nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒12‒03
nineteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. The Difference Approach to Productivity Measurement and Exact Indicators By Diewert, W. Erwin; Fox, Kevin J.
  2. Temperature Effects on Productivity and Factor Reallocation: Evidence from a Half Million Chinese Manufacturing Plants By Peng Zhang; Olivier Deschenes; Kyle C. Meng; Junjie Zhang
  3. Role of Institutional Environment in Preference of HPWS by Banks in Russia By Bordunos, Aleksandra K.; Kosheleva, Sofia V.
  4. Outlook for the Philippine Economy and Agro-Industry to 2030: The Role of Productivity Growth By Briones, Roehlano M.
  5. Credit misallocation during the European financial crisis By Fabiano Schivardi; Enrico Sette; Guido Tabellini
  6. Production Flexibility, Misallocation and Total Factor Productivity By Burak R. Uras; Ping Wang
  7. Relative Prices and Sectoral Productivity By Margarida Duarte; Diego Restuccia
  8. Benchmarking the Performance of Saint-Petersburg Public Hospitals By Fedotov, Yuri V.; Iablonskii, Kazimir P.
  9. Working long hours: less productive but less costly? Firm-level evidence from Belgium By Françoise Delmez; Vincent Vandenberghe
  10. Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey By Yao Amber Li; Valerie Smeets; Frederic Warzynski
  11. The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services By Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
  12. On the Allocation of Time - A Quantitative Analysis of the Roles of Taxes and Productivities By Duernecker, Georg; Herrendorf, Berthold
  13. Corporate Governance System and Regional Heterogeneity: Evidence from East and West Russia By Iwasaki, Ichiro
  14. School reforms and pupil performance By Eyles, Andrew; Hupkau, Claudia; Machin, Stephen
  15. Social Capital of Board of Directors and Financial Performance: Evidence from Russian Companies By Kachura, Egor; Garanina, Tatiana A.
  16. Wage Inequality and Innovative Intelligence-Biased Technological Change By Harashima, Taiji
  17. The Substitution Effect and the Profit Function in Consumption: expressions from the Marshallian, Hicksian, and Frischian demand functions By Gimenez-Nadal, Jose Ignacio; Molina, Jose Alberto
  18. Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics By Erik Brynjolfsson; Daniel Rock; Chad Syverson
  19. What drives differences in management? By Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John

  1. By: Diewert, W. Erwin; Fox, Kevin J.
    Abstract: There are many decompositions of productivity growth for a production unit that rely on the ratio approach to index number theory. However, the business and accounting literatures tend to favour using differences rather than ratios. In this paper, three analogous decompositions for productivity growth in a difference approach to index number theory are obtained. The first approach uses the production unit’s value added function in order to obtain a suitable decomposition. It relies on various first order approximations to this function, but the decomposition can be given an axiomatic interpretation. The second approach uses the cost constrained value added function and assumes that the reference technology for the production unit can be approximated by the free disposal conical hull of past observations of inputs used and outputs produced by the unit. The final approach uses a particular flexible functional form for the producer’s value added function and provides an exact decomposition of normalized value added.
    Keywords: Productivity measurement, index numbers, indicator functions, the Bennet indicator
    JEL: C43 D24 D33 E23 E31 O47
    Date: 2017–11–24
  2. By: Peng Zhang; Olivier Deschenes; Kyle C. Meng; Junjie Zhang
    Abstract: This paper uses detailed production data from a half million Chinese manufacturing plants over 1998-2007 to estimate the effects of temperature on firm-level total factor productivity (TFP), factor inputs, and output. We detect an inverted U-shaped relationship between temperature and TFP and show that it primarily drives the temperature-output effect. Both labor- and capital- intensive firms exhibit sensitivity to high temperatures. By mid 21st century, if no additional adaptation were to occur, we project that climate change will reduce Chinese manufacturing output annually by 12%, equivalent to a loss of $39.5 billion in 2007 dollars. This implies substantial local and global economic consequences as the Chinese manufacturing sector produces 32% of national GDP and supplies 12% of global exports.
    JEL: L60 O14 O44 Q54 Q56
    Date: 2017–11
  3. By: Bordunos, Aleksandra K.; Kosheleva, Sofia V.
    Abstract: This qualitative research aims to explore reasons behind banksÙ revealed preference of High Performance Work System (HPWS). Theoretical base form Institutional and Self-Determination theories. The data was analysed using theoretical thematic analysis on a latent level method, voluntary disclosure index, correlation analyses, DEA. The paper provides insights on possible reasons preventing companies from applying more suitable HPWS, showcases good case practices of how companies overcome institutional sophistication, and the role of employersÙ engagement in overcoming institutional voids. High Productivity Work System is more beneficial for voluntary disclosure, although banks' technical efficiency is associated with more advanced HPWS types.
    Keywords: High Performance Work System, HPWS, banks, institutional theories, technical efficiency, self determination theory, institutional voids, Russia,
    Date: 2016
  4. By: Briones, Roehlano M.
    Abstract: The main driver of long-run economic growth is total factor productivity. Among the basic sectors, namely, agriculture, industry, and services, inclusiveness of economic growth depends most importantly on agriculture. This study provides growth projections for the Philippine agriculture based on growth in productivity differentiated by basic sector, using a computable general equilibrium model. Scenario analysis finds that the current policy thrust for agriculture of subsidizing capital cost slightly accelerates growth of agriculture, but slows down overall growth by reducing capital formation. Meanwhile, maintaining productivity growth for industry-service at trend, notwithstanding weak growth of agriculture, suffices to reach government plan targets. Productivity growth of agriculture impacts strongly on agriculture itself, but not on the industry-services sectors; conversely, productivity growth in the latter strongly impacts on itself and the gross domestic product, but not on agriculture. The study suggests that policies emphasize the acceleration of productivity growth in the long run across all sectors, but especially in agriculture. Currently, forward and backward linkages of agriculture matter little to economic growth, increasing growth interactions across the basic sectors.
    Keywords: Philippines, Philippine economy, agriculture, agro-industry, computable general equilibrium, CGE, total factor productivity, growth projections
    Date: 2017
  5. By: Fabiano Schivardi; Enrico Sette; Guido Tabellini
    Abstract: Do banks with low capital extend excessive credit to weak firms, and does this matter for aggregate efficiency? Using a unique dataset that covers almost all bank-firm relationships in Italy in the period 2004-2013, we find that during the Eurozone financial crisis (i) undercapitalized banks were less likely to cut credit to non-viable firms; (ii) credit misallocation increased the failure rate of healthy firms and reduced the failure rate of non-viable firms and (iii) nevertheless, the adverse effects of credit misallocation on the growth rate of healthier firms were negligible, as were the effects on TFP dispersion. This goes against previous influential findings, which, we argue, face serious identification problems. Thus, while banks with low capital can be an important source of aggregate inefficiency in the long run, their contribution to the severity of the great recession via capital misallocation was modest.
    Keywords: bank capitalization, zombie lending, capital misallocation
    JEL: D23 E24 G21
    Date: 2017–11
  6. By: Burak R. Uras; Ping Wang
    Abstract: Economy-wide institutional deficiencies causing factor misallocation have been emphasized as essential determinants of aggregate TFP differences. This paper argues that production flexibility at the micro-level is an economic characteristic that should be given priority in TFP aggregation exercises. We investigate a heterogeneous firms model with two distinct notions of flexibility: (i) the firm-specific capacity to optimize over a set of production techniques that serve to organize capital and labor; and, (ii) the industry-specific substitutability between efficient units of capital and labor. We show the presence of a strong interaction between "ability to choose techniques" and "input substitutability": high complementarity at the industry-level amplifies imperfections associated with techniques choice at the firm-level. Using the micro-founded structure, we develop measures for factor, output and technique distortions across a distribution of firms and quantify their TFP effects. For a broad range of U.S. manufacturing industry clusters, technique distortions generate more TFP losses than misallocation resulting from capital and output distortions, with larger TFP gains from removing technique distortions in industries that exhibit high degrees of factor complementarity. Our key quantitative results are robust to outliers, production function specification, mismeasurement and parameterization of the model and are strongly present in developing country datasets.
    JEL: D24 E23 O11 O33
    Date: 2017–10
  7. By: Margarida Duarte; Diego Restuccia
    Abstract: The relative price of services rises with development. A standard interpretation of this fact is that productivity differences across countries are larger in manufacturing than in services. The service sector comprises heterogeneous categories. We document that many disaggregated service categories—such as transportation, communication, and finance—feature a negative income elasticity of relative prices, whereas the relative price of aggregate services is mostly driven by large expenditure categories in housing, health, and education that feature a positive income elasticity of relative prices. We also document a substantial reallocation of expenditures in services from categories with positive income elasticities (traditional services) to categories with negative elasticities (non-traditional services) as income raises. Using an otherwise standard multi-sector development accounting framework extended to include an input-output structure, we find that the cross-country income elasticity of sectoral productivity is large in non-traditional services (1.14), smaller in manufacturing (1.06) and much smaller in traditional services (0.67). We also find that heterogeneity in services has a substantial impact on aggregate productivity and that the input-output structure is important in this assessment.
    JEL: O1 O4
    Date: 2017–10
  8. By: Fedotov, Yuri V.; Iablonskii, Kazimir P.
    Abstract: The paper starts with the analysis of regulation on performance measurement of Saint-Petersburg public healthcare organizations (HCOs) issued by the City Administration in 2012. It is followed by critical overview of the approaches to performance measurement in healthcare. Special attention is given to the frontier models of measuring the HCOÙ³ operational efficiency and discussion of obtained results, The latter is extended with the performance model developed according to the NeelyÙ³ Ü°erformance prismÝ (Neely & Adams, 2002) which is then used to benchmark the performance of St.Petersburg public HCOs.
    Keywords: public hospitals, performance, benchmarking, St.Petersburg,
    Date: 2016
  9. By: Françoise Delmez (University of Namur, Economics Department); Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: From the point of view of a profit-maximizing firm, the optimal number of working hours depends not only on the marginal productivity of hours but also on the marginal labour cost. This paper develops and assesses empirically a simple model of firms' decision making where productivity varies with hours and where the firm faces labour costs per worker that are invariant to the number of hours worked: i.e. quasi-fixed labour costs. Using Belgian firm-level data on production, labour costs, workers and hours, and focusing of the estimation of workers/hours elasticities of isoquant and isocost, we find evidence of the declining productivity of hours, but also of quasi-fixed labour costs in the range of 20% of total labour costs. We also show that industries with larger estimated quasi-fixed labour costs display higher annual working hours and make less use of part-time contracts. The tentative conclusion is that firms facing large quasi-fixed labour costs are enticed to raise working hours (or oppose their reduction), even if this results in lower labour productivity.
    Keywords: men vs hours, working hours, imperfect substitutability, labour costs
    JEL: J22 J23 C13
    Date: 2017–11–17
  10. By: Yao Amber Li (Hong Kong University of Science and Technology); Valerie Smeets (Department of Economics and Business Economics, Aarhus University, Denmark); Frederic Warzynski (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially (and probably not surprisingly) large for firms involved in this type of contractual arrangements.
    Keywords: Productivity, prices, processing trade, China
    JEL: L2 D2 F14
    Date: 2017–11–23
  11. By: Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
    Abstract: We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.
    Keywords: Technology adoption; bank performance; financial services; network innovation; SWIFT
    JEL: F3 G3
    Date: 2017–03
  12. By: Duernecker, Georg; Herrendorf, Berthold
    Abstract: Basic theory suggests that increases in labor-income taxes induce people to substitute household production for market work. Time-use surveys for 12 OECD countries during 1970-2010, however, show that instead people substituted leisure for market work. To understand why this happened, we carefully measure the labor productivity of household production and find that it grew strongly in many countries of our sample. Employing a calibrated model of household production, we show that strong growth in the labor productivity of household production implies that leisure absorbs the reductions in market work after labor-income tax increases.
    Keywords: Household production; income tax; labor productivity; leisure
    JEL: E1 J4
    Date: 2017–10
  13. By: Iwasaki, Ichiro
    Abstract: Using a unique firm-level dataset obtained from a large-scale questionnaire survey conducted in late 2015, we examined the generality and heterogeneity of corporate governance systems between the eastern and western regions of Russia. The survey results strongly suggest that various characteristics of corporate governance systems observed in industrial firms and listed companies are, in fact, common and long-term trends that are seen across all Russian business sectors. At the same time, however, we also found pronounced regional heterogeneity between the eastern and western regions, with companies in the east being more reluctant than those in the west to introduce a governance system to monitor and supervise top management. Regression analysis shows that this finding is robust, even after a series of firm-level attributes are simultaneously controlled for.
    Keywords: corporate governance system, legal form of incorporation, board of directors, audit system, regional heterogeneity, Russia
    JEL: D22 G34 L22 M42 P25 P31
    Date: 2017–11
  14. By: Eyles, Andrew; Hupkau, Claudia; Machin, Stephen
    Abstract: The relationship between school reforms, specifically those involving the introduction of new school types, and pupil performance is studied. The particular context is the introduction of academy schools in England, but related evidence on Swedish free schools and US charter schools is also presented. The empirical evidence shows a positive causal impact of the conversion of disadvantaged schools to academies on end of school pupil performance and on the subsequent probability of degree completion at university. There is heterogeneity in this impact, such that more disadvantaged pupils and those attending London academies experience bigger performance improvements.
    Keywords: academies; school reform; school anatomy; pupil performance
    JEL: I20 I21 I28
    Date: 2016–08–01
  15. By: Kachura, Egor; Garanina, Tatiana A.
    Abstract: The purpose of the empirical research is to determine the existence of relationship between social capital of board of directors expressed through the presence of directors with experience in governmental institutions and companiesÙ financial performance. In order to achieve the goal information about the structure of board of directors and financial performance results of 134 public Russian companies in 2012 and 2013 was collected from open sources. The results of the research revealed the existence of positive relationship between the presence at board of directors who are former public servants and market capitalization of Russian companies. Significant models, however, were found only for the market capitalization as the dependent variable, not for such accounting variable as return on assets (ROA).
    Keywords: board of directors, social capital, government cooperation, return on assets, ROA, empirical research, board of directors, governmental institutions,
    Date: 2016
  16. By: Harashima, Taiji
    Abstract: In this paper, “innovative intelligence–biased technological change” (IIBTC) is examined as an alternative to the traditional concept of skill-biased technological change (SBTC) as a source of increases in wage inequality. The innovative intelligence of ordinary or average workers is an important element in productivity and can be heterogeneous across workers. Because technologies are heterogeneous in that they have different characteristics and are used in different situations, some technologies are “innovative intelligence-biased” and are advantageous for workers with relatively high innovative intelligence. If IIBTC prevails over a certain period of time, these workers become additionally advantaged and thereby wage inequality will increase during the period.
    Keywords: Wage inequality; Innovative intelligence; Technological change; Total factor productivity; Approximate effective production function
    JEL: D24 D63 J31
    Date: 2017–11–02
  17. By: Gimenez-Nadal, Jose Ignacio; Molina, Jose Alberto
    Abstract: In the context of the maximizing behaviour assumption (Becker, 1976), an individual usually maximizes the utility function, minimizes the cost or, finally, can also maximizes the profit function in consumption, with each of these three optimization problems providing a type of demand function: the Marshallian, the Hicksian, and the Frischian. In all three cases, an important concept for both theoretical and empirical reasons is the Substitution Effect (SE), with this measuring the substitution phenomenon in the demanded quantity in function of the price change. In this context, our short paper offers certain alternative theoretical expressions of the Substitution Effect, focusing on the Profit Function in Consumption, thus introducing the inter-temporal context with perfect information.
    Keywords: Demand analysis; Substitution Effect; Profit Function in Consumption; Marshallian, Hicksian and Frischian demand functions
    JEL: D11
    Date: 2017–10–28
  18. By: Erik Brynjolfsson; Daniel Rock; Chad Syverson
    Abstract: We live in an age of paradox. Systems using artificial intelligence match or surpass human level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices. Yet measured productivity growth has declined by half over the past decade, and real income has stagnated since the late 1990s for a majority of Americans. We describe four potential explanations for this clash of expectations and statistics: false hopes, mismeasurement, redistribution, and implementation lags. While a case can be made for each, we argue that lags have likely been the biggest contributor to the paradox. The most impressive capabilities of AI, particularly those based on machine learning, have not yet diffused widely. More importantly, like other general purpose technologies, their full effects won’t be realized until waves of complementary innovations are developed and implemented. The required adjustment costs, organizational changes, and new skills can be modeled as a kind of intangible capital. A portion of the value of this intangible capital is already reflected in the market value of firms. However, going forward, national statistics could fail to measure the full benefits of the new technologies and some may even have the wrong sign.
    JEL: D2 O3 O4
    Date: 2017–11
  19. By: Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
    Abstract: Partnering with the Census we implement a new survey of “structured” management practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices across plants, with 40% of this variation across plants within the same firm. This management variation accounts for about a fifth of the spread of productivity, a similar fraction as that accounted for by R&D, and twice as much as explained by IT. We find evidence for four “drivers” of management: competition, business environment, learning spillovers and human capital. Collectively, these drivers account for about a third of the dispersion of structured management practices.
    Keywords: management; productivity; competition; learning
    JEL: J50
    Date: 2017–03

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