nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒11‒12
fifteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  2. Total factor productivity growth in Central and Eastern Europe before, during and after the Global Financial Crisis By Natalja Levenko; Kaspar Oja; Karsten Staehr
  3. Recent US Manufacturing Employment: The Exception that Proves the Rule By Robert Z. Lawrence
  4. Refinancing and Efficiency of Microfinance Institutions in Niger By Ali Hadizatou
  5. Institutions and Other Determinants of Total Factor Productivity in Sub-Saharan Africa By David Fadiran; Olusegun A. Akanbi
  6. The impact of investment in innovation on productivity: firm-level evidence from Ireland By Di Ubaldo, Mattia; Siedschlag, Iulia
  7. Productivity and distribution effects of codetermination in an efficient bargaining By Kraft, Kornelius
  8. The sources of heterogeneity in firm performance: lessons from Italy By A. Arrighetti; E. Bartoloni; F. Landini
  9. Analysis of the Cost-Efficiency of Microfinance Institutions in the West African Economic Monetary Union Area By Leadaut Edith Prisca Togba
  10. Economic and Statistical Measurement of Physical Capital with an Application to the Spanish Economy By F. J. Escribá-Pérez; M. J. Murgui-García; J. R. Ruiz-Tamarit
  11. Can Licensing Induce Productivity? Exploring the IPR Effect By Luis Castro Peñarrieta; Gustavo Canavire-Bacarreza
  12. Institutional Quality and Economic Performance in West Africa By Iheonu, Chimere; Ihedimma, Godfrey; Onwuanaku, Chigozie
  13. Japanese Plants' Heterogeneity in Sales, Factor Inputs, and Participation in Global Value Chains By ITO Koji; Ivan DESEATNICOV; FUKAO Kyoji
  14. How Bad Is a Bad Loan? Distinguishing Inherent Credit Risk from Inefficient Lending (Does the Capital Market Price This Difference?) By Joseph Hughes; Choon-Geol Moon
  15. Who Moves Up the Job Ladder?* By John Haltiwanger; Henry Hyatt; Erika McEntarfer

  1. By: Francesco Aiello; Lidia Mannarino; Valeria Pupo (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria)
    Abstract: This paper estimates the impact of R&D investments on the productivity of European family firms. For the period 2007-2009, we consider a Cobb-Douglas production function augmented by R&D intensity. Specifically, we address the questions of whether the R&D returns of family firms differ from that of non-family firms. Final outcomes suggest that, on average, non-family firms conducting R&D record a productivity gain of about 5-8 % compared to non-innovative firms. Additionally, the innovative family firms are about 6% lower compared to innovative non-family firms. Finally, the rate of return to R&D of family firms is lower than non-family firms.
    Keywords: Productivity, R&D returns, Family firms
    JEL: O30 L60 G34
    Date: 2017–11
  2. By: Natalja Levenko; Kaspar Oja; Karsten Staehr
    Abstract: This paper conducts growth accounting for 11 EU countries from Central and Eastern Europe for the years 1996–2016. Its contributions include the estimation of new capital stock series, adjustment for the utilisation of the capital stock and a time-varying elasticity of output to capital. Before the crisis, growth in total factor productivity (TFP) was the main contributor to output growth in Slovenia, Hungary and Slovakia, while capital deepening was more important in the Czech Republic, Croatia and Poland. During the global financial crisis the contributions of TFP and capital growth differed markedly across the countries, reflecting the very diverse dynamics of the crisis. After the crisis the contribution of TFP growth has been negligible in all of the sample countries coinciding with generally weak output growth. The results are generally robust to changes in estimation methods and parametrisations, but some assumptions are critical for the results.
    Keywords: growth accounting, capital stock, perpetual inventory method, total factor productivity, global financial crisis, Central and Eastern Europe
    JEL: F43 O47
    Date: 2017–11–09
  3. By: Robert Z. Lawrence (Peterson Institute for International Economics)
    Abstract: This Working Paper challenges two widely held views: first that trade performance has been the primary reason for the declining share of manufacturing employment in the United States, and second that recent productivity growth in manufacturing has actually been quite rapid but is not accurately measured. The paper shows that for many decades, faster productivity growth interacting with unresponsive demand has been the dominant force behind the declining share of employment in manufacturing in the United States and other industrial economies. It also shows that since 2010, however, the relationship has been reversed and slower productivity growth in manufacturing has been associated with more robust performance in manufacturing employment. These contrasting experiences suggest a tradeoff between the ability of the manufacturing sector to contribute to productivity growth and its ability to provide employment opportunities. While some blame measurement errors for the recently recorded slowdown in manufacturing productivity growth, spending patterns in the United States and elsewhere suggest that the productivity slowdown is real and that thus far fears about robots and other technological advances in manufacturing displacing large numbers of jobs appear misplaced.
    Keywords: Trade Adjustment Costs, Inequality, Income Distribution
    JEL: D24 J21 O14 F16
    Date: 2017–11
  4. By: Ali Hadizatou
    Abstract: AbstractThe aim of this study was to establish the effect of refinancing resources (deposits, loans, grants) on the efficiency of 24 microfinance institutions (MFIs) in Niger over the 2005-2008 period. The study’s hypothesis was tested using a Translog function that was estimated in the form of a system with equations of cost-sharing of inputs. The outreach of the activities of the MFIs studied was established by using a descriptive analysis. A Principal Components Analysis revealed that the independent MFIs had recourse to deposits, loans, and grants more often than those affiliated to unions. Econometric results showed that the MFIs in Niger were not efficient. But they also showed that the use of deposits, physical capital and human capital led to a drop in the charges incurred by those MFIs. They further showed while deposits could replace loans and grants, the latter two could not be substituted for each other. The study also found that the social performance of the MFIs in Niger was low, due to the fact that their service outlets were still being set up and were located mostly in large towns. Men formed the majority of customers targeted by the MFIs, and these granted loans mainly to customers living in urban areas. A slowdown in the MFIs’ loan granting was observed in all the country’s regions, which had the effect of lowering the MFIs’ costs related to economies of scale. Finally, the study found that there was a link between MFI efficiency and social performance. Key words:efficiency, social performance, microfinance, refinancing, Niger
    Date: 2017–05
  5. By: David Fadiran; Olusegun A. Akanbi
    Abstract: The primacy of factors of production, such as labour and capital, over Total Factor Productivity (TFP) in stimulating economic growth, has long been a contentious subject in discussions on the underlying causes of economic growth. While the roles of labour and capital have been exhaustively explored, TFP still has room for further exploration, more specifically in sub-Saharan Africa (SSA). This study empirically examines the link between institutions and TFP in SSA, while controlling for other frequently explored variables, for example, research and development, human capital, infrastructure and financial development. The estimations provided in the study are based on a panel of 26 sub-Saharan African countries over the period 1990–2011. We find that, while some of these factors affect TFP in the long-run, there is a consistent relationship with institutions as well. We also find that market-based institutions play a more prominent role than the more frequently explored political institutions.
    Keywords: Total Factor Productivity (TFP), economic growth, Sub-Saharan Africa, market-based institutions, Human Capital, financial development
    Date: 2017–10
  6. By: Di Ubaldo, Mattia; Siedschlag, Iulia
    Abstract: This paper examines the relationship between investment in innovation and productivity across firms in Ireland. We estimate a structural model using information from three linked micro data sets over the period 2005-2012 and identify the relationships between investment in innovation, innovation outputs and productivity. Our results indicate that innovation is positively linked to productivity. This result holds for all types of innovation and for both R&D and non-R&D expenditures. The innovation-related productivity gains range from 16.2 per cent to 35.4 per cent. The strongest link between innovation and productivity is found for firms with R&D spending and with product innovation.
    Date: 2017–09
  7. By: Kraft, Kornelius
    Abstract: Codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor. Based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing. The empirical test is based on German data and includes years before and after the extension of German codetermination law in 1976. The estimates determine the productivity of labor and relative bargaining power of capital and labor. It turns out that codetermination does not affect productivity, but leads to a significant increase in workers' bargaining power and the distribution of rents.
    Keywords: codetermination,productivity,wage-bill share,bargaining
    JEL: L22 L23 J52 J53
    Date: 2017
  8. By: A. Arrighetti; E. Bartoloni; F. Landini
    Abstract: An extensive literature documents large and persistent within-industry heterogeneity of firm performance. While some authors explain such evidence in terms of factor misallocation, we provide an alternative framework that is based on the interaction among exogenous and endogenous factors. Exogenous factors, both supply and demand-related, define the opportunity set that is available to firms. Endogenous factors reflect instead firm-specific interpretations of such set that combined with the available resources and capabilities determine firm’s strategic responses, which can be markedly heterogeneous. Whenever the diversity of firm conducts is associated with relatively small profit differentials, firm heterogeneity can persist. Evidence based on the evolution of labour productivity dispersion in the Italian manufacturing sector between the 1990s and early 2000s provides support for our interpretative framework.
    Keywords: firm heterogeneity; productivity; profit; misallocation; capabilities; Italy
    JEL: D24 L11 L25
    Date: 2017
  9. By: Leadaut Edith Prisca Togba
    Abstract: The cost-efficiency of microfinance institutions (MFIs) has emerged as an issue crucial to their survival and the continuity of their services. The present study uses the stochastic frontier method to analyse the levels and determinants of cost-efficiency of a sample of microfinance institutions operating from the West African Economic and Monetary Union (WAEMU) area. For the 2000–2008 period, these MFIs were found to have functioned in an ineffective way in terms of minimizing their costs. Factors influencing cost-efficiency include the age and type of MFI. The study’s results also reveal that the number of female borrowers, the MFI’s financial performance, level of capitalization, geographical location, and size were explanatory factors for the cost-efficiency of the MFIs studied.Key Words:Cost-efficiency; Microfinance; Stochastic frontier; WAEMU
    Date: 2016–09
  10. By: F. J. Escribá-Pérez (Universitat de València (Spain), Department of Economic Analysis); M. J. Murgui-García (Universitat de València (Spain), Department of Economic Analysis); J. R. Ruiz-Tamarit (Universitat de València (Spain), Department of Economic Analysis and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Empirical studies in macroeconomics and economic growth literature are highly dependent on the measure of the physical capital stock. The variables that contribute to explain the major problems in these areas of research always appear related, whether directly or indirectly, to capital stock and depreciation. The standard measurements of capital and depreciation are statistical measures based on assumptions about the average service life of capital goods, which are accumulated according to the perpetual inventory method. In this paper we propose an alternative method based on the equations that solve the dynamic optimization problem of the neoclassical firm. This method enables us to endogenously calculate the variables rate of depreciation and capital stock, yielding an economic estimation based on indicators of profitability such as the distributed profits and the Tobin's q ratio. This represents a change of paradigm in measuring capital and depreciation, which we supply along with an application to the Spanish economy. The results show an economic depreciation rate (endogenous) that fluctuates around the statistical rate (exogenous), and two time profiles for the economic and statistical capital stocks that are markedly different. In the context of a growth accounting exercise we show how capital intensity and total factor productivity play different roles in explaining growth over the past fifty years, depending on whether we are using statistical or economic measures. Finally, we analyze the paradox of productivity and conclude that the absence of positive correlation between investment in information and communication technologies and the rate of growth of total factor productivity may be due to a combination of the delay effect associated with such investment and the under-estimation of the true economic depreciation.
    Keywords: Capital, Depreciation, Growth, Slowdown, Total Factor Productivity
    JEL: C61 D92 E22 O47
    Date: 2017–11–02
  11. By: Luis Castro Peñarrieta; Gustavo Canavire-Bacarreza
    Abstract: Licensing is one of the main channels for technology transfer from foreignowned multinational enterprises (MNEs) to domestic plants. This transfer occurs within industries and across industries, which results in technology spillovers that can affect both intra- and inter-industry productivity. We propose a theoretical model that predicts that this effect can be enhanced by the implementation of stronger intelectual property rights (IPR). Using Chilean plant-level data for the 2001–2007 period and exogenous variation from a reform in 2005, we test our theoretical predictions and find positive inter-industry effects, which result in higher productivity for domestic plants. However, there are negative spillovers when licensing is implemented within the same industry. We also test for the effect of stronger IPR and find that stronger IPR reduces intra-sector spillovers but increases inter-industry spillovers. Moreover, the IPR effect is stronger on firms that are, on average, smaller and have low productivity. Our results are robust not only to a series of definitions of IPR, licensing and productivity but also to a set of different specifications.
    Keywords: Technology Licensing, Productivity, Spillovers, Chile
    JEL: O34 O44 C5 K2
    Date: 2017–10–30
  12. By: Iheonu, Chimere; Ihedimma, Godfrey; Onwuanaku, Chigozie
    Abstract: This study empirically accessed the impact of institutional quality on economic performance in West Africa. The study employed the control of corruption, government effectiveness, regulatory quality and rule of law as institutional quality indicators as provided by the World Governance Indicators, WGI (2017). A panel data set of 12 West African countries from 1996 to 2015 was estimated using the fixed effect model, the random effect model and the panel two-stage least square technique. The result showed that all the indicators of institutional quality employed in the study have positive and significant impact on economic performance in West Africa when the fixed and random effect model estimation technique was employed but only government effectiveness was significant after taking account of endogeneity using the panel two-stage least square technique. The study concludes that economic performance in West Africa would be enhanced in the presence of improved institutions with more consideration to government effectiveness.
    Keywords: Institutional Quality, Economic Performance, Panel Data Analysis, West Africa
    JEL: A12 B41 B52 C01 C13
    Date: 2017–06–01
  13. By: ITO Koji; Ivan DESEATNICOV; FUKAO Kyoji
    Abstract: Recent research has emphasized the importance of global value chains (GVCs) in inter-country linkages and international production fragmentation. Several initiatives have attempted to construct multi-country input-output tables (MIOTs) to analyze these trends. However, heterogeneity in export and domestic activities among firms within the same industry may cause biases in analyses that rely on MIOTs. This paper has two main objectives. First, we use matched employer-employee data for Japan to split output in each industry in Japan's manufacturing sector in the Organisation for Economic Co-operation and Development (OECD) Inter-Country Input-Output (ICIO) table into output for export or domestic sale. Second, using our split ICIO table, we compute trade in value added (TiVA) indicators to examine the participation of Japanese manufacturing plants in GVCs and compare our results with the OECD-WTO TiVA indicators. Our estimates suggest that Japan's forward participation in GVCs is lower than in the original OECD-WTO TiVA indicators when we take plant heterogeneity within industries into account. We infer that this result is due to higher cross-border production fragmentation as well as the large presence of multinational companies and intra-industry trade in the manufacturing sector.
    Date: 2017–10
  14. By: Joseph Hughes (Rutgers University); Choon-Geol Moon (Hanyang University)
    Abstract: We develop a novel technique to decompose banks’ ratio of nonperforming loans to total loans into two components: first, a minimum ratio that represents best-practice lending given the volume and composition of a bank’s loans, the average contractual interest rate charged on these loans, and market conditions such as the average GDP growth rate and market concentration; and, second, a ratio, the difference between the bank’s observed ratio of nonperforming loans and the best-practice minimum ratio, that represents the bank’s proficiency at loan making. The best-practice ratio of nonperforming loans, the ratio a bank would experience if it were fully efficient at credit-risk evaluation and loan monitoring, represents the inherent credit risk of the loan portfolio and is estimated by stochastic frontier techniques. We apply the technique to 2013 data on top-tier U.S. bank holding companies. We divide them into five size groups. The largest banks with consolidated assets exceeding $250 billion experience the highest ratio of nonperformance among the five groups. Moreover, the inherent credit risk of their lending is the highest among the five groups. On the other hand, their inefficiency at lending is one of the lowest among the five. Thus, the high ratio of nonperformance of the largest financial institutions appears to result from lending to riskier borrowers, not inefficiency at lending. Small community banks under $1 billion also exhibit higher inherent credit risk than all other size groups except the largest banks. In contrast, their loan-making inefficiency is highest among the five size groups. Restricting the sample to publicly traded bank holding companies and gauging financial performance by market value, we find the ratio of nonperforming loans to total loans is on average negatively related to financial performance except at the largest banks. When nonperformance is decomposed into inherent credit risk and lending inefficiency, taking more inherent credit risk enhances market value at many more large banks while lending inefficiency is negatively related to market value at all banks. Market discipline appears to reward riskier lending at large banks and discourage lending inefficiency at all banks.
    Keywords: commercial banking, credit risk, nonperforming loans, lending efficiency
    JEL: G21 L25 C58
    Date: 2017–10–30
  15. By: John Haltiwanger; Henry Hyatt; Erika McEntarfer
    Abstract: In this paper, we use linked employer-employee data to study the reallocation of heterogeneous workers between heterogeneous firms. We build on recent evidence of a cyclical job ladder that reallocates workers from low productivity to high productivity firms through job-to-job moves. In this paper we turn to the question of who moves up this job ladder, and the implications for worker sorting across firms. Not surprisingly, we find that job-to-job moves reallocate younger workers disproportionately from less productive to more productive firms. More surprisingly, especially in the context of the recent literature on assortative matching with on-the-job search, we find that job-to- job moves disproportionately reallocate less-educated workers up the job ladder. This finding holds even though we find that more educated workers are more likely to work with more productive firms. We find that while highly educated workers are less likely to match to low productivity firms, they are also less likely to separate from them, with less-educated workers both more likely to separate to a better employer in expansions and to be shaken off the ladder (separate to nonemployment) in contractions. Our findings underscore the cyclical role job-to-job moves play in matching workers to better paying employers.
    Date: 2017–01

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