nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒11‒05
23 papers chosen by

  1. Econometric Analysis of Productivity: Theory and Implementation in R By Valentin Zelenyuk; Robin C. Sickles; Wonho Song
  2. Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown By Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
  3. Are factor biases and substitution identifiable? The Canadian evidence By Ken Stewart; Jiang Li
  4. The Inverted-U Relationship Between Credit Access and Productivity Growth By Philippe Aghion; Antonin Bergeaud; Gilbert Cette; Rémy Lecat; Hélène Maghin
  5. The Economics and Productivity of Organic versus Non-organic U.S. Dairy Farms By Nehring, Richard; Gillespie, Jeffrey; Harris, J. Michael Harris
  6. Decentralized Environmental Regulations and Plant-Level Productivity By Vivek Ghosal; Andreas Stephan; Jan F. Weiss
  7. Improving Finite Sample Approximation by Central Limit Theorems for DEA and FDH effciency scores By Valentin Zelenyuk; Léopold Simar
  8. Utilities Governance, Incentives, and Performance: Evidence from the Water Sector in India By Nyathikala, Sai Amulya Nyathikala; Jamasb, Tooraj; Llorca, Manuel; Kulshrestha, Mukul Kulshrestha
  9. The Graduation Shift of German Universities of Applied Sciences By Lutz Bornmann; Klaus Wohlrabe; Sabine Gralka
  10. Prices, Profits, and Production By Victor H. Aguiar; Roy Allen; Nail Kashaev
  11. Technological Trajectories and FDI: Top Bananas and Underdogs By Santos, Eleonora; Khan, Shahed
  12. Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter? By Santi Novita
  13. Accounting for Unobservable Heterogeneity in Cross Section Using Spatial First Differences By Hannah Druckenmiller; Solomon Hsiang
  14. Structural change and misallocation. Firm-level evidence from Poland By Jan Hagemejer; Joanna Tyrowicz
  15. Entrepreneurship in the Information Age: An Empirical Analysis of the European Regions By Petr Pleticha
  16. Misallocations go a long way: evidence from firm-level data By Jan Hagemejer; Peter; Joanna Tyrowicz
  17. Firm Scope and Spillovers from New Product Innovation: Evidence from Medical Devices By Matthew Grennan; Charu Gupta; Mara Lederman
  18. Financial constraints matter : Empirical evidence on borrowing behavior, microfinance and firm productivity By M.A. Boermans; Daan Willebrands
  19. Farewell to Agriculture? Productivity Trends and the Competitiveness of Agriculture in Central Asia By Gharleghi, Behrooz; Popov, Vladimir
  20. Distribution and productivity growth: an empirical exercise applied to selected Latin American countries By Douglas Alcantara Alencar; Frederico Gonzaga Jayme Jr.; Gustavo Britto; Claudio Puty
  22. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  23. Longitudinal Environmental Inequality and Environmental Gentrification: Who Gains From Cleaner Air? By John Voorheis

  1. By: Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland); Robin C. Sickles (Department of Economics, Rice University); Wonho Song (School of Economics, Chung-Ang University)
    Abstract: Our chapter details a wide variety of approaches used in estimating productivity and efficiency based on methods developed to estimate frontier production using Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA). The estimators utilize panel, single cross section, and time series data sets. The R programs include such approaches to estimate firm efficiency as the time invariant fixed effects, correlated random effects, and uncorrelated random effects panel stochastic frontier estimators, time varying fixed effects, correlated random effects, and uncorrelated random effects estimators, semi-parametric efficient panel frontier estimators, factor models for cross-sectional and time-varying efficiency, bootstrapping methods to develop confidence intervals for index number-based productivity estimates and their decompositions, DEA and Free Disposable Hull estimators. The chapter provides the professional researcher, analyst, statistician, and regulator with the most up to date efficiency modeling methods in the easily accessible open source programming language R.
    Keywords: Production (technical) efficiency; Stochastic frontier analysis; Data envelopment analysis; Panel data; Index numbers; Non-parametric analysis; Bootstrapping
    Date: 2018–09
  2. By: Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: A large literature documents declining measures of business dynamism including high-growth young firm activity and job reallocation. A distinct literature describes a slowdown in the pace of aggregate labor productivity growth. We relate these patterns by studying changes in productivity growth from the late 1990s to the mid 2000s using firm-level data. We find that diminished allocative efficiency gains can account for the productivity slowdown in a manner that interacts with the within-firm productivity growth distribution. The evidence suggests that the decline in dynamism is reason for concern and sheds light on debates about the causes of slowing productivity growth.
    Date: 2017–01
  3. By: Ken Stewart (Department of Economics, University of Victoria); Jiang Li (Office of the Chief Economist, Global Affairs Canada)
    Abstract: Revised productivity accounts recently released by Statistics Canada are used to estimate a Klump-McAdam-Willman normalized CES supply-side system for the half-century 1961-2012. The model permits distinct rates of factor-augmenting technical change for capital and labour that distinguish between short-term versus long-term effects, as well as a non-unitary elasticity of substitution and timevarying factor shares. The advantage of the Canadian data for this purpose is that they provide a unified treatment of measurement issues that have had to be improvised in the US and European data used by previous researchers. In contrast to previous results, we find that an elasticity of substitution and distinct factor biases of technological progress are not well determined by the model. For the Canadian data, the KMW model does not appear to provide a framework that overcomes the classic Diamond-McFadden- Rodriguez non-identification result. That impossibility theorem is manifested in our findings, not overcome by them. JEL Classification: C51, E23, E25, O30, O51
    Keywords: normalized CES system, aggregate elasticity of substitution, biased technical change
    Date: 2018–10–01
  4. By: Philippe Aghion; Antonin Bergeaud; Gilbert Cette; Rémy Lecat; Hélène Maghin
    Abstract: In this paper, we identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovation-based growth with credit constraints, where the above two counteracting effects generate an inverted-U relationship between credit access and productivity growth. Then, we test our theory on a comprehensive French manufacturing firmlevel dataset. We first show evidence of an inverted-U relationship between credit constraints and productivity growth when we aggregate our data at sectoral level. We then move to firm-level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experienced lower exit rates, particularly the least productive firms among them. To confirm our results, we exploit the 2012 Eurosystem's Additional Credit Claims (ACC) program as a quasi-experiment that generated exogenous extra supply of credits for a subset of incumbent firms.
    Keywords: credit constraint, firms, growth, interest rate, productivity.
    JEL: G21 G32 O40 O47
    Date: 2018
  5. By: Nehring, Richard; Gillespie, Jeffrey; Harris, J. Michael Harris
    Abstract: A Stochastic Production Frontier (SPF) model is estimated for U.S. dairy farms to examine the productivity of organic and non-organic dairy farms by system and size. For both systems, size is the major determinant of competitiveness based on various measures of productivity and returns to scale.
    Keywords: Production Economics
    Date: 2018–05–21
  6. By: Vivek Ghosal; Andreas Stephan; Jan F. Weiss
    Abstract: Using a unique plant-level dataset we examine total factor productivity (TFP) growth and its components, related to efficiency change and technical change. The data we use is from Sweden and for their pulp and paper industry, which is heavily regulated due to its historically large contribution to air and water pollution. Our paper contributes to the broader empirical literature on the Porter Hypothesis, which posits a positive relationship between environmental regulation and “green” TFP growth of firms. Our exercise is innovative as Sweden has a unique regulatory structure where the manufacturing plants have to comply with plant-specific regulatory standards stipulated at the national level, as well as decentralized local supervision and enforcement. Our key findings are: (1) prudential regulation limits expansion of plants with high initial pollution; (2) regulation, however, is not conducive to plants’ “green” technical change, which provides evidence against the recast version of the Porter Hypothesis; (3) decentralized command-and-control regulation is prone to regulatory bias, entailing politically motivated discriminatory treatment of plants with otherwise equal characteristics.
    Keywords: pollution, environmental regulations, plant-specific regulation, decentralized regulation, enforcement, political-economy, Porter Hypothesis, TFP, productivity, efficiency, technical change, pulp and paper industry
    JEL: D24 L51 L60 Q52 Q53 Q58
    Date: 2018
  7. By: Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland); Léopold Simar (Institut de Statistique, Biostatistique et Sciences Actuarielles, Université Catholique de Louvain.)
    Abstract: We propose an improvement of the finite sample approximation of the central limit theorems (CLTs) that were recently derived for statistics involving production efficiency scores estimated via Data Envelopment Analysis (DEA) or Free Disposal Hull (FDH) approaches. The improvement is very easy to implement since it involves a simple correction of the already employed statistics without any additional computational burden and preserves the original asymptotic results such as consistency and asymptotic normality. The proposed approach persistently showed improvement in all the scenarios that we tried in various Monte-Carlo experiments, especially for relatively small samples or relatively large dimensions (measured by total number of inputs and outputs) of the underlying production model. This approach therefore is expected to be valuable (and at almost no additional computational costs) for practitioners wishing to perform statistical inference about production efficiency using DEA or FDH approaches.
    Keywords: Data Envelopment Analysis, DEA; Free Disposal Hull, FDH; Statistical; Inference; Production Efficiency; Productivity
    Date: 2018–09
  8. By: Nyathikala, Sai Amulya Nyathikala; Jamasb, Tooraj; Llorca, Manuel; Kulshrestha, Mukul Kulshrestha
    Abstract: Network utilities across the world are subject to regulation and political scrutiny. In developing countries, managing the trade-offs between socioeconomic and environmental objectives in public water and energy utilities is particularly challenging. These industries share important underlying technical and economic features. Therefore, many economic, governance, and policy lessons are transferable across these sectors. In India, the water sector suffers from mounting financial losses, lack of access, and poor quality of service. There is a dearth of literature on the multi-faceted nature of utility performance related to water utilities. We examine the socioeconomic and environmental aspects of urban water supply in India. We use a stochastic frontier analysis approach and distance functions to analyse the performance of 304 urban water supply utilities in three Indian states during the period 2010-2015. The results suggest that incentive-based economic reform and regulation would help the utilities improve their performance. More specifically measures to improve cost recovery, billing efficiency and reduce losses would help the utilities to enhance service delivery, expand coverage and induce efficiency in the sector. The results also show the dependence of water utilities on groundwater sources which is unsustainable in the long run. We highlight the need for designing economic incentives to improve the performance of utilities and enable them to achieve social and sustainability objectives.
    Date: 2018
  9. By: Lutz Bornmann; Klaus Wohlrabe; Sabine Gralka
    Abstract: In research into higher education, the evaluation of completion and dropout rates has generated a steady stream of interest for decades. While most studies only calculate quotes using student and graduate numbers for both phenomena, we propose to also consider the budget available to universities. We transfer the idea of the excellence shift indicator [1] from the research to the teaching area, and particularly to the completion rate of educational entities. The graduation shift shows institutions’ ability to produce graduates as measured against their basic academic teaching efficiency. The new indicator avoids the well-known heterogeneity problem in efficiency measurements. Their politically determined focus on education makes German universities of applied science the perfect sample for evaluating the graduation shift. Using a comprehensive dataset covering the years 2008 to 2013, we show that the shift produces results, which correlate closely with the results of the standard Data Envelopment Analysis (DEA) and graduation rates. Thus, we recommend the graduation shift as an alternative method of efficiency measurement in the teaching area. Compared to the DEA, the computation of the shift is easy, the shift is robust and non-economists can understand its results. We outline some limitations of the graduation shift.
    Keywords: Efficiency, graduation shift, DEA, students, universities of applied sciences
    JEL: A23 H52 I21 I23 D61
    Date: 2018
  10. By: Victor H. Aguiar; Roy Allen; Nail Kashaev
    Abstract: We study identification of multi-output production possibilities sets for heterogeneous firms that can be ranked in terms of productivity. Our setup applies with price-taking, profit-maximizing firms. We require observation of profits and either prices or proxies for prices. We characterize the identified set for production sets and provide conditions that ensure point identification of production sets. Our results extend classical duality results for the deterministic firm problem to a setup with rich heterogeneity, and with potentially limited variation in prices. We show that existing convergence results for quantile estimators may be directly converted to convergence results for production sets.
    Date: 2018–10
  11. By: Santos, Eleonora; Khan, Shahed
    Abstract: Previous empirical evidence searching for externalities from Foreign Direct investment in Portugal showed mixed results. Using a new database containing 5,045 Portuguese manufacturing firms grouped by technological trajectories, we investigate the occurrence and magnitude of externalities from FDI in 1995-2007. We find both positive and negative externalities in scale-intensive and supplier-dominated industries. The magnitude of externalities is higher in the current period than in lagged periods. Because positive externalities outweigh the negative externalities, on the whole a 1% increase in foreign presence (measured by turnover) increases the Total Factor Productivity of domestic firms by 0.42 percentage points. Thus, the Investment Promoting Agency should attract foreign projects in those technological groups.
    Keywords: Technological Trajectories,Multinational Corporations,Productivity
    JEL: F23 L60 O3
    Date: 2018
  12. By: Santi Novita (Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-2-Name: Bambang Tjahjadi Author-2-Workplace-Name: Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-3-Name: Andry Irwanto Author-3-Workplace-Name: Airlangga University, Jalan Airlangga 4 60286, Surabaya, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This paper shows how leverage affects firm's fragility and financial soundness during financial and industry crises. Methodology/Technique - Long term inefficient and zombie firms are explored through the effects of leverage in additional tests. Findings - There are two main results obtained from the sample of Indonesian non-financial firms from 2007 to 2016. First, leverage has a statistically significant correlation with firm's fragility. Second, leverage has an effect on firm's financial soundness during industry crisis. Novelty - Unlike the previous paper, this paper demonstrates a significant implication on the need to differentiate fragile firms and firms that are persistently inefficient, such as zombie firms.
    Keywords: Fragility; Zombie; Financial Soundness; Leverage; Industry Crisis; Financial Crisis.
    JEL: M20 M41
    Date: 2018–09–30
  13. By: Hannah Druckenmiller; Solomon Hsiang
    Abstract: We propose a simple cross-sectional research design to identify causal effects that is robust to unobservable heterogeneity. When many observational units are adjacent, it may be sufficient to regress the "spatial first differences" (SFD) of the outcome on the treatment and omit all covariates. This approach is conceptually similar to first differencing approaches in time-series or panel models, except the index for time is replaced with an index for locations in space. The SFD approach identifies plausibly causal effects so long as local changes in the treatment and unobservable confounders are not systematically correlated between immediately adjacent neighbors. We illustrate how this approach can mitigate omitted variables bias through simulation and by estimating returns to schooling along 10th Avenue in New York and I-90 in Chicago. We then more fully explore the benefits of this approach by estimating effects of climate and soil on maize yields across US counties. In each case, we demonstrate the performance of the research design by withholding important covariates during estimation. SFD has multiple appealing features, such as internal robustness checks that exploit rotation of the coordinate system or double-differencing across space, it is immediately applicable to spatially-gridded data sets, and it can be easily implemented in statical packages by replacing a single index in pre-existing time-series functions.
    JEL: C21 Q15 Q51 Q54
    Date: 2018–10
  14. By: Jan Hagemejer (Narodowy Bank Polski; University of Warsaw; Group for Research in Applied Economics (GRAPE)); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw)
    Abstract: Early transition literature linked large number of firm failures with the inability to overcome the pre-transition misallocation of resources, i.e. the inadequate capital-labor ratio. We look at the link between misallocation and firm survival using a rich firm-level dataset of over 1600 manufacturing plants established in a centrally planned economy after 1945. Our duration models include the standard Olley-Pakes misallocation measures as well as firm-level counterfactual level of capital that takes into account the present day market allocation and productivity. We show that i) misallocation was rather a firm-level than sector-level phenomenon and more importantly ii) it did not have a sizeable effect on the actual firm survival. Moreover, privatization tends to be negatively related to firm survival. This may imply both inappropriate self-selection into privatization programs and possibly inadequate implementation of the privatization.
    Keywords: misallocation, privatization, transition
    JEL: P31 D24 O47
    Date: 2018
  15. By: Petr Pleticha (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; CERGE EI, Politickych veznu 7, 11000 Prague, Czech Republic)
    Abstract: Decelerating productivity in recent years raised questions about technology diffusion in the economy. This study focuses on one particular diffusion channel, entrepreneurship, and inspects the mechanics through which it interacts with digitalization. The composite indicator of digitalization is split into separate components which enables analyzing digitalization’s interplay with entrepreneurship as a dynamic process. Based on the econometric analysis of Eurostat regional data covering the period 2008-2015, I find significant links between digitalization and entrepreneurship. Specifically, digitalization is associated with an increase in the rate at which firms are created and with a decrease in their survival rate after 3 years. The paper demonstrates that the interaction is dynamic in its nature as the effects of initial stages of digitalization reverse or vanish in its later phases. A sectoral analysis shows the persistence of the results across industries. Moreover, there is evidence that professional, scientific and technical activities are especially sensitive towards digitalization, experiencing strong, yet short-term shock in the firms’ birth, death, and survival rates. Accounting for geographic variation reveals heterogeneity between regions but not large enough to affect the overall results.
    Keywords: Digitalization, Entrepreneurship, Technology dissemination
    JEL: L16 L26 O33 R11
    Date: 2018–10
  16. By: Jan Hagemejer (Narodowy Bank Polski; University of Warsaw; Group for Research in Applied Economics (GRAPE)); Peter (University of Warsaw; Group for Research in Applied Economics (GRAPE)); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw)
    Abstract: We analyze the link between resource misallocation and subsequent long-run economic growth. We use two unique and novel sources of data for Poland and measure misallocation inherited from the period of central planning, i.e. period where input prices did not determine the use of inputs at firm, industry and country level. We assess sectoral, regional and cohort dimension of the inputs misallocation. We then show that undercapitalization was more prevalent that overcapitalization, and that it was due mostly to the firm and sector level variation in factor inputs. Given this insight, subsequent reallocation of the resources required shifting of inputs not only between firms, but also between sectors: a process which is relatively more prone to frictions due to specialization and information. When analyzing the link to the rate of growth once market mechanisms were reinstated, we find that regions with more misaligned firms (especially in terms of undercapitalization) experienced lower subsequent economic growth. This result proves highly robust, even three decades since the market mechanisms were reinstated.
    Keywords: misallocation, privatization, transition
    JEL: P31 D24 O47
    Date: 2018
  17. By: Matthew Grennan; Charu Gupta; Mara Lederman
    Abstract: When firms span related product categories, spillovers across categories become central to firm strategy and industrial policy, due to their potential to foreclose competition and affect innovation incentives. We exploit major new product innovations in one medical device category, and detailed sales data across related categories, to develop a causal research design for spillovers at the customer level. We find evidence of spillovers, primarily associated with complementarities in usage. These spillovers imply large benefits to multi- vs. single-category firms, accounting for nearly one quarter of sales in the complimentary category (equivalent to four percent of revenue in the focal category).
    JEL: D22 D4 D43 D62 I11 K21 L1 L13 L25 L38 L4 L5 M2 M21 O25 O31 O32 O33
    Date: 2018–10
  18. By: M.A. Boermans; Daan Willebrands
    Abstract: This paper examines the effect of financial constraints on firm performance using a sample of small business owners who are client at a microfinance institution (MFI). In developing countries, a lack of access to finance is seen as a key obstacle to successful entrepreneurship and economic growth. However, empirical evidence on this is still fragmented and sparse. This study contributes to the literature by applying an alternative measure of financial constraints based on actual lending and borrowing behavior to test how borrowing affects firm productivity. We use survey data of 615 entrepreneurs from Tanzania to analyze the relationship between financial constraints and labour productivity. Using OLS regression and propensity score matching techniques the results show that financial constraints impede labour productivity and are important barriers to successful entrepreneurship. Further tests suggest that financial constraints matter regardless of the measurement method used, thereby comforting researchers in a fragmented field which applies a wide range of financial constraints variables.
    Keywords: Entrepreneurship, credit constraints, access to finance, firmperformance
    Date: 2018
  19. By: Gharleghi, Behrooz; Popov, Vladimir
    Abstract: Agricultural productivity in the Central Asian republics of the USSR stopped growing from the late 1970s and declined in the 1990s when the transition to the market occurred. As a result, most agricultural goods were uncompetitive on the both the domestic market and the world market, and the agricultural trade balance deteriorated as imports grew faster than exports. Although there have been a few success stories – cereals in Uzbekistan, meat production in Azerbaijan, oil seeds in Kazakhstan – the overall picture is not one of agriculture as the driving force of the region’s future growth. We argue, however, that the relative decline of agriculture is consistent with international experience. In ‘economic miracle’ countries, the share of agriculture fell faster than in other countries because the sector donated labour to the industrial sector, which was the engine of growth. The problem in Central Asia is not the slow growth of agricultural output, but the slow growth of productivity in agriculture, which fails to increase the competitiveness of agricultural products and leads to an inability of the rural population to move to more productive industrial activities.
    Keywords: Agriculture productivity, Central Asia, Competitiveness
    JEL: Q10 Q18
    Date: 2018–10
  20. By: Douglas Alcantara Alencar (UFPA); Frederico Gonzaga Jayme Jr. (Cedeplar-UFMG); Gustavo Britto (Cedeplar-UFMG); Claudio Puty (UFPA)
    Abstract: In this article we analyze, from a Latin American structuralist perspective, whether productivity growth is affected by growth in income and employment. In order to test our hypothesis, we have chosen a sample of Latin American countries that represent 86% of the region’s gross domestic product. We perform an econometric test of the so-called Kaldor-Verdoon parameter and the employment growth parameter for the selected countries.
    Keywords: Demand-led growth, Endogenous technological change, Wage-led and profit-led demand regimes, Productivity regime, Latin American structuralism.
    JEL: O4 O3 E3
    Date: 2018–10
  21. By: Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland)
    Abstract: By using very rich individual-level data on workers from 28 European countries, we provide the first so extensive cross-country assessment of wage response to global production links within global value chains (GVCs) in the period 2005–2014. Unlike the other studies, we (i) address the importance of backward links in globally integrated production structures (capturing imports of goods and services required in any stage of the production of the final product); (ii) measure the occupational task profile of workers with new country-specific indices of routinisation; (iii) compare the impact of global production links on wages between workers from Western, Central–Eastern, and Southern Europe employed in manufacturing and non-manufacturing sectors; and (iv) account for direct and indirect dependence on GVC imports from developing and high-income countries. We consider the potential endogeneity problems. Our results suggest that global import intensity of production exhibits negative pressure on wages in Europe. This effect mainly concerns workers from Western Europe employed in manufacturing and is driven by production links with non-high-income countries. Our counterfactual estimates suggest that the effect for all of Europe is small, but the pressure of GVC imports on wages in Western Europe is not economically negligible, in particular when inputs are from less developed countries including China.
    Keywords: wages, global value chains, global import intensity of production, tasks, EU
    JEL: F14 F16 J31
    Date: 2018–10
  22. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.
    JEL: D70 O3 O4
    Date: 2018–10
  23. By: John Voorheis
    Abstract: A vast empirical literature has convincingly shown that there is pervasive cross-sectional inequality in exposure to environmental hazards. However, less is known about how these inequalities have been evolving over time. I fill this gap by creating a new dataset, which combines satellite data on ground-level concentrations of fine particulate matter with linked administrative and survey data. This linked dataset allows me to measure individual pollution exposure for over 100 million individuals in each year between 2000 and 2014, a period of time has seen substantial improvements in average air quality. This rich dataset can then be used to analyze longitudinal dimensions of environmental inequality by examining the distribution of changes in individual pollution exposure that underlie these aggregate improvements. I confirm previous findings that cross-sectional environmental inequality has been on the decline, but I argue that this may miss longitudinal patterns in exposure that are consistent with environmental gentrification. I find that advantaged individuals at the beginning of the sample experience larger pollution exposure reductions than do initially disadvantaged individuals.
    Date: 2017–05

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