nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒01‒14
eleven papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Technological change and total factor productivity growth: evidence from China's telecommunications industry By Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
  2. Assessing Banking Profit Efficiency Using Stochastic Frontier Analysis By Riko Hendrawan
  3. Do More Productive Firms Pay Workers More? Evidence from Egypt By Caroline Krafft; Ragui Assaad
  4. Trade Policy and Input Liberalization: The Effect on Egyptian Firms’ Productivity By Inmaculada Martinez-Zarzoso; Mona Said; Chahir Zaki
  5. On the Trade-off Between Size, Sustainability and Social Outcome of the Microfinance Institutions: A Two Stages Bootstrapped DEA Approach By Mohamed Mekki Ben Jemaa; Sahar Obey
  6. Firm Productivity and Agglomeration Economies: Evidence from Egyptian Data By Karim Badr; Reham Rizk; Chahir Zaki
  7. State-Business Relations and Financial Accessibility: Explaining Firm Performance in the MENA Region By Burhan Can Karahasan; Firat Bilgel
  8. Bad Outputs By Sushama Murty; R. Robert Russell
  9. Sources of Heterogeneity in Labor Productivity and Total Factor Productivity in Egyptian Manufacturing By Abeer Elshennawy; Mohamed Bouaddi
  10. Does board gender diversity influence firm profitability? A control function approach By Rey Dang; L’Hocine Houanti; Krishna Reddy; Michel Simioni
  11. Size, Efficiency, Market Power, and Economies of Scale in the African Banking Sector By Simplice A. Asongu; Nicholas M. Odhiambo

  1. By: Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
    Abstract: The fast-growing telecommunications industry in China has been experiencing dramatic technological change and substantial productivity growth. The actual productivity growth pattern in the sector, however, need to be empirically examined. In this paper, using input and output data at the provincial level, we employ DEA-based Malmquist productivity index to estimate productivity change, technological change, and relative efficiency change in China's telecommunications industry for the period spanning the years from 2011 to 2015. The results show that based on our sample, the productivity improved by 22.9% per annum, which was exclusively due to an average of 25.5% technological progress in the industry production function, while the average efficiency change is slightly negative. Our results also indicate that regions with relatively low levels of telecommunications (and economic) development have a greater chance and ability of enhancing telecommunications productivity growth through technological catch-up. In addition, we find that the industry experienced significantly higher productivity growth and technological progress in the later sample period between 2013 and 2015 than in the early period between 2011 and 2013.
    Keywords: Telecommunications,Productivity,Technological change,Data envelopment analysis,Malmquist index
    Date: 2018
  2. By: Riko Hendrawan (Telkom University, Indonesia Author-2-Name: Azhar A. Nasution Author-2-Workplace-Name: Telkom University, Indonesia Author-3-Name: Author-3-Workplace-Name: 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 - The banking sector plays an important role in the Indonesian economy. The sustainability of the Indonesian banking sector will depend on the ability of every banking institution to maintain their competitiveness. Banking competitiveness is reflected in the level of efficiency of the banking system itself. Methodology/Technique - The purpose of this research is to assess the efficiency of 21 banks on the IDX between 2008-2017 using Stochastic Frontier Analysis. Findings - The findings of this research show a maximum efficiency score of 0.69 and the bank's average score among the research sample with the input and output allocation which can generate profits is 0.69 - 0.43 = 0.26. Overall, the banking sector in the Indonesian capital market between 2008 - 2017 recorded an efficiency score of 0.43. With this score, the banking system in the Indonesian capital market is still considered to be inefficient (0.43 = 0,5) and in the second pole, there were 10 banks with low efficiency scores (less than 0.5). Novelty – From the results, it can be concluded that several output variables, such as total loans (Y1) and securities (Y3), and input variables such as prices of labor (W2) and inflation (Z), have a significant effect on banking profits. Meanwhile, input variables such as the price of fund variables or the total funds (W1) and the price of physical capital were reflected in the depreciation of fixed assets (W3), and the output variables of income and interest (Y2) had an insignificant effect on bank profits.
    Keywords: Bank Efficiency; IDX, Stochastic Frontier Analysis, Indonesia.
    JEL: G10 G14 G19
    Date: 2018–12–10
  3. By: Caroline Krafft (St. Catherine University); Ragui Assaad
    Abstract: Theoretically, in perfectly competitive markets with full information, marginal productivity of labor and workers’ wages should be equalized across firms and wages should not be linked to the productivity of a firm. Empirically examining the relationship between wages and productivity across various types of firms can reveal important deviations from perfect competition and full information. This paper investigates the wage-productivity relationship in the case of Egypt. We find that wages are related to firm productivity, even after accounting for worker quality. The relationship between wages, productivity, and firm characteristics suggests that the association is due in part to imperfect competition and in part to the use of efficiency wages by employers.
    Date: 2018–09–18
  4. By: Inmaculada Martinez-Zarzoso (Georg-August Universitaet Goettingen); Mona Said; Chahir Zaki
    Abstract: This paper explores the link between trade liberalization and firms’ performance in Egypt combining macro and micro data. Using the Economic Census of Egypt 2013, we examine the association between tariffs and non-tariffs measures (NTM) imposed on intermediate inputs and total factor productivity (TFP). In a first step TFP is estimated as the residual of a Cobb-Douglas/Translog production function and in the second, TFP is regressed on weighted tariffs and NTM imposed on intermediate inputs. Egyptian input-output tables are used to construct the weights. Our main findings show a positive and significant association between imported inputs and value-added and a significantly negative relationship between tariffs and TFP.
    Date: 2018–10–14
  5. By: Mohamed Mekki Ben Jemaa (University of Carthage); Sahar Obey
    Abstract: The paper aims at measuring the performance of MFIs in MENA region with reference to all the MFIs around the world. The efficiency scores are derived using the nonparametric Data Envelopment Analysis (DEA) technique in order to calculate both Pure Technical Efficiency and Scale Efficiency. Bootstrapping is used in order to correct the Efficiency scores from their bias and to retrieve the correct inference when it comes to perform the second stage estimation. Data used are a non-balanced panel of 1179 MFIs from 103 countries covering the period from 2006 to 2012. The main aim of taking all the operating MFIs, for which, data are available is to produce a sound benchmark and evaluate the real performance of the MFIs in the MENA region compared to the rest of the world. In a second stage, a double censored multilevel regression is performed to assess the determinants of scale efficiency in the MFIs. The results show, among others, that financial performances enhance the possibility to operate under the optimal scale weather the MFI is too small or too big while social performances are reached more by too large MFIs.
    Date: 2018–10–28
  6. By: Karim Badr (World Bank); Reham Rizk; Chahir Zaki
    Abstract: This paper attempts to shed light on the nexus between firm productivity and economies of agglomeration in Egypt. Using a large dataset of 62,108 firms in 342 four-digit activities in 27 regions governorates, we introduce three measures of agglomeration, which are urbanization or firm diversification, measured by the number of firms in the governorate, localization and specialization, measured by the average productivity in the governorate and sector (generating externalities and knowledge spillovers), and finally competition, measured by the number of firm operating in the same governorate and the same sector. We find strong evidence for the existence of agglomeration economies in Egypt after controlling for firm age, location, economic activity and legal status. In the Egyptian context, productivity spillovers gained from agglomeration economies outweighed the negative effects of congestion implied by our competition measure. The latter is chiefly due to the lack of good infrastructure. When regressions are run by firm size and activity, our main findings show, first, that micro and small firms are more likely to benefit from localization and diversification compared to medium and large firms. Finally, service firms benefit more from a high level of diversification, while manufacturing firms gain more from knowledge spillovers and specialization. Our results support promoting entrepreneurship through the creation of industrial clusters located outside Cairo to lessen disparities between regions and acquire the full advantages of agglomeration.
    Date: 2018–10–15
  7. By: Burhan Can Karahasan (Piri Reis University); Firat Bilgel
    Abstract: This study investigates the triangular relationship among state-business relations, financial access and economic performance using _rm-level data for selected Middle East and North African countries. We hypothesize that financial intermediation acts as a mediating factor in the relationship between state-business relations and _rm performance. Employing a causal mediation analysis, our results show that inefficient ties with the state is a cause of poor _rm performance. Depending on the performance measure, inefficient state-business relations reduce _rm performance by about 2.3-4.4 percent through access to finance and by about 12 to 40 percent via its direct effect. About 3 to 16 percent of the total effect is mediated through financial access while the remaining is the direct effect of inefficient state-business relations on firm performance. Our results highlight that financial intermediation is a significant mediating factor in the mechanism between state-business relations and firm performance.
    Date: 2018–12–26
  8. By: Sushama Murty (Jawaharlal Nehru University); R. Robert Russell (University of California, Riverside)
    Abstract: This draft chapter, prepared for inclusion in the (prospective) Handbook of Production Economics, Vol. 1 (Theory), edited by Subash Ray, Robert Chambers, and Subal Kumbhakar, analyses recent developments in the modeling of pollution-generating technologies. We first lay out the inadequacies of the traditional, single-equation representations of models of such technologies prominently associated with the classic 1975 (and 1988) book by William J. Baumol and Wallace E.Oates on The Theory of Environmental Policy. In particular, these models lack the “degrees of freedom” needed to capture the complex array of trade-offs that are integral to the production of unintended as well as intended outputs using emission-generating inputs. We reprise the insight, articulated in the classic 1965 book by Ragner Frisch on the Theory of Production, that the representation of specific technologies may require the use of multiple functional restrictions. The relevance of this insight for modeling pollution-generating technologies was first highlighted in 1972 and 1998 papers by Finn Førsund. We show that the use of a particular set of functional restrictions, a phenomenon referred to as by-production in our 2012 paper with Steven Levkoff, facilitates the modeling of pollution-generating technologies. In particular, a by-production technology is obtained as the intersection of an intended-output sub-technology and an unintendedoutput sub-technology. We illustrate these principles by sketching a model of coal-fired electrical-power generation and demonstrate the use of the model for the measurement of both output-based and graph-based technical efficiency.Length:58 pages
  9. By: Abeer Elshennawy (The American University in Cairo); Mohamed Bouaddi
    Abstract: Egypt Ranking in the World Competitiveness Report deteriorated between 2004 and 2017. Boosting competitiveness requires reforms on several important fronts, but raising labor productivity and TFP are perhaps the most pressing. This paper identifies the correlates of both labor productivity and TFP at the firm level in Egypt’s in manufacturing sector using Economic Census data for the year 2012/2013.We find significant heterogeniety in both Labor productivity and TFP between firms. By econometirically dicotomizing firms into low and high productivity regimes, we find that the correlates of productivity differ between these two sets of firms. By identifying the sources of heterogeneity between low and high productivity firms we show that there is considerable scope for the former to catch up with the lattter based on factors that are internal to the firm .However, the literature does not offer much insights as to how high productivity firms can increase their productivity further.
    Date: 2018–12–26
  10. By: Rey Dang (LaRGE Research Center, Université de Strasbourg); L’Hocine Houanti; Krishna Reddy; Michel Simioni
    Abstract: We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004-2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015).
    Keywords: Women, board of directors, econometrics, control function, firm performance.
    JEL: G30 G34 J1
    Date: 2019
  11. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: There is a growing body of evidence that interest rate spreads in Africa are higher for big banks compared to small banks. One concern is that big banks might be using their market power to charge higher lending rates as they become larger, more efficient, and unchallenged. In contrast, several studies found that when bank size increases beyond certain thresholds, diseconomies of scale are introduced that lead to inefficiency. In that case, we also would expect to see widened interest margins. This study examines the connection between bank size and efficiency to understand whether that relationship is influenced by exploitation of market power or economies of scale. Using a panel of 162 African banks for 2001–2011, we analyzed the empirical data using instrumental variables and fixed effects regressions, with overlapping and non-overlapping thresholds for bank size. We found two key results. First, bank size increases bank interest rate margins with an inverted U-shaped nexus. Second, market power and economies of scale do not increase or decrease the interest rate margins significantly. The main policy implication is that interest rate margins cannot be elucidated by either market power or economies of scale. Other implications are discussed.
    Keywords: Sub-Saharan Africa; banks; lending rates; efficiency; Quiet Life Hypothesis
    JEL: E42 E52 E58 G21 G28
    Date: 2018–01

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