nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒05‒14
ten papers chosen by

  1. Competition effect on innovation and productivity - The Portuguese case By Anabela Santos; Michele Cincera; Paulo Neto; Maria Manuel Serrano
  2. Geography and Agricultural Productivity: Cross-Country Evidence from Micro Plot-Level Data By Tasso Adamopoulos; Diego Restuccia
  3. Reconciling the Firm Size and Innovation Puzzle By Anne Marie Knott; Carl Vieregger
  4. The Locus of Knowledge Externalities and the Cost of Knowledge. By Antonelli, Cristiano; Colombelli, Alessandra
  5. On Barriers to Technology Adoption, Appropriate Technology and Deep Integration (with implications for the European Union) By Mercenier, Jean; Voyvoda, Ebru
  6. Testing the Quiet Life Hypothesis in the African Banking Industry By Simplice Asongu; Nicholas Odhiambo
  7. Governance, social infrastructure and productivity By del Río, Fernando
  8. The Operational Efficiency of REITs By Eli Beracha; Zifeng Feng; William Hardin
  9. Bridge to Bigpush or Backwash? Market Integration, Reallocation, and Productivity Effects of Jamuna Bridge in Bangladesh By Blankespoor, Brian; Emran, M. Shahe; Shilpi, Forhad; Xu, Lu
  10. Why Did EU Banks Change Their Business Models in Last Years and What Was the Impact of Net Fee and Commission Income on Their Performance? By Karolina Vozkova

  1. By: Anabela Santos (Université Libre de Bruxelles, iCite); Michele Cincera (Université Libre de Bruxelles, iCite and ECARES); Paulo Neto (Universidade de Évora – Departamento de Economia, UMPP, CEFAGE-UÉ and CIEO-UALG); Maria Manuel Serrano (Universidade de Évora – Departamento de Sociologia, UMPP and SOCIUS-CSG/ISEG-UL)
    Abstract: The aim of the present paper is to assess the effect of competition on innovation (patent applications) and on productivity (Total Factor Productivity and Labour Productivity), using data from 654 Portuguese firms, according to 208 NACE 4-digits sectors, and over the period 2007 to 2015. For this purpose, two different methodological approaches were used, a Poisson regression model for the patent function and a log-log fixed effect model for the productivity function. The results reveal that, on average, competition has a negative, U-shaped form effect on innovation in the short term, and a positive effect in the medium-long term. Nevertheless, the model focusing only on manufacturing sectors shows some differences from the model considering all economic activities, namely a linear positive effect of competition on innovation. Concerning the effect of competition on productivity, a positive effect on Total Factor Productivity emerged from the analysis, while for labour productivity a negative one prevails.
    Keywords: Competition, Innovation, Productivity.
    JEL: L10 O31 D24
    Date: 2018–05
  2. 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.
    JEL: O1 O11 O13 O14 O4
    Date: 2018–04
  3. By: Anne Marie Knott; Carl Vieregger
    Abstract: There is a prevailing view in both the academic literature and the popular press that firms need to behave more entrepreneurially. This view is reinforced by a stylized fact in the innovation literature that R&D productivity decreases with size. However, there is a second stylized fact in the innovation literature that R&D investment increases with size. Taken together, these stylized facts create a puzzle of seemingly irrational behavior by large firms—they are increasing spending despite decreasing returns. This paper is an effort to resolve that puzzle. We propose and test two alternative resolutions: 1) that it arises from mismeasurement of R&D productivity, and 2) that firm size endogenously drives R&D strategy, and that the returns to R&D strategies depend on scale. We are able to resolve the puzzle under the first tack--using a recent measure of R&D productivity, RQ, we find that both R&D spending and R&D productivity increase with scale. We had less success with the second tack--while firm size affects R&D strategy in the manners expected by theory, there is no strategy whose returns decrease in scale. Taken together, our results are consistent with the Schumpeter view that large firms are the major engine of growth, they both spend more in aggregate than small firms, and are more productive with that spending. Moreover the prescription that firms should behave more entrepreneurially, should be treated with caution--one small firm strategy has lower returns to scale than its large firm counterpart.
    Date: 2018–04
  4. By: Antonelli, Cristiano; Colombelli, Alessandra (University of Turin)
    Abstract: This paper provides an extended CDM approach to analyse jointly the simultaneous effects of knowledge spillovers in the knowledge generation function and in the technology production function. It introduces the distinction between imitation and knowledge externalities and articulates the hypothesis that spillovers yield their effects via three well distinct mechanisms: i) knowledge externalities that exert positive and direct effects on the knowledge production function, and ii) indirect effects on the technology production function via their effects on the cost of knowledge; iii) imitation externalities exert direct and positive effects on productivity in the technology production function. We test our hypotheses on a large panel of Italian companies distributed in the NUTS2 regions for the period 2005 – 2009. The econometric analysis consists in a model comprising a system of equations that test the simultaneous role of spillovers in the knowledge generation function and the technology production function with the inclusion of endogenous knowledge costs. The results confirm that the access to external knowledge – as an input in the knowledge generation function – plays a key role in increasing the knowledge output and – as an input in the technology production function – has positive indirect and direct effects on the productivity of firms.
    Date: 2017–06
  5. By: Mercenier, Jean; Voyvoda, Ebru
    Abstract: Based on two strands of research, namely ‘barriers to technology adoption’ and ‘appropriate technology’, we propose a formal reappraisal of ‘deep integration’, a broad concept often used in trade policy discussions. We then evaluate the 2004-7 EU enlargement wave utilizing this operational reappraisal. More specifically, we first estimate, using 2007 data, total labor productivity (TLP) in the 27 EU member states, and show that in all but a few sectors, new member states clearly stand below the lower envelope technology frontier of the older members in their use of skilled and unskilled labor. We interpret this as being the result of past barriers to technology adoption that are likely to be removed by the integration process into the EU, with these new counties’ TLP shifting to the incumbent members’ lower envelope. We then explore the potential effects on all 27 EU member states of this ‘deep integration’ experiment using a calibrated intertemporal multisectoral general equilibrium model. Our main finding is that, for most parameter configurations, workers’ welfare in incumbent member countries is not negatively impacted despite the rather drastic improvement in competitiveness experienced by new members.
    Keywords: Barriers to technology adoption, appropriate technology, technological upgrading, deep integration, European integration, calibrated general equilibrium
    JEL: D58 E23 F12 J31 O14 R13
    Date: 2018–04–25
  6. By: Simplice Asongu (Yaoundé/Cameroun); Nicholas Odhiambo (Pretoria, South Africa)
    Abstract: The Quiet Life Hypothesis (QLH) is the pursuit of less efficiency by firms. In this study, we assess if powerful banks in the African banking industry are increasing financial access. The QLH is therefore consistent with the pursuit of financial intermediation inefficiency by large banks. To investigate the hypothesis, we first estimate the Lerner index. Then, using Two Stage Least Squares, we assess the effect of the Lerner index on financial access proxied by loan price and loan quantity. The empirical evidence is based on a panel of 162 banks from 42 African countries for the period 2001-2011. The findings support the QLH, although quiet life is driven by the below-median Lerner index sub-sample. Policy implications are discussed.
    Keywords: Financial access; Bank performance; Africa
    JEL: D40 G20 G29 L10 O55
    Date: 2018–01
  7. By: del Río, Fernando
    Abstract: I develop a neoclassical growth model in which the government accumulates contestable social infrastructure. In this framework, both a more accountable and more fairness governance encourages governmental accumulation of social infrastructure which fosters productivity. According to the calibrated model, for a country in the lower decile of the distribution of the index of social infrastructure, improving governance fairness by one standard deviation increases, on average, social infrastructure by 84% and GDP per worker by around 38%. However, the quantitative impact of improving governance accountability on social infrastructure and productivity is negligible.
    Keywords: Governance, productivity, rent-seeking, social infrastructure.
    JEL: O10 O43 O47
    Date: 2018–04–16
  8. By: Eli Beracha; Zifeng Feng; William Hardin
    Abstract: This paper examines the extent to which the operational efficiency of Real Estate Investment Trusts (REITs) is related to their operational performance, risk and stock return. In this paper, the operational efficiency of a REIT is measured as the ratio of its operational expense to revenue. Higher operational efficiency ratio (OER) indicates less efficient REIT. Using a sample of U.S. equity REITs during the 1993 – 2015 time period, we find that REITs’ operational performance measured by return on assets (ROA and FFOA) as well as return on equity (ROE and FFOE) is negatively and significantly associated with their previous-year operational efficiency ratios. The results also show that more efficient REITs explore less market risk, measured by stock return volatility, and credit risk, measured by cash flow coverage ratio. Furthermore, there are evidences that the cross-sectional stock return of REITs could be partially explained by their operational efficiency ratios, and that portfolio consisting of high efficient REITs earn, on average, higher cumulative stock return than portfolio consisting of low efficient REITs.
    Keywords: Efficiency; Performance; REIT
    JEL: R3
    Date: 2017–07–01
  9. By: Blankespoor, Brian; Emran, M. Shahe; Shilpi, Forhad; Xu, Lu
    Abstract: This paper uses a quasi-experimental study of a major bridge construction in Bangladesh to understand the effects of a large reduction in trade costs on the pattern of structural change and agricultural productivity. We develop a spatial general equilibrium model with a core and two hinterlands at the opposite sides separated by rivers and allow for productivity gains through agglomeration in both agriculture and manufacturing sectors. The model yields insights different from the standard core-periphery and trade models:(i) the newly connected hinterland may experience higher population density and agricultural productivity despite significant de-industrialization, (ii) even with increased specialization in agriculture, the share of agricultural employment may decline when inter-regional trade requires local services (e.g. processing and trading), and (iii) the strongest effects on employment structure are felt not necessarily in the areas next to the bridge but in the areas that move out of autarky as a result of the bridge. In empirical estimation, we use doubly robust estimators in a difference-in-difference design where the comparison hinterland comes from a region which was supposed to be connected to the core (capital city) by the proposed, but not yet constructed, Padma bridge due to idiosyncratic political factors. In the short run, we find significant labor reallocation from agriculture to services in the connected hinterland, but no perceptible effects on the employment share of manufacturing, population density, and night-lights. In the long run, the labor share of manufacturing declines in the treatment hinterland and increases in the core, consistent with the de-industrialization effect emphasized in core-periphery models. However, there are significant positive effects on population density, night light luminosity and agricultural yields in the treatment hinterland which contradict backwash effects of the bridge. The effects of the bridge on intersectoral labor allocation are spatially heterogeneous, with relatively weak effects in the areas close to the bridge.
    Keywords: Core-Periphery, Density, Deindustrialization, Agricultural Productivity, Bridge, Bigpush, Backwash, Agglomeration
    JEL: O12 O13 O14 O18
    Date: 2018–04–13
  10. By: Karolina Vozkova (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper contributes to the current literature dealing with the drivers of bank business model changes by analyzing the relationship between fee and commission income share and banks’ performance in terms of profitability, risk and risk-adjusted profitability in the European Union. We apply System Generalized Method of Moments on a unique data set of 329 EU banks in 2005-2014 period. We did not find any diversification benefits by increasing the fee income share based on which we conclude that increase in fee income share observed during last years in EU banks was driven mainly by external factors like increased competition rather than by internal reasons. As expected higher reliance on equity financing and better quality of provided loans enhance banks’ performance. Finally, bank business strategy and macroeconomic factors are crucial in the determination of banks’ performance.
    Keywords: bank, fee and commission income, profitability, risk
    JEL: C23 G21 L25
    Date: 2018–02

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