nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒04‒16
fifteen papers chosen by

  1. Credit supply and productivity growth By Francesco Manaresi; Nicola Pierri
  2. Interconnecting Theory A and ABC Model of Organizational Performance By Aithal, Sreeramana; Kumar, Suresh
  3. Geography and Agricultural Productivity: Cross-Country Evidence from Micro Plot-Level Data By Tasso Adamopoulos; Diego Restuccia
  4. Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy By Eva Lyubich; Joseph S. Shapiro; Reed Walker
  5. Firms and Economic Performance: A view from Trade By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  6. Efficiency of public expenditure on education: comparing Croatia with other NMS By Ahec Šonje, Amina; Deskar-Škrbić, Milan; Šonje, Velimir
  7. Innovation, Productivity Dispersion, and Productivity Growth By Lucia Foster; Cheryl Grim; John C. Haltiwanger; Zoltan Wolf
  8. Aggregate multi-factor productivity: measurement issues in OECD countries By Balázs Egert
  9. Credit Misallocation During the European Financial Crisis By Fabiano Schivardi; Enrico Sette; Guido Tabellini
  10. The IT Revolution and Southern Europe’s Two Lost Decades By Fabiano Schivardi; Tom Schmitz
  11. R&D, IP, and firm profits in the North American automotive supplier industry By Lutz, Stefan Heinz Hermann
  12. Structural Reforms and Firms’ Productivity: Evidence from Developing Countries By Wilfried A. Kouamé; Sampawende J Tapsoba
  13. Does Scale Matter in Community Bank Performance? Evidence Obtained by Applying Several New Measures of Performance By Hughes, Joseph P.; Jagtiani, Julapa; Mester, Loretta J.; Moon, Choon-Geol
  14. Taking stock of firm-level and country-level benefits from foreign direct investment By Bruno, Randolph Luca; Campos, Nauro F.; Estrin, Saul
  15. Foreign multinationals, selection of local firms, and regional productivity in Indonesia By Saito, Hisamitsu

  1. By: Francesco Manaresi (Bank of Italy); Nicola Pierri (Stanford University)
    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
  2. By: Aithal, Sreeramana; Kumar, Suresh
    Abstract: The higher education and research institutions have an objective of creating new knowledge continuously using their people as resources and success of the organizations depend on how much new knowledge they have created during a given period of time. A simple measurement system for calculating annual research index of organizations namely ABC model has been developed by Aithal P. S. and Suresh Kumar during 2016. As per this model, the annual research performance can be determined by knowing the research index of the institution/ individuals and is calculated by considering the total number of research publications during that period. Application of the theory of organizational performance namely ‘Theory A’ can improve research productivity of educational institutions. This is a management strategy which believes in delivering target as responsibility, feeling of creativity and contribution for motivation, identifying with the organization as commitment and accountability as a hallmark of efficiency. In this paper, we have interconnected Theory A of organization performance with ABC model of research productivity in order to enhance research productivity of the organizations.
    Keywords: Enhancement of research productivity, Theory A, ABC model of research productivity
    JEL: L20 M12
    Date: 2017–01–08
  3. By: Tasso Adamopoulos; Diego Restuccia
    Abstract: Why is agricultural productivity so low in poor countries relative to the rest of the world? Is it due to geography or constrained economic choices? We assess the quantitative role of geography and land quality for agricultural productivity differences across countries using high-resolution micro-geography data and a spatial accounting framework. Our rich spatial data provide in each cell of land covering the entire globe actual yields of cultivated crops and potential yields for 18 crops, which measure the maximum attainable output for each crop given soil quality, climate conditions, terrain topography, and a level of cultivation inputs. While there is considerable heterogeneity in land quality across space, even within narrow geographic regions, we find that low agricultural productivity in poor countries is not due to poor land endowments. If countries produced current crops in each cell according to potential yields, the rich-poor agricultural yield gap would virtually disappear, from more than 200 percent to less than 5 percent. We also find evidence of additional productivity gains attainable through the spatial reallocation of production and changes in crop choices.
    Keywords: agriculture, land quality, productivity, spatial allocation, crop choice, cross-country.
    JEL: O11 O14 O4
    Date: 2018–04–11
  4. 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 first 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 findings 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
  5. 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
  6. By: Ahec Šonje, Amina; Deskar-Škrbić, Milan; Šonje, Velimir
    Abstract: Modern economies are becoming more knowledge-intensive and service-oriented, which makes human capital more important than ever for mid-term and long-term growth. Therefore, education, the main channel of governments’ influence on human capital formation, became important research subject in the field of economic growth. This paper examines efficiency of public expenditure on secondary and tertiary education in the New Member States (NMS) in EU ; only efficient government spending can generate adequate returns in terms of contribution to economic growth. Data Envelopment Analysis (DEA) is applied to assess relative technical efficiency of public expenditure on secondary and tertiary education in NMS, with a particular focus on Croatia. Input variables are public expenditure on education per student and as % of total education expenditure, while output variables for secondary education are PISA results and for tertiary education share of unemployed with a tertiary education and Shanghai ranking of leading national universities. The results show high inefficiency of public spending on education in Croatia.
    Keywords: Education, technical efficiency, public expenditure on education, Data Envelopment Analysis, New Member States EU
    JEL: C61 H52 I2 I25 I28
    Date: 2018–01–02
  7. By: Lucia Foster; Cheryl Grim; John C. Haltiwanger; Zoltan Wolf
    Abstract: We examine whether underlying industry innovation dynamics are an important driver of the large dispersion in productivity across firms within narrowly defined sectors. Our hypothesis is that periods of rapid innovation are accompanied by high rates of entry, significant experimentation and, in turn, a high degree of productivity dispersion. Following this experimentation phase, successful innovators and adopters grow while unsuccessful innovators contract and exit yielding productivity growth. We examine the dynamic relationship between entry, productivity dispersion, and productivity growth using a new comprehensive firm-level dataset for the U.S. We find a surge of entry within an industry yields initially an increase in productivity dispersion and then after a significant lag an increase in productivity growth. These patterns are more pronounced for the High Tech sector where we expect there to be more innovative activities. These patterns change over time suggesting other forces are at work during the post-2000 slowdown in aggregate productivity.
    JEL: E24 L26 M13 O31
    Date: 2018–03
  8. By: Balázs 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: multi-factor productivity, measurement, human capital, OECD
    JEL: O4
    Date: 2018
  9. By: Fabiano Schivardi (Università LUISS "Guido Carli"); Enrico Sette (Banca d'Italia); Guido Tabellini (Università Bocconi)
    Abstract: Do banks with low capital extend excessive credit to weak firms, and does this matter for aggregate eciency? Using a unique data set that covers almost all bank-firm relationships in Italy in the period 2008-2013, we find that, during the Eurozone financial crisis: (i) Under-capitalized banks cut credit to healthy firms (but not to zombie firms) and are more likely to prolong a credit relationship with a zombie firm, compared to stronger banks. (ii) In areas-sectors with more low-capital banks, zombie firms are more likely to survive and non-zombies are more likely to go bankrupt; (iii) Nevertheless, bank under-capitalization does not hurt the growth rate of healthy firms, while it allows zombie firms to grow faster. This goes against previous in uential findings that, we argue, face a serious identification problem. Thus, while banks with low capital can be an important source of aggregate ineffciency in the long run, their contribution to the severity of the great recession via capital misallocation was modest.
    Keywords: Bank capitalization, zombie lending, capital misallocation
    JEL: D23 E24 G21
    Date: 2018
  10. By: Fabiano Schivardi (LUISS University, EIEF and CEPR); Tom Schmitz (Bocconi University and IGIER)
    Abstract: Since the middle of the 1990s, productivity growth in Southern Europe has been substantially lower than in other developed countries. In this paper, we argue that this divergence was partly caused by inefficient management practices, which limited Southern Europe’s gains from the IT Revolution. To quantify this effect, we build a multi-country general equilibrium model with heterogeneous firms and workers. In our model, the IT Revolution generates divergence for three reasons. First, inefficient management limits Southern firms’ productivity gains from IT adoption. Second, IT increases the aggregate importance of management, making its inefficiencies more salient. Third, IT-driven wage increases in other countries stimulate Southern high-skill emigration. We calibrate our model using firm-level evidence, and show that it can account for 28% of Italy’s, 39% of Spain’s and 67% of Portugal’s productivity divergence with respect to Germany between 1995 to 2008.
    Date: 2018
  11. By: Lutz, Stefan Heinz Hermann
    Abstract: Economic theory implies that research and development (R&D) efforts increase firm productivity and ultimately profits. In particular, R&D expenses lead to the development of intellectual property (IP) and IP commands a return that increases overall profits of the firm. This hypothesis is investigated for the North American automotive supplier industry by analyzing a panel of 5000 firms for the years 1950 to 2011. Results indicate that R&D expenses in fact increase profitability at the firm level. In particular, increases in the R&D expense to sales ratio lead to increases in the profit contribution of intangible assets relative to sales. This indicates that more R&D intensive IP should command higher royalty rates per sales when licensed to third parties and within multinational enterprises alike.
    Keywords: productivity,intellectual property,royalties,MNE,transfer pricing
    JEL: D24 L20 L62 M21
    Date: 2018
  12. By: Wilfried A. Kouamé; Sampawende J Tapsoba
    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.
    Date: 2018–03–19
  13. By: Hughes, Joseph P. (Rutgers University); Jagtiani, Julapa (Federal Reserve Bank of Philadelphia); Mester, Loretta J. (Federal Reserve Bank of Cleveland); Moon, Choon-Geol (Hanyang University)
    Abstract: We consider how size matters for banks in three size groups: banks with assets of less than $1 billion (small community banks), banks with assets between $1 billion and $10 billion (large community banks), and banks with assets between $10 billion and $50 billion (midsize banks). Community banks have potential advantages in relationship lending compared with large banks. However, increases in regulatory compliance and technological burdens may have disproportionately increased community banks’ costs, raising concerns about small businesses’ access to credit. Our evidence suggests that (1) the average costs related to regulatory compliance and technology decrease with size; (2) while small community banks exhibit relatively more valuable investment opportunities, larger community banks and midsize banks exploit theirs more efficiently and achieve better financial performance; (3) unlike small community banks, large community banks have financial incentives to increase lending to small businesses; and (4) for business lending and commercial real estate lending, large community banks and midsize banks assume higher inherent credit risk and exhibit more efficient lending. Thus, concern that small business lending would be adversely affected if small community banks find it beneficial to increase their scale is not supported by our results.
    Keywords: community banking; scale; financial performance; small business lending
    JEL: G21 L25
    Date: 2018–03–13
  14. By: Bruno, Randolph Luca; Campos, Nauro F.; Estrin, Saul
    Abstract: The empirical literature has not reached a conclusion as to whether foreign direct investment (FDI) yields spillovers when the host economies are emerging. Instead, the results are often viewed as conditional. For macro studies, this means that the existence and scale of spillover effects is contingent on the levels of institutional, financial or human capital development attained by the host economies. For enterprise level studies, conditionality relates to the type of inter-firm linkages; forwards, backwards, or horizontal. In this paper, we conduct a systematic meta-analysis on emerging economies to summarize these effects and throw light on the strength and heterogeneity of these conditionalities. We propose a new methodological framework that allows country- and firm-level effects to be combined. We hand-collected information from 175 studies and around 1100 estimates in Eastern Europe, Asia, Latin America and Africa from 1940 to 2008. The two main findings are that: (a) “macro” effects are much larger than enterprise-level ones, by a factor of at least six; and (b) the benefits from FDI into emerging economies are substantially less “conditional” than commonly thought.
    Keywords: foreign direct investment; overall effects; firm-to-firm effects; meta-regression-analysis; enterprise performance; aggregate productivity.
    JEL: F23 O12
    Date: 2018–02–14
  15. By: Saito, Hisamitsu
    Abstract: We examine whether the entry of multinational firms into a region induces the exit of low-productivity local firms from the market and the extent to which this improves regional productivity. For this purpose, we employ establishment-level data on the food manufacturing industry in Indonesia. After controlling for spillover effects, we find a greater left truncation in productivity distribution of local firms in regions with larger number of multinational firms. In addition, we find that this effect has greater impacts on regional productivity than spillover effects. Therefore, in order to maximize the regional benefits of foreign direct investment, governments should facilitate the entry and exit of local firms.
    Keywords: Firm selection; Regional productivity; Spillovers
    JEL: F23 L11 R12
    Date: 2018–03–07

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