological efficiency after a decrease in traffic. They compensate with cost controls and stable investments. While controlling for scale efficiencies, we find a lack of pure technical efficiency in highways that are not subject to a competitive environment, which produces a lack of incentives for better management. Not only does evidence exist of poor management due to a lack of competition, but the increased use of outsourcing also increases inefficiencies. The introduction of tolls and the outburst of the economic crisis in Portugal have substantially reduced traffic that further contributes to inefficiency. The local context, such as highways in low-income areas and rural regions with a lower traffic density, also affects highway performance.
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:tiu:tiutis:23264815-321e-45a3-83ee-92575535f277&r=eff
  3. By: Chhibber, Ajay (National Institute of Public Finance and Policy); Gupta, Swati (National Institute of Public Finance and Policy)
    Abstract: This paper analyses the performance of India's Public Sector Undertakings (PSUs) us-ing measures of labour and overall efficiency and productivity indicators as opposed to finan-cial returns. Using methods that correct for selection bias, the results show that performance contracts do not improve firm efficiency but disinvestment has a very strong positive effect on firm efficiency. Disinvestment improves labour productivity and efficiency, which is not surprising, but it also improves overall efficiency. India should pursue much bolder privati-zation even of PSUs which claim to be making operational profits - such as Air India, because privatization improves overall firm efficiency and unlocks capital for use elsewhere, espe-cially in public infrastructure, and reduces the possibility of political interference in their functioning in future.
    Keywords: Public Sector Undertakings ; State Owned Enterprises ; Public Sector Restructuring ; MOU (performance contract) ; Disinvestment (privatization)
    JEL: H11 L32 L33
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:npf:wpaper:17/205&r=eff
  4. By: Christian Fons-Rosen (Universitat Pompeu Fabra, CEPR, and Barcelona Graduate School of Economics, Spain); Sebnem Kalemli-Ozcan (University of Maryland, CEPR, and NBER, the USA); Bent E. Sorensen (University of Houston and CEPR, the USA); Carolina Villegas-Sanchez (ESADE - Universitat Ramon Llull, Spain); Vadym (V.) Volosovych (Erasmus University Rotterdam, Erasmus Research Institute of Management, the Netherlands; Tinbergen Institute, The Netherlands)
    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: Multinationals; Competition; Technology; Selection; FDI; TFP
    JEL: E32 F15 F36 O16
    Date: 2017–09–05
    URL: http://d.repec.org/n?u=RePEc:tin:wpaper:20170078&r=eff
  5. By: Sangyup Choi (Yonsei University); Davide Furceri (IMF); Yi Huang (Graduate Institute, Geneva); Prakash Loungani (IMF)
    Abstract: We show that an increase in aggregate uncertainty?measured by stock market volatility?reduces productivity growth more in industries that depend heavily on external finance. The mechanism at play is that during periods of high uncertainty, firms that are credit constrained switch the composition of investment by reducing productivity-enhancing investment?such as on ICT capital?which is more subject to liquidity risks (Aghion et al., 2010). The effect is larger during recessions, when financing constraints are more likely to be binding, than during expansions. Our statistical method?a difference-in-difference approach using productivity growth of 25 industries from 18 advanced economies over the period 1985-2010?mitigates concerns with omitted variable bias and reverse causality. The results are robust to the inclusion of other sources of interaction effects, instrumental variable approaches, and different datasets. The results also hold if economic policy uncertainty (Baker et al., 2016) is used instead of stock market volatility as a measure of aggregate uncertainty.
    Keywords: productivity growth; financial dependence; uncertainty; Information and communication technology investment
    JEL: E22 F43 O30 O47
    Date: 2017–09
    URL: http://d.repec.org/n?u=RePEc:yon:wpaper:2017rwp-109&r=eff
  6. By: George Fragkiadakis (Technical University of Crete [Chania]); Michael Doumpos (Technical University of Crete [Chania]); Constantin Zopounidis (Audencia Business School - Audencia Business School, Technical University of Crete [Chania]); Christophe Germain (Audencia Business School - Audencia Business School)
    Abstract: The continuous growth of hospital costs has driven governments in many countries to seek ways to improve their efficiency. In Greece, this has consistently been a major issue for almost two decades, as efficiency assessment and monitoring systems are lacking. In response to this need, the evaluation of the National Health System hospitals’ efficiency level is a precondition for planning, implementing and monitoring any promising reform. In this paper, a non-parametric modeling approach is employed to assess and analyze the efficiency of 87 Greek public hospitals over the period 2005–2009, using data envelopment analysis. The operational and economic aspects of the hospitals’ operation are considered on the basis of their service/case mix and cost structure. We also investigate the efficiency trends over time with the Malmquist index and a second stage regression analysis is performed to explain the operational and economic efficiency results in terms of the hospitals’ operating characteristics and the environment in which they operate.
    Keywords: Hospital efficiency, Technical efficiency, Data envelopment analysis
    Date: 2016–12
    URL: http://d.repec.org/n?u=RePEc:hal:journl:hal-01414677&r=eff
  7. By: Jan Hanousek; Anastasiya Shamshur; Jiri Tresl
    Abstract: We study the effects of corruption on firm efficiency using a unique dataset of private firms from 14 Central and Eastern European countries from 2000 to 2013. We find that an environment characterized by a high level of corruption has an adverse effect on firm efficiency. This effect is stronger for firms with a lower propensity to behave corruptly, such as foreign-controlled firms and firms managed by female CEOs, while local firms and firms with male CEOs are not disadvantaged. We also find that an environment characterized by considerable heterogeneity in the perception of corruption is associated with an increase in firm efficiency. This effect is particularly strong for foreign-controlled firms from low corruption countries, while no effect is observed for firms managed by a female CEO.
    Keywords: efficiency; corruption; ownership structure; foreign ownership; CEO gender; firms; panel data; stochastic frontier; Europe
    JEL: C33 D24 G32 L60 L80 M21
    Date: 2017–06
    URL: http://d.repec.org/n?u=RePEc:cer:papers:wp595&r=eff
  8. By: Ramos Francia Manuel; García-Verdú Santiago
    Abstract: We empirically assess the extent to which relative growth rates in labor productivity, output, and wage, and growth in a proxy of firms' concentration can explain relative bank credit growth at a sectorial level in the Mexican economy. To that end, we divide our sectors into two groups based on their average concentration. Then, we estimate a panel regression with fixed effects for each group, positing relative credit growth as dependent variable. We document that changes in concentration growth contribute to explaining relative credit growth, particularly so in the group with high average concentration. However, in the group with low average concentration, relative credit growth seems to be also explained by relative labor productivity, output, and wage growth rates. We also discuss some mechanisms that might explain these results. Such mechanisms could lead to counterproductive dynamics between concentration growth and relative credit growth, for which we provide some empirical evidence.
    Keywords: Credit;Concentration;Productivity;Mexico
    JEL: E51 J24 L13
    Date: 2017–08
    URL: http://d.repec.org/n?u=RePEc:bdm:wpaper:2017-14&r=eff
  9. By: Harkin, Sean M.; Mare, Davide S.; Crook, Jonathan N.
    Abstract: We study the determinants of average pay across all levels of staff seniority for UK banks between 2003 and 2012. We show that pay is affected by agency problems but not by bank operating performance. Average pay does not depend on accounting outcomes at the bank level. By contrast, average pay is positively affected by the presence of a Remuneration Committee and the proportion of Non-Executives on the Board. These findings indicate that bank pay is determined by agency issues, not bank accounting performance. Our results have practical implications for bank shareholders and regulators, suggesting the need for greater transparency in governance of bank pay.
    Keywords: Corporate Governance, Remuneration, Bank Performance, Agency Problems.
    JEL: G21 G34 G35 M52
    Date: 2017–09–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:81249&r=eff

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