nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒04‒09
twenty papers chosen by

  1. Productivity of the English National Health Service: 2015/16 Update By Adriana Castelli; Martin Chalkley; Idaira Rodriguez Santana
  2. Credit supply and productivity growth By Francesco Manaresi; Nicola Pierri
  3. Sector-Level Economies of Scale: Estimation Using Trade Data By Dave Donaldson; Arnaud Costinot; Andres Rodriguez-Clare; Dominick Bartelme
  4. Does agricultural subsidies foster Italian southern farms? A Spatial Quantile Regression Approach By Marusca De Castris; Daniele Di Gennaro
  5. The Impact of Better Work: Firm Performance in Vietnam, Indonesia and Jordan By Drusilla Brown; Rajeev Dehejia; Raymond Robertson
  6. Aggregate Multi-Factor Productivity: Measurement Issues in OECD Countries By Balazs Egert
  7. Estimating a non-neutral production function: a heterogeneous treatment effect approach By Davide Antonioli; Georgios Gioldasis; Antonio Musolesi
  8. Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy By Eva Lyubich; Joseph S. Shapiro; Reed Walker
  9. Capital Misallocation: Frictions or Distortions? By Venky Venkateswaran; Joel David
  10. From Productivity Shifts to Economic Growth: Intersectoral Linkage as an Amplifying Factor By Nikolay Chernyshev
  11. International Productivity Growth Differentials Sectoral Analysis and Missing Productivity By Razzak, Weshah
  12. The UK (and Western) Productivity Puzzle: Does Arthur Lewis Hold the Key? By Nicholas Oulton
  13. Imperfect competition in a network industry: The case of the European rail freight market By Florent Laroche; Christa Sys; Thierry Vanelslander; Eddy Van de Voorde
  14. Innovation and Product Reallocation in the Great Recession By Sara Moreira; Munseob Lee; David Argente
  15. Zombie Board: Board Tenure and Firm Performance By Sterling Huang; Gilles Hilary
  16. Structural Reforms and Firms’ Productivity: Evidence from Developing Countries By Wilfried Kouamé; J.-A Tapsoba
  17. Electricity and manufacturing firm profits in Myanmar By Lisa Chauvet; De Miguel Torres Alvaro; Alexa Tiemann
  19. The effect of Extracurricular Activities on Students’ Dropout. Evidence from Vocational Education in Italy By Rossella Iraci Capuccinello; Giuseppe Migali
  20. Political competition and economic performance: Empirical evidence from Pakistan By Chaudhry, Ahmed; Mazhar, Ummad

  1. By: Adriana Castelli (Centre for Health Economics, University of York, York, UK); Martin Chalkley (Centre for Health Economics, University of York, York, UK); Idaira Rodriguez Santana (Centre for Health Economics, University of York, York, UK)
    Abstract: This report updates the Centre for Health Economics’ time series of National Health Service (NHS) productivity growth for the period 2014/15 to 2015/16. It also reports trends in output, input and productivity since 2004/05. NHS productivity growth is measured by comparing growth in the outputs produced by the NHS to growth in the inputs used to produce them. NHS outputs include all the activities undertaken for NHS patients wherever they are treated in England and accounts for changes in the quality of care provided to those patients. NHS inputs include the number of doctors, nurses and support staff providing care, the equipment and clinical supplies used, and the facilities of hospitals and other premises where care is provided.
    Date: 2018–04
  2. By: Francesco Manaresi; Nicola Pierri
    Abstract: We study the impact of bank credit supply on firm output and productivity. By exploiting a matched firm-bank database which covers all the credit relationships of Italian corporations over more than a decade, we measure idiosyncratic supply-side shocks to firms' credit availability. We use our data to estimate a production model augmented with financial frictions and show that an expansion in credit supply leads firms to increase both their inputs and their output (value added and revenues) for a given level of inputs. Our estimates imply that a credit crunch will be followed by a productivity slowdown, as experienced by most OECD countries after the Great Recession. Quantitatively, the credit contraction between 2007 and 2009 could account for about a quarter of the observed decline in Italy's total factor productivity growth. The results are robust to an alternative measurement of credit supply shocks that uses the 2007-08 interbank market freeze as a natural experiment to control for assortative matching between borrowers and lenders. Finally, we investigate possible channels: access to credit fosters IT-adoption, innovation, exporting, and the adoption of superior management practices.
    Keywords: credit supply, productivity, export, management, IT adoption
    JEL: D22 D24 G21
    Date: 2018–03
  3. By: Dave Donaldson (Stanford University); Arnaud Costinot (MIT); Andres Rodriguez-Clare (UC Berkeley); Dominick Bartelme (University of Michigan)
    Abstract: Sector-level economies of scale matter for economic development, industrial policy, and the consequences of trade liberalization. As of yet, however, the literature has not converged on a definitive answer regarding their existence and even less an estimate of their magnitude and variation across sectors. For example, most quantitative trade papers explicitly or implicitly assume that the sector-level scale elasticity is either zero or equal to the inverse of the trade elasticity. This paper develops a two-step strategy for estimating sector-level scale elasticities using bilateral trade data. First, a revealed preference approach is used to compute the productivity of each sector-country cell from observed bilateral trade flows. Second, a market access approach is used to construct demand shifters that vary across sector-country cells. The scale elasticity (a supply side parameter) is recovered from a regression of productivity on sector size using the constructed demand shifters as instrumental variables. Preliminary results suggest that economies of scale are positive but not as large as those implicitly imposed in many leading quantitative trade models.
    Date: 2017
  4. By: Marusca De Castris; Daniele Di Gennaro
    Abstract: During the last decades, public policies become a central pillar in supporting and stabilising agricultural sector. In 1962, EU policy-makers developed the so-called Common Agricultural Policy (CAP) to ensure competitiveness and a common market organisation for agricultural products, while 2003 reform decouple the CAP from the production to focus only on income stabilization and the sustainability of agricultural sector. Notwithstanding farmers are highly dependent to public support, literature on the role played by the CAP in fostering agricultural performances is still scarce and fragmented. Actual CAP policies increases performance differentials between Northern Central EU countries and peripheral regions. This paper aims to evaluate the effectiveness of CAP in stimulate performances by focusing on Italian lagged Regions. Moreover, agricultural sector is deeply rooted in place-based production processes. In this sense, economic analysis which omit the presence of spatial dependence produce biased estimates of the performances. Therefore, this paper, using data on subsidies and economic results of farms from the RICA dataset which is part of the Farm Accountancy Data Network (FADN), proposes a spatial Augmented Cobb-Douglas Production Function to evaluate the effects of subsidies on farm's performances. The major innovation in this paper is the implementation of a micro-founded quantile version of a spatial lag model to examine how the impact of the subsidies may vary across the conditional distribution of agricultural performances. Results show an increasing shape which switch from negative to positive at the median and becomes statistical significant for higher quantiles. Additionally, spatial autocorrelation parameter is positive and significant across all the conditional distribution, suggesting the presence of significant spatial spillovers in agricultural performances.
    Date: 2018–03
  5. By: Drusilla Brown; Rajeev Dehejia; Raymond Robertson
    Abstract: The impact of Better Work (ILO/OFC) is assessed on costs, profits, productivity and business terms for firms in Vietnam, Indonesia and Jordan. Participation in Better Work has a positive productivity effect on Vietnamese and Indonesian firms. Productivity gains are captured by workers in the form of higher pay. Unit costs rise due to increased compliance with payment requirements such as the minimum wage, paying as promised and mandated promotions. Despite the increase in wages, profits for firms in Better Work Vietnam and Indonesia increase due to improved business terms such as larger orders and possibly an increase in price. The impact of Better Work Jordan suggests that exposure to the program for individual firms may have temporarily increased costs and lowered profits. However, the Jordanian apparel industry becomes more profitable over time, suggesting a positive country reputation effect. Participation in Better Work and firm performance are not jointly determined by manager quality. Early entrants into Better Work are, on average, high cost-low profit firms.
    Keywords: high road, working conditions, supply chains, social compliance, International Labor Organization, supply chains.
    Date: 2018
  6. By: Balazs Egert
    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: C230, C510, J200, L430, L510, O400
    JEL: C23 C51 J20 L43 L51 O40
    Date: 2018
  7. By: Davide Antonioli (Università degli Studi "G. D'Annunzio" di Chieti-Pescara); Georgios Gioldasis (Università degli Studi di Ferrara); Antonio Musolesi (Università degli Studi di Ferrara)
    Abstract: This paper addresses the issue of estimating a production function that allows us to depart from the standard hypothesis of Hicks neutrality while also coping with the endogeneity of a dummy innovation variable. We consider specifications that relax Hicks neutrality, and we derive the testable conditions for common parametric approximations under which Hicks neutrality holds. The model is estimated through instrumental variables methods, allowing for a heterogeneous effect of innovation on the production process. The econometric analysis rejects Hicks neutrality and highlights three main features: i) a capital-saving technology of innovative with respect to non-innovative firms, ii) a locally progressive technical change and iii) fully heterogeneous technologies when comparing innovative to non-innovative firms.
    Keywords: Biased technical change; Hicks neutrality; Innovation; Productivity; Knowledge production function; CDM model; Instrumental variables; heterogeneous treatment effect
    JEL: C26 C31 D24 O33
    Date: 2018–03
  8. By: Eva Lyubich (UC Berkeley); Joseph S. Shapiro (Cowles Foundation, Yale University); Reed Walker (University of California, Berkeley, IZA, & NBER)
    Abstract: This paper provides the ?rst estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three ?ndings emerge. First, within narrowly de?ned industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
    JEL: F18 H23 Q56
    Date: 2018–01
  9. By: Venky Venkateswaran (New York University); Joel David (USC)
    Abstract: We study a model of investment in which both technological and informational frictions as well as institutional/policy distortions lead to capital misallocation, i.e., static marginal products are not equalized. We devise an empirical strategy to disentangle these forces using readily observable moments in firm-level data. Applying this methodology to manufacturing firms in China reveals that adjustment costs and uncertainty have significant aggregate consequences but account for only a modest share of the observed dispersion in the marginal product of capital. A substantial fraction of misallocation stems from firmspecific distortions, both productivity/size-dependent as well as permanent. For large US firms, adjustment costs are relatively more salient, though permanent firm-level factors remain important. These results are robust to the presence of liquidity/financial constraints.
    Date: 2017
  10. By: Nikolay Chernyshev (University of St Andrews)
    Abstract: This paper documents the presence of a positive link between the intensity of using intermediates by a country’s industries and its economic growth. We explain the finding by advancing a framework of endogenous growth in an economy with interconnected industries, whereby sectoral productivity growth is amplified by the interconnection, and the degree of amplification grows in the strength of sectoral connections. We use the framework to derive the optimal growth-enhancing structure of an economy, which is when all industries source their intermediates from a single sector (the star network) characterised by the largest concentration potential – a novel indicator which captures how fast is a sector’s productivity growth and how much it itself relies on intermediates.
    Keywords: Economic growth, input-output linkage, production networks
    JEL: D57 E21 E23 E32 L13
    Date: 2018–03–15
  11. By: Razzak, Weshah
    Abstract: In Jones (2002), Lucas (2009), and Lucas and Moll (2014), among others, growth is a function of new ideas, and reflects Kuznets (1960) useful knowledge (or testable knowledge) as a main driver of growth. In both Kuznets and Jones, the discovery of new ideas is tied to population growth. In the long run, the stock of ideas is proportional to the number of researchers, which is proportional to population. This is the scale factor, where essentially, long-run growth is tied to population growth in the advanced countries. The growth of knowledge due to new ideas depends on the number of people producing them and their productivity, essentially determines Total Factor Productivity growth (TFP). During the transition to the long-run, knowledge in excess of the long-run population growth, i.e., excess knowledge, explains most of the productivity growth. We use EUKLEMS 2017 data to show that the model explains 80 percent of the international productivity growth differentials because excess knowledge varies from one country to another. Effective world research efforts diffuse at a different pace from one country to another. We also modify the model and test hypotheses about sector-led growth such as finance and ICT. Finally, we shed light on the current missing productivity conundrum.
    Keywords: endogenous growth, Growth accounting, transitional dynamic, labor productivity growth, estimation, and measurements.
    JEL: E10 O40
    Date: 2017–12–15
  12. By: Nicholas Oulton (Centre for Macroeconomics (CFM); National Institute of Economic and Social Research; Economic Statistics Centre of Excellence)
    Abstract: I propose a new explanation for the UK productivity puzzle. I graft the Lewis (1954) model onto a standard Solow growth model. What I call the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input. I also argue that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. The predictions of the neo-Lewis model are tested on data for 23 advanced countries and also on a larger sample of 52 countries and find support.
    Keywords: Productivity, Slowdown, TFP, Capital, Lewis, Immigration
    JEL: E24 O41 O47 J24 F43 F44
    Date: 2018–03
  13. By: Florent Laroche (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique); Christa Sys (BNP Paribas Fortis chair on transport, logistics and ports); Thierry Vanelslander (Department of Transport and Regional Economics - UA - University of Antwerp); Eddy Van de Voorde (Department of Transport and Regional Economics - UA - University of Antwerp)
    Abstract: Purpose: This paper opts for a time varying approach to measure the competition on the European rail freight sector according to two questions: what is the current level of competition and how is this expected to evolve in the long run? Approach: A firm-level dynamic panel estimates the persistence of profit in the European rail freight sector. Main findings: The persistence of profits shows a high degree of competition in the short run but imperfect in the long run due to the existence of barriers on the market. Secondly, the ratio between capital and labour cost is calculated. It indicates moderate economies of scale. Originality:Knowledge about this new market and the dynamics are limited in the academic literature. The research is relevant for the policy makers to monitor the rail freight market and to harmonise the practices between network managers to improve the European single market.
    Keywords: Single market,Persistence of profits,Rail freight,barriers,competition,persistence of profit
    Date: 2017
  14. By: Sara Moreira (Northwestern University); Munseob Lee (University of Chicago); David Argente (University of Chicago)
    Abstract: We exploit detailed product- and firm-level data to study the sources of innovation and the patterns of productivity growth in the consumer goods sector over the period 2006-2014. Using a dataset that contains information on the product portfolio of each firm and the characteristics of each product, we document new facts on product reallocation. First, we find that reallocation of products happens within the boundaries of the firm, but the largest changes in product quality come from new firms launching new varieties and from small firms expanding to other product lines. Second, we document that product reallocation within and between firms are procyclical and that product reallocation within firms was more affected than product reallocation between firms during the great recession. Finally, we quantify the extent to which product reallocation affects firm-level productivity growth and and innovation as reflected by changes in their total factor productivity. Our preliminary findings suggest that within-firm product reallocation contributes substantially to the growth in innovation across all sectors.
    Date: 2017
  15. By: Sterling Huang; Gilles Hilary (Georgetown University - Georgetown University)
    Date: 2018–03–18
  16. By: Wilfried Kouamé (The World Bank - The World Bank - The World Bank); J.-A Tapsoba (International Monetary Fund (IMF), FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: This paper assesses the effects of structural reforms on firm-level productivity for 37 developing countries from 2006 to 2014 period. It takes advantage of the IMF Monitoring of Fund Arrangements dataset for reform indexes and the World Bank Enterprise Surveys for firm-level productivity. The paper highlights the following results. Structural reforms such as financial, fiscal, real sector, and trade reforms, significantly improve firm-level productivity. Interestingly, real sector reforms have the most sizeable effects on firm-level productivity. The relationship between structural reforms and firm-level productivity is nonlinear and shaped by some firms' characteristics such as the financial access, the distortionary environment, and the size of firms. The pace of structural reforms matters since being a " strong reformer " is associated with a clear productivity dividend for firms. Finally, except for financial and trade reforms, all structural reforms under consideration are bilaterally complementary in improving firm-level productivity. These findings are robust to several sensitivity checks including alternatives methodology and measure of productivity, and a counterfactual experiment based on unsuccessful reforms.
    Keywords: Structural Reforms, Firm-level productivity, Developing countries
    Date: 2018–03–05
  17. By: Lisa Chauvet (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); De Miguel Torres Alvaro (PSE - Paris School of Economics); Alexa Tiemann (OCDE - Département des affaires économiques)
    Abstract: We examine the impact of being located in areas with higher availability of electricity on manufacturing firm profits in Myanmar. Using a survey of 497 manufacturing firms conducted in 2014 and covering the whole territory of Myanmar, we investigate whether firms belonging to industries that tend to make more intensive use of electricity show better performance if such firms are located in areas with higher availability of electricity. We find that electricity provided by the national power grid tends to have a positive impact on manufacturing firm profits. Results are robust to reducing the sample to firms that could not have chosen their location endogenously, as well as to the use of an instrumental variable.
    Keywords: H4,L60,Myanmar,electricity,firm performance,O13,O14
    Date: 2018–02–22
    Date: 2018
  19. By: Rossella Iraci Capuccinello; Giuseppe Migali
    Keywords: High school dropout, Extracurricular Activities, Student Engagement, Propensity score matching
    JEL: I20 I21 I28
    Date: 2018
  20. By: Chaudhry, Ahmed; Mazhar, Ummad
    Abstract: The influence of politics on economic policy is not fully understood. The challenge to ensure political inclusiveness and economic prosperity remains. Perhaps, one way to attain this objective is by increasing political competition. This paper gathers empirical evidence from Pakistan, a country with a checkered political history characterized by episodes of representative, non-representative, and indirectly elected governments. In recent years, the country has witnessed a gradual strengthening of democratic rule with economic progress. Focusing on nine elections held over 1970 to 2015 the authors measure political competition and estimate its impact on economic performance. Contrary to popular conceptions about Pakistan's economic performance, they find a positive association between lack of political competition and poor economic performance. This finding holds at national as well as subnational levels in Pakistan and withstands a number of robustness tests.
    Keywords: Political Competition,Pakistan,Economic Performance,Subnational
    JEL: H50 H83 D70
    Date: 2018

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