nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒07‒09
seven papers chosen by

  1. Revisiting the causal effects of exporting on productivity: Does price heterogeneity matter? By Tewodros Ayenew Wassie
  2. GVC centrality and productivity: Are hubs key to firm performance? By Chiara Criscuolo; Jonathan Timmis
  3. Fear the walking dead: Zombie firms, spillovers and exit barriers By Ana Fontoura Gouveia; Christian Osterhold
  4. Financial Markets and the Allocation of Capital: The Role of Productivity By Filippo Di Mauro; Fadi Hassan; Gianmarco I. P. Ottaviano
  5. A Framework to Study the Role of Structural Transformation in Productivity Growth and Regional Convergence By Fukao, Kyoji; Paul, Saumik
  6. Generation of regional input-output tables: a spatial econometric approach with illustrative simulations for France,Germany and Poland By Andrzej Toroj
  7. Making investment work for productivity-enhancing, inclusive and sustainable development: What we know, and what we would still like to know By Görg, Holger

  1. By: Tewodros Ayenew Wassie (Department of Economics, University of Sheffield)
    Abstract: In most empirical studies that establish the export-productivity relationships, output is measured in values rather than in quantities. This makes it difficult to distinguish between productivity and within-firm changes in price that could occur following exposure to international markets. Using detailed data on quantity and prices from Ethiopian manufacturing firms in the period 1996-2005, this paper distinguishes efficiency from revenue based productivity and examines what this means for the estimated relationship between exporting and productivity. The main results show that exporters are more productive than non-exporters in terms of revenue based productivity and this is explained by both self-selection and learning effects. However, when correcting for price heterogeneity, exporters appear to be similar to non-exporters both before and after export entry. Overall, the results suggest that the increase in firm-level productivity following entry into foreign markets is associated with changes in prices as opposed to productive efficiency.
    Keywords: Export; revenue productivity; physical productivity; price heterogeneity; Africa; Ethiopia
    JEL: F14 D22 O14 O55
    Date: 2018–12
  2. By: Chiara Criscuolo; Jonathan Timmis
    Abstract: This paper uses “centrality” metrics to reflect the changing structure of Global Value Chains (GVCs), contrasting central hubs and peripheral countries and sectors, and examine how these changes impact firm productivity. Using cross-country firm-level data from ORBIS, the paper finds that changing position within GVCs can play a role in the catch up of firms, but the results are heterogeneous across firms and countries. Firstly, becoming more central is associated with faster productivity growth of smaller firms, nonfrontier businesses, and of firms in smaller economies and in post-2004 EU member countries. And these correlations weaken with firm size and with proximity to the frontier, such that when one ignores firm heterogeneity and only considers average effects, there is no correlation for the average firms in the data. Secondly, the (centrality weighted) average productivity of buyers matters for the productivity of firms in our data overall, however this is particularly true for firms in large economies, for non-frontier and for smaller firms. The policy environment, such as flexible labour markets, better access to finance, stronger contract enforcement and simplified export procedures, appears to be important in translating the changing structure of GVCs into faster productivity growth of these non-frontier firms.
    Keywords: centrality, firms, global value chains, network analysis, Productivity
    JEL: D22 F12 F14 L25
    Date: 2018–06–25
  3. By: Ana Fontoura Gouveia; Christian Osterhold
    Abstract: Productivity growth is slowing down among OECD countries, coupled with increased misallocation of resources. A recent strand of literature focuses on the role of non-viable firms (“zombie firms”) to explain these developments. Using a rich firm-level dataset for one of the OECD countries with the largest drop in barriers to firm exit and restructure, we assess the role of zombies on firm dynamics, both in the extensive and intensive margins. We confirm the results on the high prevalence of zombie firms, significantly less productive than their healthy counterparts and thus dragging aggregate productivity down. Moreover, while we find evidence of positive selection within zombies, with the most productive restructuring and the least productive exiting, we also show that the zombies' productivity threshold for exit is much lower than that of nonzombies, allowing them to stay in the market, distorting competition and sinking resources. Zombie prevalence curbs the growth of viable firms, in particular the most productive, harming the intra-sectoral resource reallocation. We show that a reduction in exit and restructuring barriers promotes a more effective exit channel and fosters the restructuring of the most productive. These results highlight the role of public policy in addressing zombies' prevalence, fostering a more efficient resource allocation and enabling productivity growth.
    Keywords: Firm Dynamics, Insolvency Frameworks, Labor Productivity, Resource Allocation, Zombie Firms
    JEL: D24 E22 E24 G33 J24 L25
    Date: 2018–06–25
  4. By: Filippo Di Mauro; Fadi Hassan; Gianmarco I. P. Ottaviano
    Abstract: The efficient allocation of credit is a key element for the success of an economy. Traditional measures of allocative efficiency focus on the Q-theory of investment and, in particular, on the elasticity of finance to investment opportunities proxied by firm real value added. This paper introduces a theory-based alternative measure that focuses instead on the elasticity of credit to firm productivity. In doing so, it develops a simple theoretical framework that delivers clear predictions for the elasticity of credit to current and future productivity depending on capital market frictions. When applied to the novel firm-level dataset of the Competitiveness Research Network (CompNet) set up by the EU System of Central Banks, the proposed measure leads to normative statements about the efficiency of credit allocation across the largest Eurozone economies, changing the conclusions that one would reach based on traditional empirical applications of Q-theory.
    Keywords: bank credit, capital allocation, productivity, credit constraints
    JEL: G10 G21 G31 D92 F3 O16
    Date: 2018–07
  5. By: Fukao, Kyoji (Asian Development Bank Institute); Paul, Saumik (Asian Development Bank Institute)
    Abstract: We show that σ-convergence in regional productivity growth can be approximated by σ-convergence in sectoral productivity growth and σ-convergence in structural transformation-led productivity growth. Applying this framework to Japanese prefecture-level data from 1874 to 2008, we find support for substantial convergence effects of structural transformation in the post-WWII years.
    Keywords: structural transformation; labor productivity; regional convergence; Japan
    JEL: O10 O40
    Date: 2018–04–23
  6. By: Andrzej Toroj
    Abstract: This paper investigates the construction of multisector-multiregion input-output tables by using spatial econometric methods. I demonstrate that, under reasonable assumptions, the problem of finding Leontief's technical coeffecients can be formulated as a modified multi-equation spatial Durbin model and the missing parameters can be estimated via maximum likelihood. The resulting coefficients are computed as a function of country-wide coeffiecients, as well as distance and regional-sectorial data on value added. The statistical performance of the model is scrutinized and the method is illustrated with simulations of regional (NUTS-3 level) economic impact assessment - for generic companies located in Southern France, Germany and Poland.
    Keywords: input-output modelling, GRIT(generation of regional input-output tables), spatial econometrics, SDM (spatial Durbin model), regional EIA (economic impact assessment)
    JEL: C31 C67 R12 R15
    Date: 2018–05
  7. By: Görg, Holger
    Abstract: Goal 8 of the UN Sustainable Development Goals (SDGs) calls for promoting "sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all". One driver that may help to achieve this goal is foreign direct investment (FDI). It has the potential to foster productivity growth and generate quality employment, and also - though many globalization critics may disagree - to help moving towards more socially and environmentally sustainable business practices (e.g., Görg, Hanley, Hoffmann, Seric, 2015). This short note reviews briefly what we do know from recent work using large scale firm level datasets about the potential benefits or costs of foreign direct investment as regards these aspects. It then sets out what else we would want to know, and how to go about collecting this knowledge. Based on this, some policy conclusions are offered.
    Date: 2018

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.