nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒04‒02
seventeen papers chosen by

  1. Agricultural Productivity in Space - An econometric assessment on Italian farm-level data By Edoardo Baldoni; Roberto Esposti
  2. Intangible Investment and Firm Performance By Nathan Chappell; Adam B. Jaffe
  3. Cohesion Policy Meets Heterogeneous Firms By Loredana Fattorini; Mahdi Ghodsi; Armando Rungi
  4. The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms By Fan, Haichao; Liu, Yu; Qian, Nancy; Wen, Jaya
  5. Firm Dynamics and Multifactor Productivity: An Empirical Exploration By Pierre St-Amant; David Tessier
  6. Aggregation of Individual Efficiency Measures and Productivity Indices By Andreas Mayer; Valentin Zelenyuk
  7. Can depleting technological opportunities explain the stagnation of productivity? Panel data evidence for 11 OECD countries By Schubert, Torben; Neuhäusler, Peter
  8. The role of infrastructure efficiency in economic development – the case of underused highways in Europe By José Pedro Pontes; Joana Pais
  9. Misallocation in the Market for Inputs By Ezra Oberfield; Johannes Boehm
  10. Worker Flows, Entry and Productivity in the New Zealand Construction Industry By Nathan Chappell; Adam B. Jaffe; Trinh Le
  11. Convexity, Disposability and Returns to Scale in Production Analysis By Manh D. Pham; Valentin Zelenyuk
  12. Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection By Julieta Caunedo
  13. Quantifying and Accounting for Quality Differences in Services in International Price Comparisons: A Bilateral Price Comparison between United States and Japan By Abe, Naohito; Fukao, Kyoji; Ikeuchi, Kenta; Rao, D.S. Prasada
  14. Rate of profit in the United States and in China (2007-2014): introductory comparison of two trajectories By Adalmir Marquetti; Catari Vilela Chaves; Leonardo Costa Ribeiro; Eduardo da Motta e Albuquerque
  15. Family firms: the problem of second-generation bosses By Renata Lemos; Daniela Scur
  16. Firms and economic performance: A view from trade By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  17. International Technology Sourcing and Knowledge Spillovers: Evidence from OECD Countries By Sophia Chen; Estelle Dauchy

  1. By: Edoardo Baldoni (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche); Roberto Esposti (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche)
    Abstract: This work aims to investigate the spatial dependence of agricultural Total Factor Productivity (TFP) by using farm-level data and aggregating them at a variable geographical scale. At this scale a multilateral TFP index is computed and the spatial and time dependence of this TFP measure is assessed within a spatial dynamic panel specification. Alternative Least Squares (LS), Maximum Likelihood (ML) and Generalized Method of Moments (GMM) estimation approaches are proposed and respective results compared. The application concerns Italian farm-level data over the period 2008-2015. Results suggests that higher productivity spillovers are found for those NUTS3 regions with similar neighborhoods in terms of production specialization. Higher spill-ins are found in those NUTS3 with a larger number of geographical connections, regardless of their similarity in terms of production specialization.
    Keywords: Productivity Spatial Dependence, Technological Spillovers, Multilateral TFP index, Dynamic Panel Models
    JEL: Q12 O47 C23
    Date: 2018–03
  2. By: Nathan Chappell; Adam B. Jaffe
    Abstract: We combine survey and administrative data for about 13,000 New Zealand firms from 2005 to 2013 to study intangible investment and firm performance. We find that firm size and moderate competition is associated with higher intangible investment, while firm age is associated with lower intangible investment. Examining firm performance, we find that higher investment is associated with higher labour and capital input, higher revenue, and higher firm-reported employee and customer satisfaction, but not with higher productivity or profitability. The evidence suggests that intangible investment is associated with growth and 'soft' performance objectives, but not with productivity or profitability.
    JEL: D22 D24 L21
    Date: 2018–03
  3. By: Loredana Fattorini; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Armando Rungi
    Abstract: In this paper, we empirically test the effects of the EU’s ‘cohesion policy’ on the performance of 273,500 European manufacturing firms after combining regional policy data at NUTS 2 level with firm-level data. In a framework of heterogeneous firms and different absorptive capacity of regions, we show that the financing of ‘cohesion policy’ by the European Regional Development Fund (ERDF) aimed at direct investments in R&D correlates with an improvement of firms’ productivity in a region. Conversely, funding aimed at overall Business Support correlates with negative productivity growth rates. In both cases, we registered an asymmetric impact along the firms’ productivity distribution, where a stronger impact can be detected in the first quartile, i.e. less efficient firms in a region. We finally argue that considering the heterogeneity of firms allows a better assessment of the impact of ‘cohesion policy’ measures.
    Keywords: firm performance, total factor productivity, cross-country analysis, convergence, regional policy
    JEL: D22 D24 E23 F15 L25
    Date: 2018–03
  4. By: Fan, Haichao; Liu, Yu; Qian, Nancy; Wen, Jaya
    Abstract: This paper uses a balanced panel of large manufacturing firms to study the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 10.8% of cumulative VAT revenues and increases the effective average tax rate by approximately 9-12% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.
    Keywords: economic development; Firm Growth; state capacity; taxation; technology
    JEL: H25 H26 O12
    Date: 2018–03
  5. By: Pierre St-Amant; David Tessier
    Abstract: There are indications that business dynamism has declined in advanced economies. In particular, firm entry and exit rates have fallen, suggesting that the creative destruction process has lost some of its vitality. Meanwhile, productivity growth has slowed. Some believe that lower entry and exit rates partly explain the weaker productivity growth. However, the evidence supporting, or invalidating, this view is scarce. In the present paper, we use multi-horizon causality tests and dynamic simulations with Canadian and US data to examine the following question: Do changes to entry and exit rates provide information about, or Granger-cause, future productivity? We do not find significant evidence that entry rates Granger-cause productivity. But we do find evidence that productivity causes entry rates. Using small models with economy-wide data (but not at the sectoral level), we find some evidence that exit rates cause productivity in both countries. This suggests that the decline in productivity growth is partly caused by a decline in the productivity-based exit selection process. However, when other variables, such as measures of the business cycle and the real effective exchange rate, are controlled for, the significance of exit rates in explaining productivity tends to fall. Specifically, business-cycle measures appear to cause both productivity and the exit rate. This suggests that firm dynamics are an intermediate, not an ultimate, cause of productivity growth.
    Keywords: Firm dynamics, Productivity
    JEL: M13 D24 O47
    Date: 2018
  6. By: Andreas Mayer; Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland)
    Abstract: Here we consider the problem of aggregation of efficiency and productivity indices. We will summarize some of the existing results and will derive new results for aggregation of Hicks-Moorsteen productivity indices.
    Keywords: Productivity, Efficiency, Aggregation, Hicks-Moorsteen Index
    JEL: C14 C43 D23
    Date: 2018–02
  7. By: Schubert, Torben; Neuhäusler, Peter
    Abstract: We analyze the stagnating productivity levels observable across many Western economies during the last two decades. Relying on techniques to measure total factor productivities (TFP), we provide evidence for a set of 11 OECD countries observed over the period from 1993-2011 that TFP-levels exhibited growth rates of about 0.9% per year until 2000. In the period after 2000, the TFP levels almost stagnated with average annual growth rates declining to about 0.3%. The stagnating trends hold almost uniformly across the analyzed countries and across broad economic sectors. Following recently made claims in the literature, we analyze the hypothesis that the stagnating trend was due to generally declining technological opportunities. Our evidence suggests that the importance of intrasectoral innovation as measured by R&D remained relatively constant and was at best slightly decreasing. However, the importance of investments in the physical capital stock considerably declined after 2000. We take this as evidence that rather than a general depletion of technological opportunities, the possibilities to achieve TFP-growth via capital-embodied technical change became less abundant.
    Date: 2018
  8. By: José Pedro Pontes; Joana Pais
    Abstract: In this paper, we establish a two way causality between the phenomenon of the infrastructure which is underused (the so called “white elephant case”) and the aggregate productivity level (TFP) of the economy. On the one hand, the fact that a transport infrastructure is not used so much as it could be is itself a cause of low TFP, because it represents a low productivity for an important item of social capital. On the other hand, low aggregate productivity makes firms strategies founded on large scale of production and exports more risky, given the possibility that the political decision to build the required transport infrastructure may never be taken.
    Keywords: Total Factor Productivity, Efficiency in Infrastructure Use; Economic Development, Transport Economics
    JEL: O12 O47 R40
    Date: 2018–03
  9. By: Ezra Oberfield (Princeton University); Johannes Boehm (Sciences Po)
    Abstract: How costly is weak contract enforcement? Using microdata on Indian manufacturing plants, we show that in states with weaker enforcement, as measured by judicial lags, production and sourcing decisions appear systematically distorted. We document that in those states, plants' expenditure shares on intermediate inputs tend to be lower, with the effect concentrated in industries rely more heavily on inputs that require customization. To quantify the impact of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The distortions accumulate along supply chains.
    Date: 2017
  10. By: Nathan Chappell; Adam B. Jaffe; Trinh Le
    Abstract: The 21st century global decline in productivity growth is not well understood. One possible contributor is a decline in economic dynamism. We explore the contribution of firm formation and employee movement to productivity using administrative data on the population of New Zealand construction firms from 2001-2012, along with linked data on their employees and working proprietors, to study the relationships among entry, worker flows and firm productivity. Entrants are more productive than pre-existing firms. Firms that enter and stay exhibit a persistent productivity advantage that averages about seven percent, but which grows as experience accumulates. We find that job churn is prevalent in construction, with around 60 percent of firm-worker pairs not existing previously or not existing subsequently. Firms with new employees are more productive than those with no change in workforce, in part because of knowledge flows from other construction firms. In our preferred specification, with firm fixed effects, a standard deviation increase in the productivity of new employees' previous firms is associated with a 0.6 percent increase in productivity. The entry and worker-knowledge-flow phenomena are distinct, in that the entry effect is not explained by employee composition, and non-entrant firms also benefit from worker knowledge flows.
    JEL: D24 J63 L74
    Date: 2018–03
  11. By: Manh D. Pham; Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland)
    Abstract: Adequate modelling of undesirable outputs is a key aspect for any performance analysis of economic systems. A nonparametric approach assuming jointly weak disposability of desirable and undesirable outputs inspired by Shephard (1974) has gained substantial popularity in addressing this issue. Recently, researchers were offered an alternative that is to use multiple scaling factors (rather than a single one as in the Shephard’s (1974) approach) when imposing weak disposability in practice. In this paper we discover new properties and relationships between the two approaches, which in turn sheds some new light on the problem and offers reconciling solutions.
    Keywords: Data envelopment analysis, Nonparametric productivity analysis, Weak disposability, Undesirable outputs, Environmental performance
    JEL: C14 C44 C51 D24 M11
    Date: 2017–10
  12. By: Julieta Caunedo (Cornell University)
    Abstract: Disparities in revenue productivity for narrowly defined industries is ubiquitous in firm-level data. Whereas often times such a heterogeneity is a symptom of factor misallocation, it is also possible that part of it is induced by firms' optimal decisions under technology and information constraints. To date, there is limited understanding of the implications of the observed revenue product heterogeneity for efficiency in frameworks where both sources for dispersion coexist. This paper fills the gap. Market distortions that generate inefficient factor accumulation may feed back into the equilibrium distribution of revenue productivity, and hence, empirical measures of allocative efficiency. Understanding such interaction is key for policy design. In this paper, I focus on the study of market distortions generated by firms' market power and I generate endogenous revenue product dispersion through either heterogeneous market power, non-convex production technologies, or information frictions. I characterize the market decentralization of efficient outcomes via policies that do not require firm-level information. Most importantly, I show that the welfare gains for a wide class of models when implementing these optimal policies follows a common pattern: welfare gains are proportional to the change in average revenue product and the number of operating units in the market.
    Date: 2017
  13. By: Abe, Naohito; Fukao, Kyoji; Ikeuchi, Kenta; Rao, D.S. Prasada
    Abstract: Purchasing power parities (PPPs) from the International Comparison Program (ICP) are used for cross-country comparisons of price levels and real gross domestic product (GDP), household consumption and investment. PPPs from the ICP are also used in compiling internationally comparable output aggregates and making productivity comparisons in the KLEMS initiative. PPP compilation is anchored on the principle of comparing the like with like and price data are collected for goods and services with detailed specifications in the form of structural product descriptions. While this approach works well for goods, it is not effective in the case of services. If differences in service quality exist, these get reflected in the PPPs from the ICP. In this paper, we focus on the USA-Japan bilateral price comparison in the 2014 ICP in the OECD region and estimate bias induced by differences in quality of services in. Service quality is driven by various unobservable factors. In this paper we make use of data on quality differences and consumers’ willingness to pay collected through a specialised survey conducted by the Japan Productivity Center early in 2017. Data are collected from a large sample of 517 respondents from USA and 519 respondents from Japan, covering 28 service items including transport, restaurants, retail services, health and education. Estimates of consumers’ willingness to pay for quality differences in services by the US and Japanese consumers are obtained using standard econometric methodology, these are in turn used in estimating quality adjustment factors that can be applied to price data used in PPP computation. Using the Sato-Vartia index, which has useful analytical and decomposition properties, we find PPP for household consumption (including real estate services) of 113 JPY per US dollar reduces to 104 JPY per dollar after adjusting for quality differences. When real estate services are not included, PPP reduces from 95 JPY to 87 JPY after quality adjustment. The paper also presents labour productivity estimates before and after quality adjustment for a number of service sectors including transport and storage; retail trade; hotels and restaurants; and other subsectors. Our exploratory study demonstrates that adjustment for quality differences in services is feasible and such adjustments are important for making meaningful international price comparisons.
    Keywords: International comparisons, services, quality differences, willingness to pay, Sato-Vartia Index
    JEL: C43 E O47
    Date: 2018–03
  14. By: Adalmir Marquetti (PUC-RS); Catari Vilela Chaves (PUC-MG); Leonardo Costa Ribeiro (Inmetro); Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: This paper compares data on rate of profit for the United States and China, exploring a dialogue between investigations on the average and general rates of profit (classical political economy and its modern versions) and inter-industry differences in the rate of profit (industrial economics). The comparative analysis between USA and China (2007-2014) is presented through the trajectories of national average rates of profit, the differences according to firm size, economic and manufacturing sectors. The data show a mismatch between the national average rate of profit (China has higher rates for all years, but 2014) and the rates of profit for manufacturing (USA have higher sectoral rates of profit for all years, but 2009).
    Keywords: Rate of profit, different national rates of profit, inter-industry differences in profitability
    JEL: P16 O33
    Date: 2018–03
  15. By: Renata Lemos; Daniela Scur
    Abstract: Although family firms are widely praised as the 'backbone of the economy', their productivity is often hampered by weak management. Research by Daniela Scur and Renata Lemos provides new evidence on the performance of 'dynastic' family-owned firms and explores why those led by family bosses adopt fewer structured management practices.
    Keywords: CEO, firm productivity, management
    Date: 2018–03
  16. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
    Abstract: We use transaction-level US import data to compare firms from virtually all countries in the world competing in a single destination market. Guided by a simple theoretical framework, we decompose countries'market shares into the contribution of the number of firm-products, their average attributes (quality and efficiency) and heterogeneity around the mean. Our results show that the number of firm-products explains half of the variation in sales, while the remaining part is equally accounted for by average attributes and their dispersion. Quality is the main driver of firm heterogeneity (explaining between 75% and 100%). We then study how the distribution of firm-level characteristics varies across countries, and we explore some of its determinants. Countries with a larger market size tend to be characterized by a more dispersed distribution of firms'sales, especially due to heterogeneity in quality. These countries also tend to be more likely to host superstar firms, although this is not the only source of higher heterogeneity. To further explore the role of exceptional firms, we develop a novel decomposition that separates the contribution of heterogeneity from that of granularity. While individual firms matter, we find that heterogeneity is more important than granularity for explaining sales.
    Keywords: US Imports, Firm Heterogeneity, International Trade, Prices, Quality, Variety, Granularity.
    JEL: F12 F14
    Date: 2018–03
  17. By: Sophia Chen; Estelle Dauchy
    Abstract: How much do firms benefit from foreign R&D and through what channel? We construct a global network of corporate innovation using more than 1.5 million patents granted to firms in OECD countries. We test the “international technology sourcing” hypothesis that foreign innovation activities tap into foreign R&D and improve home productivity through knowledge spillovers. We find that firms with stronger inventor presence in technology frontier countries benefit disproportionately more from their R&D. The strength of knowledge spillovers depends on the direction of technology sourcing. Knowledge externality is larger for firms in technology frontier countries than for firms in non-frontier countries.
    Date: 2018–03–12

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