nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒12‒18
sixteen papers chosen by

  1. The Productivity Puzzle and Misallocation: an Italian Perspective By S. Calligaris; M. Del Gatto; F. Hassan; G. I.P. Ottaviano; F. Schivardi
  2. Do creditor rights and information sharing affect the performance of foreign banks? By Emmanuel C. Mamatzakis; Antonios Kalyvas
  4. Technology-specific Production Functions By M. Battisti; F. Belloc; M. Del Gatto
  5. A new stochastic frontier model with cross-sectional effects in both noise and inefficiency terms By Orea, Luis; Álvarez, Inmaculada C.
  6. Aggregate multi-factor productivity: Measurement issues in OECD countries By Balázs Égert
  7. The Long-run Effects of Agricultural Productivity on Conflict, 1400-1900 By Murat Iyigun; Nathan Nunn; Nancy Qian
  8. The Effect of Firm Entry on Capacity Utilization and Macroeconomic Productivity By Huw Dixon; ANTHONY SAVAGAR
  9. Quantile Approach for Distinguishing Agglomeration from Firm Selection in Stata By KONDO Keisuke
  10. Why do manufacturing firms produce services? Evidence for the servitization paradox in Belgium By Catherine Fuss; Pierre Blanchard; Claude Mathieu
  11. Does hospital competition improve efficiency? The effect of the patient choice reform in England By Francesco Longo; Luigi Siciliani; Giuseppe Moscelli; Hugh Gravelle
  13. Productivity and Wage Premiums: Evidence from Vietnamese Ordinary and Processing Exporters By Mai T.P. Vu; Flora Bellone; Marion Dovis
  14. Production Efficiency and Profit Taxation By Stéphane Gauthier; Guy Laroque
  15. Is Job Polarization a Recent Phenomenon? Evidence from Sweden, 1950–2013, and a Comparison to the United States By Gustavsson, Magnus
  16. The Postwar British Productivity Failure By Crafts, Nicholas

  1. By: S. Calligaris; M. Del Gatto; F. Hassan; G. I.P. Ottaviano; F. Schivardi
    Abstract: Productivity has recently slowed down in many economies around the world. A crucial challenge in understanding what lies behind this " productivity puzzle" is the still short time span for which data can be analysed. An exception is Italy where productivity growth started to stagnate 25 years ago. Italy therefore offers an interesting case to investigate in search of broader lessons that may hold beyond local specificities. We find that resource misallocation has played a sizeable role in slowing down Italian productivity growth. If misallocation had remained at its 1995 level, in 2013 Italy's aggregate productivity would have been 18% higher than its actual level. Misallocation has mainly risen within sectors than between them, increasing more in sectors where the world technological frontier has expanded faster. Relative specialization in those sectors explains the patterns of misallocation across geographical areas and firm size classes. The broader message is that an important part of the explanation of the productivity puzzle may lie in the rising difficulty of reallocating resources between firms in sectors where technology is changing faster rather than between sectors with different speeds of technological change.
    Keywords: misallocation;tfp;productivity;Productivity Puzzle;italy
    Date: 2017
  2. By: Emmanuel C. Mamatzakis (University of Sussex); Antonios Kalyvas (University of Sussex)
    Abstract: This paper examines the effect of host economy creditor rights and information sharing on the profit performance of foreign banks vis-a-vis domestic banks for a global sample of commercial banks over the 2005-2009 period. To this end, we employ the recent foreign bank ownership dataset of Claessens and Van Horen (2014) and measure performance as profit efficiency using the alternative profit function. Results from the Battese and Coelli (1995) stochastic frontier analysis model show that creditor rights exert a positive effect on efficiency that strengthens for foreign banks. On the other hand, information sharing exerts a negative effect on profit efficiency which strengthens for foreign banks. The results for information sharing show some variability across different levels of development of the host economy. Moreover, the transparency of the host economy moderates the effect of creditor rights and information sharing on foreign bank efficiency. We also examine the effect of “institutional distance” in creditor rights and information sharing between the home and host economy on foreign bank efficiency. The effect of creditor rights “institutional distance” on foreign bank efficiency is negative, while it turns positive for information sharing. These findings highlight the importance of strong creditor rights for foreign bank performance and are useful for both regulators in host economies and foreign bank managers.
    Keywords: Foreign Banks; Liability of Foreignness; Profit Efficiency; Creditor Rights, Information Sharing
    JEL: F21 F23 G21 G28
    Date: 2017–07
  3. By: Baum, Christopher F (Department of Economics, Boston College, Chestnut Hill, MA and Department of Macroe- conomics, DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper studies firms' capability to recombine internal and local knowledge. It measures the outcome in terms of total productivity growth.Using Swedish data on commuting time for face-to-face contacts across all 290 municipalities, we employ a time sensitive approach for calculating localized knowledge within a municipality and and its close neighbors. Internal knowledge is captured by register data on firms' innovation intensity. The two sources of knowledge are modeled in a production function setting by discrete composite variables with different combinations of input factors. Applying the model on Swedish firm level panel data, we find strong evidence of differences in the capacity to benefit from external knowledge among persistent innovators, temporary innovators and non-innovators. The results are consistent regardless of whether innovation efforts are measured in terms of the frequency of patent applications or the level of R&D investment.
    Keywords: Innovation strategies; localized knowledge; patents; TFP growth; panel data
    JEL: C23 O31 O32
    Date: 2017–12–12
  4. By: M. Battisti; F. Belloc; M. Del Gatto
    Abstract: We rely on mixture models to estimate technology-specific production functions avoiding any type of ex-ante assumption on the degree of technological sharing across firms and leaving the number of available technologies unconstrained. Internationally comparable firm-level data are used, to potentially capture all possible technologies available worldwide. Differently from conventional TFP estimates, where the terms "TFP", "productivity" and "technology" are often used interchangeably, our approach enables us to isolate the contribution to labour productivity stemming from technology (i.e. between-technology TFP) from the contribution associated to idiosyncratic productivity shocks not related to technology (i.e. within-technology TFP). While we find the former to be much larger than the latter in most sectors, the relative role of these two dimensions varies considerably across firms, being often reversed. We also find that the firm-level gaps are non-linearly correlated with the international flows of technology, as measured by the OECD country-sector technology payments and receipts. In particular, we show higher incoming (outcoming) flows of technology to be associated to higher (lower) average and dispersion of the between-technology TFP gaps. This stresses the growing importance of the availability of internationally comparable data in dealing with the technological dimension of firm-level productivity.
    Keywords: tfp;technology adoption;production function estimation;mixture models
    Date: 2017
  5. By: Orea, Luis; Álvarez, Inmaculada C.
    Abstract: This paper develops a new stochastic frontier model that allows for cross-sectional (spatial) correlation in both the noise and inefficiency terms. The model proposed is useful in efficiency analyses when there are omitted but spatially-correlated variables and firms benefit from best practices implemented by other (adjacent) firms. Unlike the previous literature, our model can be estimated by maximum likelihood using standard software. The model is illustrated with an application to the Norwegian electricity distribution sector.
    Date: 2017
  6. By: Balázs Égert
    Abstract: This paper analyses for 34 OECD countries the extent to which the calculation of aggregate multi-factor productivity (MFP) is sensitive to alternative parameterisations. The starting point is the definition of MFP used in previous work in the OECD’s Economics Department (e.g. Johansson et al. 2013). They include alternative MFP measures, with human capital included or excluded, with different measures of Purchasing Power Parity (PPP) exchange rates, using time-varying capital depreciation rates and different measures of capital stock and labour input (headcount against hours worked). The main result of the paper is that whether or not human capital is included in MFP makes a significant difference for the level and dynamics of MFP. At the same time, MFP measures are less sensitive to other parameters of the calculation.
    Keywords: human capital, measurement, multi-factor productivity, OECD
    JEL: C23 C51 J2 L43 L51 O4
    Date: 2017–11–29
  7. By: Murat Iyigun; Nathan Nunn; Nancy Qian
    Abstract: This paper provides evidence of the long-run effects of a permanent increase in agricultural productivity on conflict. We construct a newly digitized and geo-referenced dataset of battles in Europe, the Near East and North Africa covering the period between 1400 and 1900 CE. For variation in permanent improvements in agricultural productivity, we exploit the introduction of potatoes from the Americas to the Old World after the Columbian Exchange. We find that the introduction of potatoes permanently reduced conflict for roughly two centuries. The results are driven by a reduction in civil conflicts.
    JEL: D74 O13 Q34
    Date: 2017–11
  8. By: Huw Dixon (Cardiff University); ANTHONY SAVAGAR (University of Kent)
    Abstract: This paper argues that firm entry causes endogenous fluctuations in macroeconomic productivity through its effect on incumbent firms’ capacity utilization. The analysis shows that imperfect competition causes long-run excess entry leading to many small firms each with excess capacity. Since entry occurs slowly, macroeconomic shocks are initially borne by these incumbents who respond by altering their capacity utilization. As they vary utilization efficiency changes because of non-constant returns to scale and this aggregates to affect the economy’s productivity. In the long run, entry occurs and new firms dissipate the shock, which alleviates incumbents’ alteration in capacity. Therefore the endogenous productivity effect is temporary.
    Date: 2017
  9. By: KONDO Keisuke
    Abstract: Firms and workers, on average, are more productive in larger cities. One possible explanation which has been studied for a long time is that firms and workers in larger cities benefit from agglomeration economies. Another possible explanation is that the higher concentration of economic activities in larger cities forces tougher competition, and less productive firms cannot survive there. To distinguish agglomeration from firm selection, Combes et al. (2012, "The productivity advantages of large cities: Distinguishing agglomeration from firm selection," Econometrica, vol. 80) newly propose a quantile approach. This paper introduces the estquant command that implements their quantile approach in Stata. Our Monte Carlo experiments emphasize the importance of simultaneously considering agglomeration and selection.
    Date: 2017–03
  10. By: Catherine Fuss (Economics and Research Department, NBB); Pierre Blanchard (UPEC); Claude Mathieu (UPEC)
    Abstract: The increasing role of services in GDP results from the growing share of service industries, but also from the fact that firms produce services along with goods. This paper investigates the determinants of service provision by manufacturing firms. First, it develops a model of differentiated products with, on the demand side, complementarities between the firm’s goods and services, and, on the supply side, rivalry in the allocation of expertise between the production of goods and the provision of services. Second, it provides an econometric assessment of the determinants of servitization for manufacturing firms, using a fractional Probit model with heterogeneity, controlling for endogeneity with respect to unobserved firm characteristics. Both the theoretical model and empirical estimates point to a non-linear relationship between servitization and firm productivity. The relationship is further shaped by the sector environment as well as intrinsic characteristics of the goods and services supplied.
    Keywords: Services, multi-product firms, firm behavior, Total Factor Productivity, panel data analysis, non linear model.
    JEL: D24 D29 L11 L22 L23 L25
    Date: 2017–11
  11. By: Francesco Longo (Centre for Health Economics, University of York, York, UK.); Luigi Siciliani (Department of Economics and Related Studies, University of York, York, UK.); Giuseppe Moscelli (Centre for Health Economics, University of York, York, UK.); Hugh Gravelle (Centre for Health Economics, University of York, York, UK.)
    Abstract: We use the 2006 relaxation of constraints on patient choice of hospital in the English NHS to investigate the effect of hospital competition on dimensions of efficiency including indicators of resource management (admissions per bed, bed occupancy rate, proportion of day cases, cancelled elective operations, proportion of untouched meals) and costs (cleaning services costs, laundry and linen costs, reference cost index for overall and elective activity). We employ a quasi difference-indifference approach and estimate seemingly unrelated regressions and unconditional quantile regressions with data on hospital trusts from 2002/03 to 2010/11. Our findings suggest that increased competition had mixed effects on efficiency. An additional equivalent rival increased admissions per bed and the proportion of day cases by 1.1 and 3.8 percentage points, and reduced the proportion of untouched meals by 3.5 percentage points, but it also increased the number of cancelled elective operations by 2.6%. Unconditional quantile regression results indicate that hospitals with low efficiency, as measured by few
    Keywords: competition, efficiency, choice, hospital, difference-in-difference
    JEL: C21 H51 I11 I18 L1
    Date: 2017–11
  12. By: Liis Roosaar, Jaan Masso, Urmas Varblane
    Abstract: This paper aims to clarify how changes in the age and wage composition of the labour force are related to the productivity of firms over the business cycle. Based on a matched employer-employee database of Estonian firms from 2006–2014, we decompose changes in the labour force and distinguish between hired, separated and staying workers. Considering the age and wage of workers, we link changes in the labour force to changes in productivity. Using fixed effect panel data analysis we indicate that among high-waged employees middle-aged are the most productive, the productivity decreases with age but remains higher for old compared to young. the increase in labour productivity is supported by the decreasing share of employees with the lowest productivity. The share of high-income employees was reduced in the crisis and later mostly low-income employees were hired. In addition, structural changes have accelerated the process of ageing. There are, however, sector-specific differences because in knowledge intensive services, ageing is not as prevalent as in industry. We also show that labour productivity is higher in the youngest quartile than in the oldest quartile of enterprises in all four periods.
    Keywords: productivity, labour productivity, ageing, Estonia
    JEL: J23 J24 J31 J63 M51
    Date: 2017
  13. By: Mai T.P. Vu (Foreign Trade University); Flora Bellone (Université Côte d'Azur; GREDEG CNRS); Marion Dovis (Aix-Marseille University; GREQAM)
    Abstract: We propose some new stylized facts on Vietnamese exporters that emphasize firm heterogeneity in trade regimes and firm ownership. We show first that the distribution of firms export intensities is U-shaped with more than half of Vietnamese exporters exporting more than 50% of their output. This contrasts with the export patterns in industrialized countries but is similar to the export intensity distribution for other emerging economies with strong participation in global value chains. Second, we show that export premia, evaluated in terms of both productivity and wage indexes, are positive only for Vietnamese exporters involved primarily in ordinary trade, and that processing exporters exhibit lower productivity indexes and pay lower wages than their non-exporting counterparts. This pattern is more pronounced among the group of foreign-owned firms in Vietnam compared to the group of domestic firms and is in line with previous ndings for China.
    Keywords: Processing trade, wage, firm productivity, firm-level data, Vietnam
    JEL: F10 F14 L60
    Date: 2017–12
  14. By: Stéphane Gauthier (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Guy Laroque (Sciences-Po - Département d'Economie, UCL - University College of London [London], Institute for Fiscal Studies)
    Abstract: Consider a simple general equilibrium economy with one representative consumer, a single competitive firm and the government. Suppose that the government has to finance public expenditures using linear consumption taxes and/or a lump-sum tax on profits redistributed to the consumer. This note shows that, if the tax rate on profits cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less efficient profit-generating decreasing returns to scale technology.
    Keywords: optimal taxation,taxation of profits,production efficiency
    Date: 2017–10
  15. By: Gustavsson, Magnus (Department of Economics)
    Abstract: In this paper, I first show that Swedish job polarization is––contrary to common belief––a long-run phenomenon: the share of middle-wage jobs has declined relative to the highest- and lowest-paid jobs since at least the 1950s. Based on previous results for the US, I then demonstrate that the same major employment shifts across routine and nonroutine jobs drive long-run job polarization in both Sweden and the US. In particular, the shrinking manufacturing sector, with the subsequent decline of routine manual (blue-collar) jobs, stands out as the main explanation for why job polarization is a long-run phenomenon. However, consistent with the hypothesis of routine-biased technological change, both countries display across-the-board declines of routine jobs from around the 1980s, as well as polarizing employment patterns not only between but also within industries. But despite these trend breaks, Sweden actually experienced a stronger job-polarization process—a more pronounced hollowing out of the job-wage distribution—in the pre- than in the post 1980-era.
    Keywords: Automation; Industrial Composition; Routine-Biased Technological Change; Routinization; Structural Change
    JEL: J21 J23 N10 N30 O33
    Date: 2017–11–16
  16. By: Crafts, Nicholas (University of Warwick)
    Abstract: British productivity growth disappointed during the early postwar period. This reflected inadequate investment in equipment and skills but also entailed inefficient use of inputs. Weak management, dysfunctional industrial relations, and badly-designed economic policy were all implicated. The policy framework was partly the result of seeking low unemployment through wage restraint by appeasement of organized labour. A key aspect was weak competition. This exacerbated corporategovernance and industrial-relations problems in the British 'variety of capitalism' which sustained low effort bargains and managerial incompetence. Other varieties of capitalism were better placed to achieve fast growth but were infeasible for Britain given its history.
    Keywords: competition; productivity; relative economic decline; varieties of capitalism JEL Classification: N14; O62; P170
    Date: 2017

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