nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒10‒22
27 papers chosen by

  1. What happens after an investment spike - investment events and firm performance By Michal Gradzewicz
  2. Measuring Profit Efficiency of Colombian Banks: A Composite Nonstandard Profit Function Approach By Diego Restrepo-Tobón; Jim Sánchez-González
  3. International Taxation and Productivity Effects of M&As By Todtenhaupt, Maximilian; Voget, Johannes
  4. Small U.S. Dairy Farms: Can They Compete? A Revisit By Nehring, Richard; Gillespie, Jeffrey; Erickson, Kenneth; Harris, J. Michael; Heutte, Silke; Sauer, Johannes
  5. How efficiently produce elite US universities highly cited papers? A case study based on input and output data By Klaus Wohlrabe; Felix de Moya Anegon; Lutz Bornmann
  6. Wealth of the Nation: Scotland’s Productivity Challenge - Technical Appendix By Mark Mitchell; Robert Zymek
  7. The long-term effect of digital innovation on bank performance: an empirical study of SWIFT adoption in financial services By Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
  8. Relations between input efficiency and financial situation of agricultural companies By Zabolotnyy, Serhiy; Felczak, Tomasz; Wasilewski, Mirosław
  9. Source of Total Factor Productivity Change with heterogeneity: an empirical analysis of two-grain producing regions in Norway By Alem, Habtamu
  10. Transmission of Monetary Policy and Bank Heterogeneity in Colombia By Carolina Ortega Londoño
  11. The effect of local industry competition on firm productivity. Evidence from the Mexican manufacturing industry By Barriga-Cabanillas, Oscar
  12. Firm Productivity and Exports: Firm-Level Evidence from the Korean Agro-Food Industries By Oh, Saera; Cho, Sung Ju
  13. On the Identification of Gross Output Production Functions By Amit Gandhi; Salvador Navarro; David Rivers
  14. Different Paths? Human Capital Prices, Wages and Inequality in Canada and the U.S. By Audra J. Bowlus; Chris Robinson
  15. The case of a rural branch of an Indian Public Sector Bank: Innovation through Learning and Thinking Lean with a Managerial Performance Perspective By Pankaj Kumar Baag; Kavitha P
  16. Technological Diversification in European Regions: The Role of E-skills By Fulvio Castellacci; Davide Consoli; Artur Santoalha
  17. Readability of MD&A and Operating Performance of Banking Companies By Dr. M. Jayasree; Dr. Rachappa Shette
  18. Level of the current liquidity ratio versus financial efficiency of dairy cooperatives By Ganc, Marzena
  19. Cost of Production and Competitiveness for Production of Milk in Nepal By Ojo, Kehinde; VanSickle, John
  20. Knowledge Spillover in China: A Firm Level Study By Xu, Shicong; Sam, Abdoul G.
  21. Predictors of Bank Distress: The 1907 Crisis in Sweden By Grodecka, Anna; Kenny, Seán; Ögren, Anders
  22. Factor prices and induced technical change in the Industrial Revolution By Ravshonbek Otojanov and Roger Fouquet
  23. Immigration and Economic Performance in the US: Evidence from the 50 States By Rutledge, Zach; Kane, Tim
  24. How Does Eliminating Quotas Affect Firm Investment? Evidence from Dairy Farms By Levi, Loic; Chavas, Jean-Paul
  25. Voluntary Environmental Program and Export Performance By Song, Danbee; Sam, Abdoul G.
  26. ICT, R&D and Organizational Innovation: Exploring Complementarities in Investment and Production By Pierre Mohnen; Michael Polder; George van Leeuwen
  27. Does energy price affect energy efficiency? Cross-country panel evidence By Roberto Antonietti; Fulvio Fontini

  1. By: Michal Gradzewicz
    Abstract: Our study aims at investigating the relationship between investment spikes andsubsequent productivity development at the firm level. We propose a novel identification scheme for the effects of an investment spike, using matching techniques andadequate econometric modelling. It allows us to find efficiency differentials againstmatched firms. We showed that TFP falls after an investment spike and slowly recovers thereafter, which is consistent with learning-by-doing effects. For smaller firmsthe fall is more pronounced and the subsequent recovery is longer. On the contrary, labor productivity rises after an investment spike, driven mainly by capital deepen-ing. The increase of sales after a spike suggests that expansion is the main purpose of an investment spike and rising employment confirms that this type of investmentis complementary to labor. As firms with spikes are on average more efficient andinvestment spikes attract resources and production factors, it suggests that improved allocative efficiency is an important factor driving positive macroeconomic correlation between investment and TFP.
    Keywords: difference-in-difference, investment spike, matching, productivity, TFP
    JEL: D22 D24 L16 O3
    Date: 2018–10
  2. By: Diego Restrepo-Tobón; Jim Sánchez-González
    Abstract: We analyze the profit efficiency of the Colombian banking industry during theperiod 2001 - 2013. Unlike previous studies, we estimate revenue and cost efficiencyseparately and then compute profit efficiency as a composite measure of both costand revenue efficiency. This approach overcomes the mis-specification problems ofthe traditional nonstandard profit function approach used in most of the literatureregarding profit efficiency. We find that profit efficiency improved during the periodunder analysis mainly because gains in revenue efficiency. In addition, and in contrastwith previous studies but in line with economic intuition, we find that while revenue andcost efficiency tend to be negatively correlated, each correlates positively with profitefficiency. Thus, improving either revenue efficiency or cost efficiency has a positiveimpact on profit efficiency.
    Keywords: Profit Efficiency; Revenue Efficiency; Cost Efficiency; Nonstandard Profit Function; Stochastic Frontier
    JEL: D24 G21 G34 L13
    Date: 2018–08–27
  3. By: Todtenhaupt, Maximilian; Voget, Johannes
    Abstract: We investigate the effect of international differences in corporate taxation on the realization of productivity gains in M&A deals. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus mitigate the resulting productivity improvement. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we estimate that a 1 percentage point increase in the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain by 4.5%. This effect is less pronounced when firms can use international profit shifting to attenuate effective differences in taxation. In a complementary analysis, we use an event study design and a fixed effects model to explore the timing of the response of productivity, as well as, labor and capital input to the tax rate differential after the merger separately for the acquirer and the target. We show that our findings are mainly driven by deals with targets residing in locations with a tax advantage with respect to the acquirer. In these transactions, tax differentials reduce the post-merger adjustment in the target firm and inhibit the full realization of productivity gains.
    Keywords: M&A,productivity,international taxation
    JEL: F23 G34 H25 D24
    Date: 2018
  4. By: Nehring, Richard; Gillespie, Jeffrey; Erickson, Kenneth; Harris, J. Michael; Heutte, Silke; Sauer, Johannes
    Abstract: With rapid structural change in the U.S. dairy industry, we use data from USDA’s Agricultural Resource Management Survey to determine financial performance, scale efficiency, and technical efficiency associated with U.S. conventional and pasture-based milk production during 2010-2016. Large farms generally outperformed smaller farms in terms of technical efficiency, profitability measures, and returns to scale.
    Keywords: Agricultural and Food Policy, Agricultural Finance, Production Economics
    Date: 2018–01–15
  5. By: Klaus Wohlrabe; Felix de Moya Anegon; Lutz Bornmann
    Abstract: While output and impact assessments were initially at the forefront of institutional research evaluations, efficiency measurements have become popular in recent years. Research efficiency is measured by indicators that relate research output to input. The additional consideration of research input in research evaluation is obvious, since the output should be related to the input. The present study is based on a comprehensive dataset with input- and output-data for 50 US universities. As input, we used the amount of budget, and as output the number of highly-cited papers. We employed Data Efficiency Analysis (DEA), Free Disposal Hull (FDH), and two more robust models: the order-m and order-α approach. The results of the DEA and FDH analysis show that Harvard University and Rice University can be called especially efficient compared to the other universities. While the strength of Harvard University lies in its high output of highly-cited papers, the strength of Rice University is its small input. In the order-α and order-m frameworks, Harvard University remains efficient, but Rice University becomes super-efficient. We produced university rankings based on adjusted efficiency scores (subsequent to regression analyses), in which single covariates (e.g. the disciplinary profile) are held constant.
    Keywords: University; efficiency analysis; regression analysis; normalized citation impact
    JEL: I21 I23 D61
    Date: 2018
  6. By: Mark Mitchell; Robert Zymek
    Abstract: This note provides technical background information on some contents of the report Wealth of the Nation: Scotland’s Productivity Challenge (Kelly et al.,2018). The report shows that Scotland’s productivity performance is only middling in the OECD: Scotland would need to close a productivity gap of 20% to reach the top quartile of most productive OECD countries. It also illustrates that this gap can be attributed to a relatively low capital stock and low Total Factor Productivity (TFP) in equal measure. In this note, we make transparent the data and assumptions underlying these calculations.
    Keywords: input-output, development accounting, productivity
    JEL: E01 F40 O52 R11
    Date: 2018–10
  7. By: Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
    Abstract: We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.
    Keywords: technology adoption; bank performance; financial services; network innovation; SWIFT
    JEL: N20 O33
    Date: 2017–06–01
  8. By: Zabolotnyy, Serhiy; Felczak, Tomasz; Wasilewski, Mirosław
    Abstract: The research defines the input efficiency and estimates relations between factors of efficiency and financial situation of agricultural companies. In 2005-2013, the input efficiency of agricultural companies was low which was illustrated by insufficient profitability. An increase in investments did not result in a substantial improvement in return on capital. It was stated that the highest impact on financial situation of companies had the labour factor, while capital and land factors were of lesseru importance. The efficiency of capital use was highly related to assets’ capacity of agricultural companies, although labor and land were strongly connected to sales revenue and operating profit.
    Keywords: Agricultural Finance, Farm Management, Production Economics
    Date: 2018
  9. By: Alem, Habtamu
    Keywords: Agribusiness Economics and Management, Productivity Analysis and Emerging Technologies, Production Economics
    Date: 2018–06–20
  10. By: Carolina Ortega Londoño
    Abstract: This study provides evidence of bank heterogeneity in Colombiafor the period 2002-2014 and analyzes how bank-specific character-istics determine the bank-lending channel for monetary policy. Toanalyze bank heterogeneity, this study estimates technical (cost) effi-ciency using Stochastic Frontier Analysis, which also allows for themeasurement of Returns to Scale and a Lerner Index to proxy mar-ket power in the loans market. This study also provides measuresof capitalization, liquidity, and the commonly used ratios of financialand operational efficiency with bank’s balance-sheet data. Further-more, using a long and unbalanced panel, this study finds evidence ofthe existence of a bank-lending channel and finds that this transmis-sion mechanism is determined by bank-specific characteristics. Theresults suggest higher technical and operational efficiency, capitaliza-tion, liquidity and market power, increase the sensitivity of loans dis-bursements to monetary policy shocks, while higher returns to scalelowers this sensitivity.
    Keywords: monetary policy transmission; bank lending channel; bank heterogeneity; bank efficiency
    JEL: G21 E52 E59
    Date: 2018–06–01
  11. By: Barriga-Cabanillas, Oscar
    Keywords: Productivity Analysis and Emerging Technologies, Industrial Org./Supply Chain Management, Demand and Price Analysis
    Date: 2018–06–20
  12. By: Oh, Saera; Cho, Sung Ju
    Keywords: International Trade, Agribusiness Economics and Management, Productivity Analysis and Emerging Technologies
    Date: 2018–06–20
  13. By: Amit Gandhi; Salvador Navarro (University of Western Ontario); David Rivers (University of Western Ontario)
    Abstract: We study the nonparametric identification of gross output production functions under the environment of the commonly employed proxy variable methods. We show that applying these methods to gross output requires additional sources of variation in the demand for flexible inputs (e.g., prices). Using a transformation of the firm’s first-order condition, we develop a new nonparametric identification strategy for gross output that can be employed even when additional sources of variation are not available. Monte Carlo evidence and estimates from Colombian and Chilean plant-level data show that our strategy performs well and is robust to deviations from the baseline setting.
    Date: 2018
  14. By: Audra J. Bowlus (University of Western Ontario); Chris Robinson (University of Western Ontario)
    Abstract: In the last three decades, Canada and the US showed different paths in per capita GDP growth, skill premiums and inequality. Both rm and worker productivity differences play a role and have di erent policy implications, but are dicult to distinguish. To examine separate rm and worker productivity effects, human capital prices and quantities are estimated using the methods developed in Bowlus and Robinson (2012). The quantities re ect worker productivity while the prices tend to re ect firm productivity. In the US there was faster growth and a much more rapid rise in skill premia and inequality. This was primarily due to di erent paths for the relative price paid to rent high skilled human capital in the two countries, rather than differences in relative quantities of human capital supplied by the typical high skilled worker. Worker productivity increased for high skilled workers, but decreased for low skilled workers over the 1980-2000 period.
    Date: 2017
  15. By: Pankaj Kumar Baag (Indian Institute of Management Kozhikode); Kavitha P (Indian Institute of Management Kozhikode)
    Abstract: The Indian Public Sector bank’s drawback includes cost per employee and inflexible operating procedures. This paper for the first time confirms application of innovative lean thinking process to this service sector through ‘value stream mapping’ during the phase when banks started with upgrades. The results were efficiency improvements through lower wait time, stress levels, besides increased customer satisfaction, profit, and business. The paper concludes that financial services renovation can be a catalyst for change, but demands coordination with other areas to maximize operational efficiency through redesigned resources and capacities, accurate and improved understanding of variation, demand and costs, to make decisions about service mix with policies.
    Keywords: Innovation in finance, lean thinking, Indian Banking, Value Stream Mapping Under the Themes: Innovation in Finance/ Indian Banking
    Date: 2018–05
  16. By: Fulvio Castellacci (TIK Centre, University of Oslo); Davide Consoli (TIK Centre and INGENIO, Valencia); Artur Santoalha (TIK Centre, University of Oslo)
    Abstract: This paper argues that e-skills, namely capabilities associated with the use and development of digital technologies, enhance regions’ ability to imitate existing knowledge and to create new industrial paths. The empirical analysis focuses on the relationship between e-skills and technological diversification for a panel of European regions for the period 2001-2012. We construct novel indices of regional e-skill endowment distinguishing between basic users, professional users and expert developers of ICTs. The econometric results show that e-skills foster technological diversification dynamics in European regions, and that this effect is particularly strong for less developed regions.
    Date: 2018–10
  17. By: Dr. M. Jayasree (GITAM Hyderabad Business School); Dr. Rachappa Shette (Indian Institute of Management Kozhikode)
    Abstract: The impact of firm performance on readability has become significant in understanding the qualitative aspect of financial reports. There are several studies on readability and firm performance. We therefore attempt to explore firm performance and readability of banking firms in India which is more relevant in the current situation of increased provisioning by banks. Netinterest margin (NIM) and Fog index are used as operating performance and readability variables respectively. The lower Fog index implies easy readability. We use cross sectional analysis of data to understand the effect of firm’s performance on readability and bidirectional effect readability on operating performance. We find Indian banking firms’ MD&A are difficult to read. However, when we compare with existing literature based on companies from the USA and 42 other countries, Indian banking firms’ MD&A are difficult but not unreadable. Our results show that firm’s performance influence readability. The results are statistically significant showing that firm performance would have negative impact on Fog index of readability and Fog index would have negative association with firm performance. Based on our results, we, therefore, affirm that firms with poor performance would structure their annual reports to veil adverse information, in unfavorable situations. Application of readability index in case of banking companies of emerging economy in association with operating performance is the contribution of this paper to the existing literature.
    Keywords: Firm performance, Non-performing assets, Readability, Fog Index, Net-interest margin, Noninterest ratio
    Date: 2018–04
  18. By: Ganc, Marzena
    Abstract: The study shows the efficiency of the dairy cooperative depending on the level of their current financial liquidity. Cooperatives were grouped according to the current liquidity ratio using quartiles methods and significance e test of the differences between the groups was conducted on the groups. Adopted to verify the hypothesis that dairy cooperatives with liquidity above the recommended standards of literature show highest efficiency adopted for verification. The most advantageous financial conditions were characterized by dairy cooperatives with liquidity above and within the limits recommended in the literature. This may be due to the fact that having adequate levels of liquidity may be in the form of cooperative farming more important than maximizing financial performance.
    Keywords: Agricultural Finance, Financial Economics, Production Economics
    Date: 2018
  19. By: Ojo, Kehinde; VanSickle, John
    Abstract: Nepal is a developing country located in South Asia with high economic dependency on agriculture. Eighty percent of the population works in the agricultural sector, generating 40% of the GDP. Livestock is an important part of mixed farming with dairy generating about two-thirds of the livestock GDP. Almost three-fourths of the households in Nepal keep cattle and one-half keep buffalo for milk production. Even with a larger percentage of the animals being cattle, buffalo produced 71% of the milk. Cost of production is higher for cattle because cattle productivity declines after 5 to 6 lactations but must be kept in the herd because cattle cannot be slaughtered because of religious based policy. This makes milk production cost higher and reduces the competitiveness of milk in south Asia. The no slaughter policy puts Nepal at a disadvantage to other growers in south Asia. The purpose of this study was to assess the cost of production for producing milk and the impact of no slaughter policies on producers. Monte Carlo simulations were completed to quantify a baseline and alternative scenarios for milk production. Our results suggest that milk production would increase significantly allowing domestic consumption and trade to increase as well.
    Keywords: Agricultural and Food Policy, International Development, Livestock Production/Industries
    Date: 2018–01
  20. By: Xu, Shicong; Sam, Abdoul G.
    Keywords: Rural/Community Development, Productivity Analysis and Emerging Technologies, Agribusiness Economics and Management
    Date: 2018–06–20
  21. By: Grodecka, Anna (Sveriges Riksbank); Kenny, Seán (Department of Economic History, Lund University); Ögren, Anders (Department of Economic History, Lund University)
    Abstract: This paper contributes to literature on bank distress using the Swedish experience of the in- ternational crisis of 1907, often paralleled with 2008. By employing previously unanalyzed bank-level data, we use logit regressions and principal component analysis to measure the im- pact of pre-crisis bank characteristics on the probability of their subsequent distress. The crisis was characterized by “creative destruction,” as those banks with weaker corporate governance structures, wider branching networks, operating with lower cost efficiency were more likely to experience distress. We find that poor credit allocation rather than foreign borrowing, as often stressed, were associated with ultimate demise.
    Keywords: bank distress; financial crises; Swedish banks; lender of last resort
    JEL: E58 G21 G28 H12 N23
    Date: 2018–10–12
  22. By: Ravshonbek Otojanov and Roger Fouquet
    Abstract: Allen (2009) has argued that the divergence in factor prices determined the direction of technical change that altered the course of economic growth in Britain. Using historical data for the 1700 – 1914 period, this paper derives and analyses the nature and direction of technical change. The results show that technical change was biased during the Industrial Revolution and that the bias stemmed from the divergence in the cost of labour and energy. In particular, labour saving responded strongly to the acceleration in wage growth in the 1850-1914 period. Overall, technical change was labour-saving, energy-using and hence capital-deepening. Moreover, the evidence shows that the expansion of effective energy supply allowed British economy to sustain output growth in the First Industrial Revolution era. Labour-saving innovations were particularly crucial in the Second Industrial Revolution.
    Keywords: Industrial Revolution; Factor-Saving Technical Change; Induced Technical Change, Productivity, Innovation.
    JEL: N13 O3 O11
  23. By: Rutledge, Zach; Kane, Tim
    Keywords: Household and Labor Economics, Research Methods/Econometrics/Stats, Rural/Community Development
    Date: 2018–06–20
  24. By: Levi, Loic; Chavas, Jean-Paul
    Keywords: Food and Agricultural Policy Analysis, Production Economics, Risk and Uncertainty
    Date: 2018–06–20
  25. By: Song, Danbee; Sam, Abdoul G.
    Keywords: Resource and Environmental Policy Analysis, International Trade, Industrial Org./Supply Chain Management
    Date: 2018–06–20
  26. By: Pierre Mohnen; Michael Polder; George van Leeuwen
    Abstract: This paper examines whether there are complementarities between investments in ICT, R&D and organizational innovation, and the effects of different investment profiles on total factor productivity growth on Dutch firm-level data. We estimate an integrated model of investment profile adoption and total factor productivity growth. We find that the three investment decisions are complementary, in the sense that investing in one increases the probability of investing in another one because joint investments lead to higher TFP growth than individual investments. ICT earns on average an expected rate of return of 9.7%, followed by 6% to 7% on organizational innovation and a modest 1.4% to 1.8% on R&D in services and manufacturing respectively.
    JEL: L25 O30 O33
    Date: 2018–09
  27. By: Roberto Antonietti (Department of Economics and Management, University of Padova); Fulvio Fontini (Interdepartmental Centre for Energy Economics and Technology, University of Padova)
    Abstract: In this paper, we analyze the relationship between energy intensity and energy price in a panel of 120 countries over 34 years, from 1980 to 2013. We use information on energy intensity and real oil price, and merge it with macroeconomic data on the countries’ structural characteristics. We assess their direction of causality using fixed effects, dynamic panel data models and Granger causality tests. We identify a statistically significant, but weak negative effect of real oil price on energy intensity, which corresponds to a positive effect of energy price on energy efficiency. We also show significant, large regional differences in this relationship. We thus posit that a global policy aimed at increasing the price of oil would induce a limited increase in average energy efficiency through a more efficient use of energy, but this increase would differ considerably across regions around the world.
    Keywords: energy price, energy efficiency, real oil price, panel data
    JEL: Q41 Q43 Q55
    Date: 2018–10

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.