nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒07‒30
eight papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Offshore Profit Shifting and Domestic Productivity Measurement By Guvenen, Fatih; Mataloni Jr., Raymond J.; Rassier, Dylan G.; Ruhl, Kim J.
  2. The Productivity-Wage Premium: Does Size Still Matter in a Service Economy? By Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
  3. The impact of the European Union Emission Trading Scheme on Multiple Measures of Economic Performance By Giovanni Marin; Marianna Marino; Claudia Pellegrin
  4. The Effects of Being Subject to the Colombian Apprenticeship Contract on Manufacturing Firm Performance By Carlos Ospino
  5. Staying Young at Heart or Wisdom of Age: Longitudinal Analysis of Age and Performance in US and Japanese Firms By YAMAGUCHI, Shotaro; NITTA, Ryuji; HARA, Yasushi; SHIMIZU, Hiroshi
  6. Testing the quiet life hypothesis in the African banking industry By Asongu, Simplice A; Odhiambo, Nicholas M.
  7. A Comparison of TFP Estimates via Distribution Dynamics: Evidence from Light Manufacturing Firms in Brazil By Mendez-Guerra, Carlos; Gonzales-Rocha, Erick
  8. Econometric Perspectives on Economic Measurement By Adam Gorajek

  1. By: Guvenen, Fatih (Federal Reserve Bank of Minneapolis); Mataloni Jr., Raymond J. (Bureau of Economic Analysis); Rassier, Dylan G. (Bureau of Economic Analysis); Ruhl, Kim J. (Pennsylvania State University)
    Abstract: Official statistics display a significant slowdown in U.S. aggregate productivity growth that begins in 2004. We show how offshore profit shifting by U.S. multinational enterprises affects GDP and, thus, productivity measurement. Under international statistical guidelines, profit shifting causes part of U.S. production generated by multinationals to be excluded from official measures of U.S. production. Profit shifting has increased significantly since the mid-1990s, resulting in lower measures of U.S. aggregate productivity growth. We construct an alternative measure of value added that adjusts for profit shifting. The adjustments raise aggregate productivity growth rates by 0.09 percent annually for 1994-2004, 0.24 percent annually for 2004-2008, and lowers annual aggregate productivity growth rates by 0.09 percent after 2008. Our adjustments mitigate, but do not eliminate, the measured productivity slowdown. The adjustments are especially large in R&D-intensive industries, which most likely produce intangible assets that facilitate profit shifting. The adjustments boost value added in these industries by as much as 8 percent in the mid-2000s.
    Keywords: Tax havens; Formulary apportionment; Productivity slowdown
    JEL: E01 F23 O4
    Date: 2018–04–24
  2. By: Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
    Abstract: Ever since Moore (1911) a large empirical and theoretical literature has established the existence of a firm size-wage premium. At the same time, a second regularity in empirical work, linking size and productivity, has inspired a vast literature in multiple fields. However, the majority of the existing evidence is based on manufacturing data only. With manufacturing nowadays accounting for a very small share of the economy in many countries, whether productivity, size, and wages are closely linked, and how tight this link is across sectors, is still an open question. Using a unique dataset that collects micro-aggregated firm-level information on productivity, size, and wages for the entire economy in 17 countries over the 1994-2012 period, this paper unveils a much more subtle picture. First, while in the manufacturing sector both productivity and wages increase monotonically with firm size, the same is not true in the service sector. Second, a tight and positive link between wages and productivity is instead found in both manufacturing and services. The combination of these results suggests that, when looking at data for a much larger share of the economy, the ``size-wage premium' becomes more a "productivity-wage premium'". Unbundling the relationship between size, wages, and productivity has first-order policy implications for both workers and firms.
    Keywords: productivity, size-premium, wages
    JEL: E2 D2 J3
    Date: 2018–07
  3. By: Giovanni Marin (Università degli Studi di Urbino 'Carlo Bo', SEEDS - Sustainability Environmental Economics and Dynamics Studies (Università degli Studi di Ferrara)); Marianna Marino (ICN Business School, BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Claudia Pellegrin (EPFL - Ecole Polytechnique Fédérale de Lausanne)
    Abstract: The European Emission Trading Scheme (EU ETS) has introduced a price for carbon, thus generating an additional cost for companies that are regulated by the scheme. The objective of this paper is to provide empirical evidence on the effect of the EU ETS on firm-level economic performance. There is a growing body of empirical literature that investigates the effects of the EU ETS on firm economic performance, with mixed results. Differently from the previous literature, we test the effect of the EU ETS on a larger set of indicators of economic performance: employment, average wages, turnover, value added, markup, investment, labour productivity, total factor productivity and ROI. Our results, based on a large panel of European firms, provide a broad picture of the economic impact of the EU ETS in its first and second phases of implementation. Contrarily to the expectations, the EU ETS did not affect economic performance negatively. Results suggest that firms have reacted to the EU ETS by passing-through costs to their customers on the one hand and improving labour productivity on the other hand.
    Keywords: European Emission Trading Scheme, economic performance
    Date: 2017
  4. By: Carlos Ospino (Universidad de los Andes)
    Abstract: This paper evaluates the intent to treat local average treatment effects of the Colombian apprenticeship contract on manufacturing firm dynamics taking advantage of an exogenous variation generated by the 2002 labor reform and the regulation design. This evaluation is appealing because very little is known about the effects of apprenticeship policies on firm dynamics in developing countries. Moreover, although this regulation has been in place for years it has not been evaluated. Results using a regression discontinuity design which compares small firms subject to the regulation to those that are not, shows positive effects on output per worker (10 log points), total factor productivity (3 log points) and the share of exported sales (2 percentage points). It also shows a negative effect on the average wage bill of directly hired workers (9 log points). These results suggest that small firms which became subject to the regulation adjusted their labor force more efficiently, thus increasing productivity but did not share these gains with workers through higher wages.
    JEL: C21 D22 O47
    Date: 2018–07
  5. By: YAMAGUCHI, Shotaro; NITTA, Ryuji; HARA, Yasushi; SHIMIZU, Hiroshi
    Abstract: How does ageing influence the profitability of firms? This study uses an analysis of corporations listed on the NYSE and TSE between 1978 and 2015 to highlight clear differences between US and Japanese firms with respect to the relationship between age and profitability. It shows that US firms lose efficiency, as measured by total asset turnover as they age, whereas Japanese firms’ ability to generate profit from sales declines. This study explores the factors underlying these national differences in the relationship between ageing and profitability, focusing on rigidity of resource allocation. By examining the technological distance, we calculate resource allocation rigidity of the firms. The results show at all ages, Japanese firms are more rigid than their US counterparts, although the slope is steeper in the case of US firms. These observations suggest that Japanese firms’ operating profit margins decline as they age because they are less likely to change how they allocate resources and tend to stay in their existing business sectors, even if they are underperforming. In other words, these findings suggest that being flexible about allocation of resources mitigates the negative effect of ageing on profitability. The results suggest that changing patterns of resource allocation retards learning in the business domains in which a firm is already active.
    Date: 2018–06
  6. By: Asongu, Simplice A; Odhiambo, Nicholas M.
    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
    Date: 2018–05–07
  7. By: Mendez-Guerra, Carlos; Gonzales-Rocha, Erick
    Abstract: This article compares the distribution dynamics of two commonly used TFP estimation frameworks: the control function approach of Levinsohn and Petrin (2003) (LP for short) and the corrected control function approach of Ackerberg et al. (2015) (ACF for short). Using Brazilian firm-level data for the textile and furniture sectors, we estimate the transitional dynamics and long-run equilibrium of the TFP distribution for each framework over the 2003-2009 period. Results of this comparison are as follows. In the textile sector, the distribution dynamics for both frameworks are to some extent qualitatively similar. In the furniture sector, however, the distribution dynamics are largely different. While the LP framework shows relatively less mobility, two convergence clusters in the transition stage, and a bumpy distribution in the long run; the ACF framework shows relatively more backward mobility, a unique convergence cluster in the transition, and a highly symmetric distribution in the long run. In light of these results, the article concludes urging researchers not to rely too heavily on one or the other framework. It seems more appropriate to consider both frameworks for drawing inferences on productivity convergence and dispersion dynamics
    Keywords: total factor productivity, control function approach, distribution dynamics, manufacturing firms, Brazil
    JEL: D24 O47 O54
    Date: 2018–07–04
  8. By: Adam Gorajek (Reserve Bank of Australia)
    Abstract: It turns out that price index functions share a basic interpretation; practically all of them measure a change in some average of quality-adjusted prices. The different options are distinguished by their choice of average, their definition of quality, and their stance on what I label 'equal interest'. This new perspective updates the so-called stochastic approach to choosing index functions. It also offers new avenues to understand and tackle measurement problems. I discuss three examples.
    Keywords: macroeconomic data; index number; stochastic approach; hedonic price index
    JEL: C18 C43 C51 C80
    Date: 2018–07

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