nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒03‒12
eighteen papers chosen by

  1. Compositional changes in aggregate productivity in an era of globalisation and financial crisis By Catherine Fuss; Angelos Theodorakopoulos
  2. Nonparametric identification of unobserved technological heterogeneity in production By Laurens Cherchye; Thomas Demuynck; Bram De Rock; Marijn Verschelde
  3. Importance of EU Regional Support Programmes for Firm Performance By Konstantins Benkovskis; Olegs Tkacevs; Naomitsu Yashiro
  4. Estimating risk efficiency in MiddleEast banks before and after the crisis.A Metafrontier framework. By Colesnic, Olga; Kounetas, Kostas; Polemis, Michael
  5. Is there a market value for energy performance in a local private housing market? An efficiency analysis approach By Déborah Leboullenger; Frédéric Lantz; Catherine Baumont
  6. Firms Left Behind: Emigration and Firm Productivity By Yvonne Giesing; Nadzeya Laurentsyeva
  7. Improving the performance of sub-national governments through benchmarking and performance reporting By Leah Phillips
  8. Are ecosystem services complementary or competitive? An econometric analysis of cost functions from private forests in Vietnam By Cosmas Kombat Lambini; Trung Thanh Nguyen; Jens Abildtrup; Van Dien Pham; John Tenhunen; Serge Garcia
  9. Do Mincerian wage equations inform how schooling influences productivity? By Christian Groth; Jakub Growiec
  10. The efficiency of Portuguese Technology Transfer Offices and the importance of university characteristics By Aurora Teixeira; André Monteiro
  11. Computerizing Industries and Routinizing Jobs: Explaining Trends in Aggregate Productivity By Aum, Sangmin; Lee, Tim; Shin, Yongseok
  12. The Impact of Management Practices on SME Performance By Alex Bryson; John Forth
  13. Aggregate Consequences of Credit Subsidy Policies: Firm Dynamics and Misallocation By Hwan Jo; Tatsuro Senga
  14. Misallocation, Markups, and Technology By Bayer, Christian; Meier, Matthias
  15. The effect of entrepreneurial origin on firms’ performance - The case of Portuguese academic spinoffs By Natália Barbosa; Ana Paula Faria
  16. ICT Adoption in Micro and Small Firms: Can Internet Access Improve Labor Productivity? By Mariana Viollaz
  17. Identifying Productivity Spillovers Using the Structure of Production Networks By Samuel Bazzi; Amalavoyal V. Chari; Shanthi Nataraj; Alexander D. Rothenberg
  18. A Bootstrap Approach for Bandwidth Selection in Estimating Conditional Efficiency Measures By Luiza Badin; Cinzia Daraio; Léopold Simar

  1. By: Catherine Fuss (Economics and Research Department, National Bank of Belgium, Brussels, Belgium); Angelos Theodorakopoulos (VIVES - Research Centre for Regional Economics, KU Leuven,Waaistraat 6 - Box03550, 3000 Leuven, Belgium)
    Abstract: We demonstrate that common modeling assumptions underlying micro-unit productivity indices induce biases in the evolution and decomposition of standard aggregate productivity measures. After controlling for such biases, we decompose aggregate productivity based on groups of economically significant firm types. We show that large incumbent firms that both export and import determine the evolution of aggregate productivity for the Belgian manufacturing sector. Over time, the increase in average productivity outweighs the decline in the covariance between market shares and productivity of this group. The former result stems from stronger learning-by-doing effects for granular firms. The latter suggests an increase in resource misallocation due to market distortions. This pattern intensifies after the 2008 financial crisis. All other firm types, if anything, contribute negatively to aggregate productivity and productivity growth.
    Keywords: Aggregate Productivity, Decomposition, Globalisation, Trade, Granularity, Learning.
    JEL: D24 F14 L25 O47
    Date: 2018–02
  2. By: Laurens Cherchye (Department of economics, University of Leuven. E. Sabbelaan 53, 8500 Kortrijk, Belgium); Thomas Demuynck (ECARES, Université Libre de Bruxelles. avenue F. D. Roosevelt 50, CP 114, 1050 Brussels, Belgium); Bram De Rock (ECARES, Université Libre de Bruxelles. avenue F. D. Roosevelt 50, CP 114, 1050 Brussels, Belgium); Marijn Verschelde (Department of Economics and Quantitative Methods, IÉSEG School of Management, LEM (UMR-CNRS 9221), and Department of Economics, KULeuven)
    Abstract: We propose a novel nonparametric method for the structural identification of unobserved technological heterogeneity in production. We assume cost minimization as the firms' behavioral objective, and we model unobserved heterogeneity as an unobserved productivity factor on which firms condition the input demand of the observed inputs. Our model of unobserved technological differences can equivalently be represented in terms of unobserved\latent capital" that guarantees data consistency with our behavioral assumption, and we argue that this avoids a simultaneity bias in a natural way. Our empirical application to Belgian manufacturing data shows that our method allows for drawing strong and robust conclusions, despite its nonparametric orientation. For example, our results pinpoint a clear link between international exposure and technological heterogeneity and show that primary inputs are in the considered sectors substituted for materials rather than for technology.
    Keywords: production behavior, unobserved heterogeneity, cost minimization, nonparametric identification, simultaneity bias, latent capital, manufacturing
    JEL: C14 D21 D22 D24
    Date: 2018–02
  3. By: Konstantins Benkovskis (Bank of Latvia); Olegs Tkacevs (Bank of Latvia); Naomitsu Yashiro (OECD)
    Abstract: This paper investigates the effects of EU regional support on firms' productivity, the number of employees and other firm performance indicators. For this purpose, a rich firmlevel dataset for Latvia, a country where investment activities are affected by the availability of EU funding, is used. The paper finds that participation in activities cofunded by the ERDF raises firms' input and output soon after they embark on them, while the effect on labour productivity and TFP appears only with a time lag of three years. However, this positive productivity premium is not homogenous across firms and is more likely to materialise in the case of initially less productive and medium-sized/large firms. Furthermore, statistical significance of positive productivity gains is not particularly robust across different estimation procedures. The study also shows that after controlling for investment expenditures, EU sponsored projects are as efficient as the privately financed ones, irrespective of where private financing comes from.
    Keywords: EU funds, productivity, firm-level data, propensity score matching
    JEL: C14 D22 R11
    Date: 2018–02–23
  4. By: Colesnic, Olga; Kounetas, Kostas; Polemis, Michael
    Abstract: The aim of this study is two-fold. Firstly, it attempts to analyse the effect of risk on Middle East bank's efficiency levels before and after the recent financial crisis. Secondly, it seeks to determine the influence of bank size taking into consideration the possible inefficiency originated to risk abatement cost. To examine the aforementioned issues we introduce a risk efficiency index based on an output orientated directional distance function with weak and strong disposability assumptions. The methodology has been applied on a panel data of Middle East banks spanning the period 1998-2014.The empirical findings suggest that on average small banks are more efficient and their size have less negative impact on their technical efficiency and risk management. On the other hand, large banks' risk management is found to be more flexible during financial crisis. Finally, banks with higher fixed assets are associated with more costly dispose of non performing loans justifying the rejection of a positive relation between bank size and technical efficiency.
    Keywords: Risk efficiency, Middle East banks, Directional distance function, Metatechnology
    JEL: D20 D24 G1 G2 G21
    Date: 2018–02–09
  5. By: Déborah Leboullenger; Frédéric Lantz; Catherine Baumont
    Abstract: This paper aims to find evidence of a “green value†in a local housing market using notarial data on a small urban area in France. We use frontier functions, an original approach that departs from customary hedonistic regressions, to model housing market prices as a production set bordered by an efficiency frontier estimated by Data Envelopment Analysis (DEA). The paper tests if difference in prices (i.e. the distance from the frontier) can be explained by energy performance measured as a normalized categorical ascending kWh/m²/year grade (or Energy Performance Certificate -EPC). We show that there is significative evidence for energy performance's market value. The “Green Property Value†is estimated to range between 1% and 3% of the price for medium-high performance buildings. Our findings are robust to the specifications of the first (frontier estimation) and the second stage (residual analysis). We then propose a cost-benefit analysis to evaluate the return on retrofit investment a household would get from higher market value. We find that housing green property value accounts for a part, between 4.6% in houses and 6.6% in collective dwellings, of the real terms investment in energy retrofit. We interpret our findings with regard to spatial dependencies that affect the market and the heterogeneity between the private and the public social housing stocks.
    Keywords: Residential Housing Market, Energy Retrofit, Green Value, Efficiency Analysis, Frontier Functions, Data Envelopment Analysis, Energy Performance Certificates
    JEL: C5 Q41 Q51 R15
    Date: 2018
  6. By: Yvonne Giesing; Nadzeya Laurentsyeva
    Abstract: This paper establishes a causal link between the emigration of skilled workers and firm performance in source countries. Using firm-level panel data from ten Eastern European countries, we show that the emigration of skilled workers lowers firm total factor productivity. We exploit time, country, and industry differences in the opening of EU labor markets from 2004 to 2014 as a source of exogenous variation in the emigration rates from new EU member states. We argue that a potential channel behind this effect relates to the reduction in firm-specific human capital due to a higher worker turnover.
    Keywords: migration, firm productivity, human capital, EU enlargement
    JEL: O15 D24 F22 J24
    Date: 2017
  7. By: Leah Phillips
    Abstract: Performance systems are one tool available to central governments to improve the performance of sub-national service delivery. This paper provides a preliminary review of suitable metrics and mechanisms to reliably measure and monitor the efficiency and quality of public services that are provided by sub-national governments. This review aims to conceptualise the challenges associated with measuring public sector inputs, outputs and outcomes and implementing effective performance systems. Robust performance systems aim to measure both the efficiency and effectiveness of public services, as well measure cost efficiency, to better understand and remedy cost discrepancies across regions. Implementing qualitative mechanisms such as external inspections and user surveys are also useful in providing insights into consumer experience and well-being.
    Keywords: benchmarking systems, public sector productivity, sub-national government performance
    JEL: H44 H77 O43
    Date: 2018–02–27
  8. By: Cosmas Kombat Lambini (Bayreuth Center for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany; Bayreuth Graduate School of Mathematical and Natural Sciences (BayNAT), University of Bayreuth 95440, Bayreuth, Germany); Trung Thanh Nguyen (Institute for Environmental Economics and World Trade, Leibniz University of Hannover, Königsworther Platz 1, 30167 Hannover, Germany); Jens Abildtrup (UMR INRA – AgroParisTech, Laboratoire d’Économie Forestière, 54042 Nancy Cedex, France); Van Dien Pham (Department of Silvilculture, Forestry University, Hanoi, Vietnam); John Tenhunen (Bayreuth Center for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany); Serge Garcia (UMR INRA – AgroParisTech, Laboratoire d’Économie Forestière, 54042 Nancy Cedex, France)
    Abstract: Forest ecosystem services (FES) provisioning and management in Vietnam is highly rated in the Vietnamese’s environmental agenda. The main rationale of private forest management is to maximise profit from timber and non-timber forest products (NTFPs) production. From a social point of view there is an under-supply of positive forest externalities (or non-marketed ecosystem services). The paper contributes to the ecosystem services (ES) literature by assessing the production cost structure, i.e., the cost of marketed production and provision of carbon and biodiversity, based on a survey of private forest owners in the Hoa Binh Province. The econometric analysis is carried out applying a dual cost function approach to analyse the trade-off between forestry costs and ecological performance. This is, to our knowledge, the first time such an approach is applied to estimate the production relationship between marketed outputs and non-marketed ES in the forest sector. This approach appears to be appropriate for handling the multiple joint outputs of production in forest. It allows us to estimate marginal costs and other cost measures such as cost complementarities in production of multiple ES. Our results indicate that there is complementarity in the provision of timber and carbon sequestration and therefore, policies enhancing carbon sequestration in private forest in Vietnam can be implemented without additional costs for the forest owner. We also find that keeping deadwood had no significant cost and was complementary with NTFP, but could increase the marginal cost of producing timber. This means that biodiversity can be enhanced without additional costs on the condition of limited quantity of deadwood.
    Keywords: private forest owners, forest ecosystem services, Vietnam, cost function, cost complementarity
    JEL: C31 Q23 Q24
    Date: 2016–08
  9. By: Christian Groth (University of Copenhagen); Jakub Growiec (Narodowy Bank Polski and SGH Warsaw School of Economics)
    Abstract: We study the links between the Mincerian wage equation (the cross-sectional relationship between wages and years of schooling) and the human capital production function (the causal effect of schooling on labor productivity). Based on a stylized Mincerian general equilibrium model with imperfect substitutability across skill types and ex ante identical workers, we demonstrate that the mechanism of compensating wage differentials renders the Mincerian wage equation uninformative for the human capital production function. Proper identification of the human capital production function should take into account the equilibrium allocation of individuals across skill types.
    Keywords: Mincerian wage equation, human capital production function, skill distribution, compensating wage differentials, golden rule of skill formation
    JEL: E24 J24
    Date: 2018
  10. By: Aurora Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Tec; OBEGEF); André Monteiro (Faculdade de Economia, Universidade do Porto)
    Abstract: Studies on the efficiency of TTOs have mainly focused on well-developed countries (US and UK), whereas intermediate technology countries have been rather neglected. This study intends to complement existing empirical work on this matter by providing evidence on Portugal, an intermediate technology country, which has invested quite heavily in technological support infrastructures (including TTOs) in the last decade. Using the Data Envelopment Analysis approach to 18 Portuguese TTOs over the period 2007-2011, we found that TTOs had improved their efficiency especially in the more upstream stages of the technology transfer process (invention disclosures and priority filings). Additionally, based on econometric models, we found that universities characteristics do matter, with universities with a large number of accumulated patents and publications being associated to more efficient TTOs in terms of invention disclosures and priority filings. Moreover, the regional industrial basis, most notably the weight of the manufacturing industry and new high- and medium-tech firms in regions where the university is located, contributes significantly to the efficiency of TTOs, in both the more upstream (invention disclosure and priority filings) and downstream (start-ups) phases, reflecting the importance of strong business regional spillovers for TTOs efficiency.
    Keywords: Technology Transfer Offices, Efficiency, Data Envelopment Analysis, Universities, Portugal
    JEL: O34 O39 C14
    Date: 2018–02
  11. By: Aum, Sangmin; Lee, Tim; Shin, Yongseok
    Abstract: Aggregate productivity growth in the U.S. has slowed down since the 2000s. We quantify the importance of differential productivity growth across occupations and across industries, and the rise of computers since the 1980s, for the productivity slowdown. Complementarity across occupations and industries in production shrinks the relative size of those with high productivity growth, reducing their contributions toward aggregate productivity growth, resulting in its slowdown. We find that such a force, especially the shrinkage of occupations with above-average productivity growth through \routinization," was present since the 1980s. Through the end of the 1990s, this force was countervailed by the extraordinarily high productivity growth in the computer industry, of which output became an increasingly more important input in all industries (\computerization"). It was only when the computer industry's productivity growth slowed down in the 2000s that the negative effect of routinization on aggregate productivity became apparent. We also show that the decline in the labor income share can be attributed to computerization, which substitutes labor across all industries.
    Date: 2018–02
  12. By: Alex Bryson; John Forth
    Abstract: We examine the impact of management practices on firm performance among SMEs in Britain over the period 2011-2014, using a unique dataset which links survey data on management practices with firm performance data from the UK’s official business register. We find that SMEs are less likely to use formal management practices than larger firms, but that such practices have demonstrable benefits for those who use them, helping firms to grow and increasing their productivity. The returns are most apparent for those SMEs that invest in human resource management practices, such as training and performance-related pay, and those that set formal performance targets.
    Keywords: SMEs, small and medium-sized enterprises, employment growth, high-growth firms, productivity, workplace closure, management practices, HRM, recession
    JEL: L25 L26 M12 M52 M53
    Date: 2018–03
  13. By: Hwan Jo (National University of Singapore); Tatsuro Senga (Queen Mary University of London)
    Abstract: Government policies that attempt to alleviate credit constraints faced by small and young firms are widely adopted across countries. We study the aggregate impact of such targeted credit subsidies in a heterogeneous firm model with collateral constraints and endogenous entry and exit. A defining feature of our model is a non-Gaussian process of firm-level productivity, which allows us to capture the skewed firm size distribution seen in the Business Dynamics Statistics (BDS). We compare the welfare and aggregate productivity implications of our non-Gaussian process to those of a standard AR(1) process. While credit subsidies resolve misallocation of resources and enhance aggregate productivity, increased factor prices, in equilibrium, reduce the number of firms in production, which in turn depresses aggregate productivity. We show that the latter indirect general equilibrium effects dominate the former direct productivity gains in a model with the standard AR(1) process, as compared to our non-Gaussian process, under which both welfare and aggregate productivity increase by subsidy policies.
    Keywords: misallocation, collateral constraints, firm dynamics, firm size
    JEL: E22 G32 O16
    Date: 2017–11–16
  14. By: Bayer, Christian; Meier, Matthias
    Abstract: Hsieh and Klenow (2009) quantifies aggregate TFP losses from misallocation through factor productivity dispersions and finds misallocation important in explaining international TFP differences. Using micro data from Chile, Colombia, Indonesia, and Germany, we document that dispersion in factor productivities is driven by dispersion in technology and markup. Relative to Germany, misallocation losses for the developing economies are explained to 1/3 by larger technology and to 2/3 by larger markup dispersion. Finally, we show that increased competition reduces technology dispersions but can cause larger markup dispersions as does more innovation. Hence, looking at markup dispersions alone might be misleading.
    Keywords: Competition; Development; Misallocation; productivity
    JEL: D24 E23 O47
    Date: 2018–02
  15. By: Natália Barbosa (School of Economics and Management, University of Minho); Ana Paula Faria (School of Economics and Management, University of Minho)
    Abstract: We investigate the role of different entrepreneurial origin on firms’ performance by comparing academic spinoff firms with their non-academic counterparts and using alternative growth measures. Estimates based upon dynamic panel-data models reveal that academic spinoffs grow through resources accumulation and internationalization. However, comparatively to non- academic counterparts, they fail to translate these advantages into productivity gains. Also, despite younger academic spinoff outperform, in terms of sales growth, firms from different entrepreneurial origin, they fail to retain these scale effects, as they grow older. Portuguese academic spinoffs are contributing to economic development by creating new jobs, yet their relevance as a source of sustained economic value is limited so far. Policy implications are discussed in light of these findings.
    Keywords: Academic Spinoff, firm growth, dynamic estimators
    JEL: L21 L25 M13 H32
    Date: 2018–02
  16. By: Mariana Viollaz
    Abstract: This paper analyzes the impact of internet adoption on labor productivity in Peruvian micro and small manufacturing firms over the period 2011-2013. Instrumental variables estimates show that internet adoption: (i) increases firms’ labor productivity; (ii) reallocates employment away from temporary administrative workers and non-remunerated workers and expands employment of permanent production workers; (iii) leads to the formalization of labor relationships, to the implementation of new organizational practices, and to the improvement of training measures. These findings point to the implementation of combined policies, where ICT expansion is accompanied by the development of digital skills.
    Keywords: internet adoption, labor productivity, micro and small firms, employment structure, organizational practices
    JEL: J23 J24 O32 O33
    Date: 2017
  17. By: Samuel Bazzi; Amalavoyal V. Chari; Shanthi Nataraj; Alexander D. Rothenberg
    Abstract: Despite the importance of agglomeration externalities in theoretical work, evidence for their nature, scale, and scope remains elusive, particularly in developing countries. Identification of productivity spillovers between firms is a challenging task, and estimation typically requires, at a minimum, panel data, which are often not available in developing country contexts. In this paper, we develop a novel identification strategy that uses information on the network structure of producer relationships to provide estimates of the size of productivity spillovers. Our strategy builds on that proposed by Bramoulle et al. (2009) for estimating peer effects, and is one of the first applications of this idea to the estimation of productivity spillovers. We improve upon the network structure identification strategy by using panel data and validate it with exchange-rate induced trade shocks that provide additional identifying variation. We apply this strategy to a long panel dataset of manufacturers in Indonesia to provide new estimates of the scale and size of productivity spillovers. Our results suggest positive productivity spillovers between manufacturers in Indonesia, but estimates of TFP spillovers are considerably smaller than similar estimates based on firm-level data from the U.S. and Europe, and they are only observed in a few industries.
    Date: 2017–03
  18. By: Luiza Badin (Department of Applied Mathematics, Bucharest University of Economic Studies and Gh. Mihoc-C. Iacob Institute); Cinzia Daraio (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Léopold Simar (Institut de Statistique, Biostatistique et de Sciences Actuarielles, Universite´ Catholique de Louvain, Voie du)
    Abstract: Conditional efficiency measures are needed when the production process does not depend only on the inputs and outputs, but may be influenced by external factors and/or environmental variables (Z). They are estimated by means of a nonparametric estimator of the conditional distribution function of the inputs and outputs, conditionally on values of Z. For doing this, smoothing procedures and smoothing parameters, the bandwidths, are involved. So far, Least Squares Cross Validation (LSCV) methods have been used, which have been proven to provide bandwidths with optimal rates for estimating conditional distributions. In efficiency analysis, the main interest is in the estimation of the conditional efficiency score, which typically depends on the boundary of the support of the distribution and not on the full conditional distribution. In this paper, we show indeed that the rate for the bandwidths which is optimal for estimating conditional distributions, may not be optimal for the estimation of the efficiency scores. We propose hence a new approach based on the bootstrap which overcomes these difficulties. We analyze and compare, through Monte Carlo simulations, the performances of LSCV techniques with our bootstrap approach in ï¬ nite samples. As expected, our bootstrap approach shows generally better performances and is more robust to the various Monte Carlo scenarios analyzed. We provide in an Appendix the Matlab code performing our experiments.
    Keywords: Data Envelopment Analysis (DEA)/Free Disposal Hull (FDH); Conditional Efficiency ; Bandwidth ; Bootstrap ; Monte Carlo
    Date: 2018

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