nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒12‒03
seventeen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Farm Size and Productive Efficiency in Brazilian Amazon By Ferreira, M.; Feres, J.G.
  2. Technical and Environmental Efficiency of Water Use in Agriculture By Nin-Pratt, A.
  3. Accounting for the Impacts of Changing Configurations in Temperature and Precipitation on U.S. Agricultural Productivity By Njuki, E.; Bravo-Ureta, B.
  4. Production risk and technical (in)efficiency amongst smallholder livestock farmers in Botswana: An exploratory investigation By Amuakwa-Mensah, F.; Chube, B.; Surry, Y.; Bahta, S.
  7. Productivity spillovers from multinational activity to local firms in Ireland By Mattia Di Ubaldo; Martina Lawless; Iulia Siedschlag
  8. Lobster farming in Vietnam: the relationship between being cost efficient and environmentally efficient By Speelman, S.; Hai, A. Ton Nu
  9. Does Bank Efficiency Influence the Cost of Credit? By Anastasiya SHAMSHUR; Laurent WEILL
  10. Labour Productivity and Firm-Level TFP with Technology-Specific Production Functions By Michele Battisti; Filippo Belloc; Massimo Del Gatto
  11. Innovation and Productivity in the Food vs. the High-Tech Manufacturing Sector By Frick, F.; Jantke, C.; Sauer, J.
  12. Back to the Plough: Women Managers and Farm Productivity in India By Mahajan, K.
  13. Persistent and Transient Inefficiency: Explaining the Low Efficiency of Chinese Big Banks By Zuzana FUNGACOVA; Paul-Olivier KLEIN; Laurent WEILL
  14. An Alternative Estimate of Canadian Potential Output: The Multivariate State-Space Framework By Lise Pichette; Maria Bernier; Marie-Noëlle Robitaille
  15. Does Output Influence Productivity? - A Meta-Regression Analysis By Ludwig List
  16. Agricultural Productivity and Food Supply Stability in Sub-Saharan Africa: LSDV and SYS-GMM Approach By Ogunlesi, Ayodeji; Bokana, Koye; Okoye, Chidozie; Loy, Jens-Peter
  17. Machines and Machinists: Importing Skill-Biased Technology By Miklós Koren; Márton Csillag

  1. By: Ferreira, M.; Feres, J.G.
    Abstract: This paper assessed the relationship between farm size and productivity performance in Brazilian Amazon. We built two productivity indicators: technical efficiency and land use efficiency. We used Stochastic Frontier Analysis and 2006 agricultural census data to derive the efficiency measures and to assess their relationship with farm size. Results pointed out that the average Amazonian farm is productivity inefficient. The average farm could increase its agricultural production in 35.3% using the current amount of inputs. For land use efficiency, results indicate that farmers could reduce agricultural land in 90% and produce the same output using the current amount of labor and capital. Our measures of productivity presented a nonlinear relationship with farm size. However, both relations possess a similar turning point around 16,500 hectares. For policy analyses purposes, the actual relationship between farm size and productive efficiency is negative, as the turning points are far above the average farm-size in the region. Acknowledgement : This study is a part of first author's dissertation which was funded by a Capes/Embrapa doctoral scholarship. This research is supported by a CNPq research grant.
    Keywords: Productivity Analysis
    Date: 2018–07
  2. By: Nin-Pratt, A.
    Abstract: This article proposes a measure of multi-factor water efficiency as an alternative to partial water productivity indicators that are easy to calculate but give an incomplete picture of productivity and efficiency. Technical water efficiency is determined in the production process of desired outputs using a nonparametric, directional distance function that evaluates water efficiency given levels of all other inputs and outputs. Environmental efficiency is evaluated separately using a distance function that finds the minimum level of pollutants for different combinations of polluting inputs. Efficiency of these two production processes are then combined in an overall measure of water efficiency that can be decomposed into a technical efficiency component and an environmental efficiency component. Results of an application to global agriculture show that differences in overall efficiency across countries are mostly explained by differences in environmental efficiency, that improved water efficiency could reduce the total amount of water used for irrigation by 11 percent, while improved environmental efficiency could reduce pollution by 30 percent globally. Even if countries achieve full water efficiency, significant differences in water use and pollution will remain as the result of differences in production technology between countries. Acknowledgement :
    Keywords: Environmental Economics and Policy
    Date: 2018–07
  3. By: Njuki, E.; Bravo-Ureta, B.
    Abstract: The objective of this study is to investigate how changing configurations in temperature and precipitation are transmitted to productivity growth in the U.S. agricultural sector. In doing so, we account for farm heterogeneity in production possibilities and the considerable variations in weather and other physical characteristics of the environment. In contrast, the received literature on productivity growth assumes that firms share the same production possibilities and only differ with respect to their level of inefficiency. We do this by implementing a Random Parameters approach in a Stochastic Production Frontier framework. The resulting parameter estimates are used to decompose a multiplicative TFP index that yields measures of technological progress, technical efficiency change, environmental, and scale-mix efficiency. Our results indicate that even after accounting for knowledge stocks generated from investments in research and development there are significant reductions in productivity growth, primarily driven by weather anomalies. Acknowledgement : This study was partially funded by U.S. Department of Agriculture, National Institute of Food and Agriculture grant number 2016-67012-24678 and 2016-67024-24760.
    Keywords: Environmental Economics and Policy
    Date: 2018–07
  4. By: Amuakwa-Mensah, F.; Chube, B.; Surry, Y.; Bahta, S.
    Abstract: This article investigates production (in)efficiency and production risk among smallholder livestock farmers in Botswana. Using cross-sectional data for beef production households, we estimate stochastic production frontier model that accommodates both technical inefficiency and production risk simultaneously. Heteroscedasticity is assumed for both inefficiency and production risk functions. Potential endogeneity of off-farm income is investigated using the control function approach. The empirical results indicate that the deterministic beef production function exhibits decreasing returns to scale and it is mainly explained by herd size and capital equipment. Non-linear relationship between inefficiency and herd size is established with an inverted U shape. Whereas, off-farm income reduces inefficiency, an increase rainfall and household size were found to increase inefficiency. In addition, production risk increases with an increase in maximum temperature and off-farm income but reduces with an increase in rainfall. The average inefficiency and risk scores for beef production are 9.4% and 3.2% respectively. Acknowledgement :
    Keywords: Livestock Production/Industries
    Date: 2018–07
  5. By: Maina, Florence Wanjiru; Mburu, John; Gitau, George Karuoya; Van Leeuwen, John
    Abstract: Kenya boasts of having the best dairy sector in the region. The sector is the best performing in the agricultural sector, contributing 17% to the agricultural gross domestic product (GDP) annually. It is dominated by small-scale farmers who account for the highest amounts of milk produced in the country especially in the Central and Rift Valley regions. These areas are most vigilant in dairy farming in Kenya and share ecological conditions and the same breed of animals, however, some areas produce the expected 20 litres per cow per day while others produce below that at about 5 litres per cow per day. Mukurweini sub-county in Nyeri County of Central region of Kenya is an area with intensive dairy farming but producing low amounts of milk, thus, the reason for selecting it for this study. Cross-sectional data on socio-economic factors and milk production in the past one month were collected from the 91 small-scale dairy farmers sampled in 2017, using semi-structured questionnaires. The study used the Stochastic Frontier model to analyze the technical, allocative and economic efficiency of milk production, while Tobit model was used to assess the factors associated with economic efficiency. The results indicated that the farmers had a mean of 68.7% in technical efficiency, 91.3% in allocative efficiency and 62.6% in economic efficiency. The results showed that the economic inefficiency among the farmers is mostly caused by low technical efficiency since the farmers indicated high levels of allocative efficiency. From the findings, there were considerable production inefficiencies and thus there was room for increasing productivity through the use of available inputs and reducing costs. Farmers having increasing returns to scale (IRS) showed that enhanced utilization of the available resources would yield a proportionate increase in the milk output. Increasing herd sizes, feeding animals with enough concentrates and ensuring the animals’ health care costs are met were found to be some of the solutions to the low milk v productivity among the small-scale farmers. At the same time, older farmers were found to be responsible for technical inefficiencies in milk production. The cost of concentrates and other feeds was found to be the major component of the total cost of dairy production. However, the allocative efficiency level among the farmers was quite high, an indication that the farmers in the study area, though resource-poor, were efficient at minimizing costs. The study indicated that age, household size, having dairy farming as the main source of income, hired labour and monthly cost of concentrates were the significant factors associated with economic efficiency among small-scale dairy farmers in Mukurweini. Price subsidies on dairy inputs, especially concentrates, as well as better milk prices, are some of the interventions that will see an increase in efficiency resulting in an increase in milk productivity.
    Keywords: Agricultural and Food Policy
    Date: 2018–10–31
  6. By: Tope Isaac Awe (College of Education, Ikere - Ekiti.)
    Abstract: This study investigates the relationship between total factor productivity and manufactured export in Nigeria between 1973 and 2009. The study made use of time series data and adopted vector autoregressive (VAR) Model with its forecast error variance decomposition (FEVD) in investigating shock transmission among TFP and manufactured export. The study also estimates TFP in Nigeria using non-parametric approach. The empirical finding in the study revealed that TFP in Nigeria had been low and unstable, indicating a situation of poor and unstable technological growth in Nigeria. The study also found that both manufactured export and import of capital goods exhibited positive relationship with TFP in Nigeria. The findings also showed the existence of bi-directional causality between Total factor productivity and manufactured export in Nigeria. The paper recommended that government should improve technological efficiency i.e. TFP and import of capital goods in order to experience improvement in Nigeria manufactured export, government should also take drastic step in improving the growth of per capita output .
    Keywords: Total Factor Productivity and Manufactured Export
    JEL: A10
    Date: 2018–11
  7. By: Mattia Di Ubaldo (Economic and Social Research Institute); Martina Lawless (Economic and Social Research Institute); Iulia Siedschlag (Economic and Social Research Institute)
    Abstract: As well as their direct effects on output and employment, the attraction of foreign direct investment is sometimes argued to provide further economic benefits through spillover effects that potentially increase the productivity performance of domestic firms. Empirical evidence on these indirect effects has however tended to be mixed. This paper uses Irish firm-level data on both manufacturing and services firms to re-examine and update evidence on intra-industry and intra-region spillovers and then extends the previous research by examining if spillovers are more likely to occur through supply chain linkages. In addition, we consider the heterogeneity of investors and allow the spillover effects to differ for foreign affiliates owned by EU and non-EU based parent companies. Finally, we examine the role of domestic firms’ absorptive capacity in conditioning the effects of spillovers from multinationals on their productivity. Overall, we find limited evidence or a negative link between the presence of foreign-owned firms and the productivity of domestic firms in the same industry or the same region. Examining forward and backward linkages through supply chains indicates that on average, selling to foreign-owned firms had a positive effect while buying from foreign owned firms had a negative effect on the average productivity of domestic firms. Finally, considering the absorptive capacity of domestic firms and allowing the spillover effects to differ depending on the origin of the parent companies, we find that the positive productivity spillovers come from supply chain linkages between domestic firms investing in R&D and foreign affiliates of multinationals with headquarters based outside the EU.
    Keywords: absorptive capacity, Foreign direct investment, productivity spillovers
    JEL: D22 F23 O33
    Date: 2018–11–30
  8. By: Speelman, S.; Hai, A. Ton Nu
    Abstract: Marine cage lobster in Vietnam has been known as a high return industry. But in recent years, it has also been facing with negative feedback on productivity due to overuse of nutrient content inputs. Local lobster farmers seemed to internalize this negative feedback by paying more efforts on cleaning cage and more cost on antibiotics and chemical without knowing if it is a positive or negative economic-environmental trade-off. In order to identify the relationship between the cost and environmental efficiency, this paper used Data Envelopment Analysis and Material Balance Principle with a dataset of 353 marine cage lobster farms in Vietnam. The findings show that improvements in efficiency of current input used would result in both lower production costs and better environmental performance. There is a positive trade-off in most lobster farms for being environmentally efficient and cost efficient from the current production. If lobster farms used appropriate input mix given input price information to be more cost efficient, it would benefit to environment. Moreover, producing friendlier with the marine environment also reduce production cost. However, there is a negative trade-off for the movement from being cost efficient to environmentally efficient position for all three groups. Acknowledgement :
    Keywords: Resource/Energy Economics and Policy
    Date: 2018–07
  9. By: Anastasiya SHAMSHUR (University of East Anglia); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Using a large sample of firms from nine European countries, this study examines the relationship between bank efficiency and the cost of credit for borrowing firms. We hypothesize that bank efficiency – the ability of banks to operate at lower costs – is associated with lower loan rates and thus lower cost of credit. Combining firm-level and bank-level data, we find support for this prediction. The effect of bank efficiency on the cost of credit varies with firm and bank size. Bank efficiency reduces the cost of credit for SMEs, but does not exert a significant influence for either micro companies or large firms. Furthermore, the effect is driven by large banks, where improvements in bank efficiency tend to be strongly associated with lower cost of credit. We also find that lower bank competition facilitates the transmission of greater bank efficiency to lower cost of credit. Overall, our results indicate that measures that increase bank efficiency can foster access to credit.
    Keywords: bank efficiency, cost of credit. Classification-JEL G21, L11.
    Date: 2018
  10. By: Michele Battisti; Filippo Belloc; Massimo Del Gatto
    Abstract: We investigate the technological dimension of productivity, presenting an empirical methodology based on mixture models to disentangle the labor productivity differences associated with the firm's choice of technology (BTFP) and those related to the rm's ability to exploit the adopted technology (WTFP). The estimation endogenously determines the number of technologies (in the sector) and degree of technology sharing across firms (i.e., for each firm, the probability of using a given technology). By using comparable data for about 35,000 rms worldwide distributed across 22 (two-digit) sectors, we show BTFP to be at least as important as WTFP in explaining the labor productivity gaps across firms. Intra-sectoral and inter-sectoral heterogeneity is substantial and, even in sectors in which BTFP dominates on average, we nd a considerable number of firms for which labor productivity is mostly determined by the ability to use the adopted technology. Hence, dissecting the labor productivity gaps is crucial to achieving more targeted innovation policies. The estimated number of technologies ranges from one (in only three industries) to five, being three in most cases. The suggested estimation strategy takes simultaneity into account. The BTFP measure is unaffected by omitted price bias. The presence of BTFP dispersion can be associated with the action of frictions preventing firms from switching to superior and more productive technologies. Eliminating BTFP does not eliminate misallocation.
    Keywords: TFP, technology adoption, production function estimation, mixture models
    JEL: D24 O33 C29
    Date: 2018–11
  11. By: Frick, F.; Jantke, C.; Sauer, J.
    Abstract: The food sector is considered a mature and a research and development (R&D) extensive industry. Nevertheless, also food companies face numerous challenges and cannot abstain from innovation activity if they want to keep their competitive stance. We examine the impact of innovation on labor productivity in European food companies in comparison to results for firms operating in high-tech sectors. The central motivation of our study is that the observed low R&D intensity in the food sector should be mirrored in different productivity effects of innovation when compared to the high-tech sector. We use microdata from the European Union s Community Innovation Survey (CIS) and apply an endogeneity-robust multi-stage model that has been applied by various recent studies. Our results point out major differences between the examined subsectors. While we find strong positive effects of innovation on labor productivity for food firms, we find insignificant effects in the high-tech sector. This suggests that the returns to innovation might be best evaluated separately by sector rather than for the manufacturing sector as a whole. Acknowledgement :
    Keywords: Labor and Human Capital
    Date: 2018–07
  12. By: Mahajan, K.
    Abstract: In India the role of women as farm managers has been veiled behind the image of men as primary decision makers on farms. Data shows that approximately 8% of farm households had women farm managers in India in 2004 and this number increased to 11% in 2011. This rising phenomenon of farm management by women begets an in depth understanding of these farms, including, differentials in productivity levels across men and women managed farms. This paper uses three measures to capture productivity production value, profit value and crop specific yields. The results show that production value is lower by approximately 7% in women managed farms even with all controls. The difference in profitability is of the same magnitude, albeit, insignificant. There are two possible channels behind the result unobservable soil quality or differences in managerial efficiency as a result of inexperience. While we cannot test explicitly for the first channel, the paper provides suggestive evidence on the second channel using crop specific yields. This study makes two contributions to the literature one, it is the first study in the Indian context and second, it employs semi-parametric decomposition techniques to look at the productivity differentials along the entire distribution. Acknowledgement : I would like to thank Bharat Ramaswami, Bina Agarwal for useful discussions and the participants at the third CECFEE workshop held in India for their valuable comments.
    Keywords: Labor and Human Capital
    Date: 2018–07
  13. By: Zuzana FUNGACOVA (Bank of Finland); Paul-Olivier KLEIN (University of Aberdeen Business School); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Considering the evidence that China’s five largest state-owned banks (the Big Five) suffer from low cost efficiency, this paper decomposes overall efficiency of Chinese banks into persistent efficiency and transient efficiency components. Low persistent efficiency reflects structural problems, while low transient efficiency is associated with short-term problems. Using the model of Kumbhakar, Lien and Hardaker (2014) based on the stochastic frontier approach, we measure persistent efficiency and transient efficiency for a large sample of 166 Chinese banks over the period 2008–2015. In line with existing evidence, we find a lower average cost efficiency of the Big Five banks compared to other Chinese banks. It is almost entirely due to low persistent cost efficiency. The Big Five banks transient efficiency is similar to other Chinese banks. Our findings support the view that major structural reforms are needed to enhance the efficiency of China’s Big Five banks.
    Keywords: banks, efficiency, China. Classification-JEL C23, D24, G21.
    Date: 2018
  14. By: Lise Pichette; Maria Bernier; Marie-Noëlle Robitaille
    Abstract: In this paper, we extend the state-space methodology proposed by Blagrave et al. (2015) and decompose Canadian potential output into trend labour productivity and trend labour input. As in Blagrave et al. (2015), we include output growth and inflation expectations from consensus forecasts to help refine our estimates. Our alternative model, which we call the multivariate state-space framework (MSSF), adds to the Bank’s existing set of tools for estimating potential output and the output gap in Canada. We find that while the MSSF shares similar dynamics to the main approaches used by the Bank, it also indicates that the economy experienced greater excess supply in both the 1990 and 2008 recessions than the Bank’s other tools would suggest. Finally, the MSSF estimates that the Canadian economy has been operating close to capacity since the end of 2017.
    Keywords: Economic models, Potential output
    JEL: C5 E0 E5
    Date: 2018
  15. By: Ludwig List (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: The goal of this paper is to conduct a meta-regression analysis (MRA hereafter) regarding the effects of the Kaldor-Verdoorn effect – the relation between output/demand and productivity. The Kaldor-Verdoorn effect has been subject to many econometric studies and while the overwhelming majority of them finds a positive overall effect, there is no consensus on its size - the results vary quite a bit, especially according to the chosen econometric specification. This MRA estimates a 'true value' of the Kaldor-Verdoorn effect without interference from potential publication selection bias via the use of multivariate MRA. A series of moderator variables is used to check for their effect of excess variation, including amongst others the year of publication, the sectors and the countries studied. This MRA study uses available data from 22 published studies with 303 estimations of the Kaldor-Verdoorn effect. When examining the primary literature as a whole, there seems to be publication bias. While there seems to exist a genuine Kaldor-Verdoorn effect, its size varies considerably depending on the specification chosen.
    Keywords: Kaldor-Verdoorn effect, Productivity, Meta-regression analysis, Effective demand, Learning by doing
    JEL: E24 O14 O25 O47 Q11
    Date: 2018–11
  16. By: Ogunlesi, Ayodeji; Bokana, Koye; Okoye, Chidozie; Loy, Jens-Peter
    Abstract: Food supply fluctuations remain a major challenge in Sub-Saharan Africa (SSA). In this regard, this study empirically examined the impact of agricultural productivity on food security stability in 37 selected countries in SSA from 1990 to 2016, using the pooled, least square dummy variable (LSDV), random and system generalized methods of moments (SYS-GMM) models. The study adopted per-capita food supply variability (PCFSV) as a measure of food security stability while agriculture value-added contribution to gross domestic product (AGVA) and crop production (CRPROD) were selected indicators of agricultural productivity. The LSDV and SYS-GMM model estimations revealed that agricultural productivity and the control factors contributed significantly, though with a mix of positive and negative effects, to food security stability in the selected countries in SSA during the period under review. The LSDV model showed that AGVA had no statistically significant positive effect on food security stability, however, this was corrected in the SYS-GMM model, but with a positive impact. The study concludes that stability in food security is achieved and sustained by improving agricultural productivity. Based on the findings, the study recommended that food security stability should be improved by enhancing agricultural productivity through ensuring effective implementation of pro-agriculture growth policies in SSA
    Keywords: Food Supply variability, Agricultural Productivity, Sub-Saharan Africa, Panel System GMM
    JEL: E00 O1 O13 Q1 Q18
    Date: 2018–01–02
  17. By: Miklós Koren; Márton Csillag
    Abstract: We build a model of technology choice with heterogeneous firms and workers to study how imported technology affects wages. Imported machines increase the productivity of worker-firm matches, but are more expensive than domestic ones. More productive firms and more skilled workers are hence more likely to use an imported machine. We study trade liberalization in the model, which makes imported machines cheaper. Both the direct and the equilibrium implications of trade liberalization increase the returns to skill. We use linked employer-employee data on Hungarian machine operators for 1992-2003 to test the predictions of the model. Machine operators exposed to imported machines earn higher wages than similar workers at similar firms. The returns to skill have increased in our sample between 1992 and 2000. A quarter of the increase can be attributed to greater exposure to imported machines. Our results suggest that imported machines can help propagate skill-biased technical change.
    Date: 2017–10–21

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