nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒02‒18
fourteen papers chosen by

  1. Innovation, productivity, exports and the investment climate: A study based on Indian manufacturing firm-level data By Patrick Plane; Marie-Ange Veganzones-Varoudakis
  2. Industry Competitiveness Indicators By Mette Asmild; Tomas Baležentis; Jens Leth Hougaard
  3. Computerization, labor productivity and employment: impacts across industries vary with technological level By Ch-M. CHEVALIER; A. LUCIANI
  5. Cluster externalities, firm capabilities, and the recessionary shock: How the macro-to-micro-transition shapes firm performance during stable times and times of crisis By Christian Hundt; Linus Holtermann; Jonas Steeger; Johannes Bersch
  6. “Technological cooperation and R&D outsourcing at the firm level: The role of the regional context ” By Damián Tojeiro-Rivero; Rosina Moreno
  7. Multilevel proficiency comparisons with an application to educational outcomes in PISA By Ricardo Martínez; Antonio Villar
  8. Predictors of Bank Distress:The 1907 Crisis in Sweden By Grodecka, Anna; Kenny, Seán; Ögren, Anders
  9. Local territorial reform and regional spending efficiency By António Afonso; Ana Venâncio
  10. Envelope Wages, Hidden Production and Labor Productivity By Di Nola, Alessandro; Kocharkov, Georgi; Vasilev, Aleksandar
  11. Zombie firms in Italy: a critical assessment By Giacomo Rodano; Enrico Sette
  12. The supply of skill and endogenous technical change: evidence from a college expansion reform By Pedro Carneiro; Kai Liu; Kjell G. Salvanes
  13. On Luenberger Input, Output and Productivity Indicators By Rolf Färe; Valentin Zelenyuk
  14. Measuring multi-product banks' market power using the Lerner index By Sherrill Shaffer; Laura Spierdijk

  1. By: Patrick Plane (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Marie-Ange Veganzones-Varoudakis (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the interactions between firm-level innovation, productivity and exports in the case of the Indian manufacturing sector. To differentiate the incentives to innovate from the ability to innovate, we distinguish the inputs of innovation (R&D and training), from the outputs. Our findings highlight a virtuous circle between the three components of innovation, as well as between firm-level R&D, innovation and exports. The results suggest a positive effect of R&D on innovation (product innovation in particular), of innovation on exports (product and marketing innovation especially), and of exports on R&D. Furthermore, it seems that training and R&D reinforce each other in the Indian firm-level innovation process: doing R&D incites firms to train their workforce, and training stimulates R&D in return. Productivity of the Indian manufacturing firms seems to benefit from that dynamics, as exporting and innovating would improve firm-level TFP. As for the investment climate, our results suggest that the differences in the Indian firm-level environment participate in the firms' performance gaps. These results are all the more important in the context of the Make in India campaign and the business environment deficiencies.
    Keywords: Innovation,Productivity,Exports,Investment climate,Manufacturing,Firm-level data.
    Date: 2019–01–23
  2. By: Mette Asmild (Department of Food and Resource Economics, University of Copenhagen); Tomas Baležentis (Lithuanian Institute of Agrarian Economics); Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: It can be argued that the competitiveness of an industry consists of two main parts: The production conditions and the utilization of these. The production conditions are largely determined by factors exogenous to the firms comprising the industry, including the economic environment, regulatory framework, etc. The utilization of the production conditions corresponds to the classic economic notion of structural efficiency. We here argue that it is crucial for policy analysis to be able to quantify each of these two aspects separately, since the production conditions are partly in the hands of the policy makers, whereas the utilization is mainly the responsibility of firm management. In this paper we define two new bilateral indicators; the Bilateral Industry Utilization (BIU) indicator, and the Bilateral Production Conditions (BPC) indicator. These are applied to a large data set of dairy farms across 19 European countries provided by the Farm Accountancy Data Network (FADN). With focus on the competitiveness of Danish dairy farms we show that dairy farms in most other countries have significantly better production conditions than those in Denmark while Sweden is the only country with significantly better utilization. Finally, we asses potential causes behind the differences and discuss possible remedies.
    Keywords: Competitiveness indicators; Production conditions; Structural efficiency; Bilateral indicators; Dairy farms; Efficiency; Frontier analysis; Jackknifing.
    JEL: C61 D04 E23 O47 Q12
    Date: 2019–02
  3. By: Ch-M. CHEVALIER (Insee-Crest); A. LUCIANI (Insee)
    Abstract: Technical progress notably through computerization raises concerns about the future of labor. In parallel, productivity became sluggish in many developed countries and computers are everywhere but not in all productivity statistics, especially not among non IT producing manufacturing industries in the United States (Acemoglu, Autor, Dorn, Hanson, and Price, 2014). To observe whether job losses and missing labor productivity gains from computerization are localized in the same part of the manufacturing sector, this paper delves into targeted disaggregated focuses in France between 1994 and 2007. As computers can be used as complements or substitutes for labor depending on the (non-) routine nature of tasks, we concentrate on low-tech vs. mid/high tech industries and on high-skilled vs. low-skilled workers. Our main results are the following. Contrary to the United States, labor productivity is not driven to a large extent by IT-producing industries. Yet, for the whole IT-using manufacturing sector, computerization is associated with positive but fragile effects on labor productivity, and to unambiguous declines in employment. Actually, a labor saving effect of computerization is massively concentrated among industries relying on low production technology. For mid/high-tech IT-using industries, evidence is less straightforward on labor productivity. Among them, computerization is not associated to job cuts whatever the job type, and is related to a rise in the share of high-skilled workers. In the end, computerization could go in hand in hand with economy wide structural changes, with strong productivity improvements in declining sectors and labor deepening in rising ones.
    Keywords: labor productivity, computerization, capital-labor substitution and complementarity
    JEL: J2 L60 O3
    Date: 2018
  4. By: Maryna Tverdostup; Tiiu Paas
    Abstract: The study aims to assess productivity and efficiency of selected blue economy sectors in two neighbouring countries: Estonia and Finland. The analysis relies on the Amadeus database for both countries, implementing Data Envelopment Analysis (DEA) and calculating partial productivity measures. The results of the study show that, on average, blue sectors report high performance indicators in coastal regions of the countries, the only exceptions being the tourism and bio and subsea activities sectors in Estonia and marine (cargo) transportation in Finland. The common pattern of imperfectly efficient blue sectors in both countries is a substantial excess of fixed assets, which convey extra costs for business activities and, to some extent, generate excessive environmental pressures. The special nature of a shared blue economic area of Estonia and Finland stipulates close cross-border cooperation as a major tool to improve performance of the imperfectly efficient sectors through shared “best practice” operations, technologies and infrastructures. However, the lack of appropriate cross-border statistical data restricts analytical opportunities and development of policy recommendations.
    Keywords: blue economy, economic performance analysis, cross-border statistics
    Date: 2019
  5. By: Christian Hundt; Linus Holtermann; Jonas Steeger; Johannes Bersch
    Abstract: In this paper, we examine the macro-to-micro-transition of cluster externalities to firms and how it is affected by the macroeconomic instability caused by the recessionary shock of 2008/2009. Using data from 16,166 manufacturing and business services firms nested in 390 German regions, we employ within-firm regression techniques to estimate the impact of cross-level interactions between firm- and cluster-level determinants on phase-related differences in firm performance between a pre-crisis (2004-2007) and a crisis period (2009-2011). The empirical results validate the existence of a macro-to-micro-transition that evolves best in the case of broad firm-level capabilities and variety-driven externalities. Furthermore, the results indicate that the transition strongly depends on the macroeconomic cycle. While the transition particularly benefits from a stable macroeconomic environment (2004-2007), its mechanisms are interrupted when being exposed to economic turmoil (2009-2011). Yet, the crisis-induced interruption of the transition is mainly restricted to the national recession in 2009. As soon as the macroeconomic pressure diminishes (2010-2011), we observe a reversion of the transmission mechanisms to the pre-crisis level. Our study contributes to the existing literature by corroborating previous findings that the economic performance of firms depends on a working macro-to-micro transition of external re-sources, which presupposes sufficient cluster externalities and adequate firm-level combinative capabilities. In contrast to previous studies on this topic, the transition mechanism is not modeled as time-invariant. Instead, it is coupled to the prevailing macroeconomic regime.
    Keywords: Macro-to-micro-transition, combinative capabilities, agglomeration economies, cluster-level externalities, unrelated variety, related variety, macroeconomic regimes, Great Recession, economic resilience
    JEL: C33 R11 R58
    Date: 2019–02
  6. By: Damián Tojeiro-Rivero (AQR-IREA Research Group, University of Barcelona. Department of Econometrics, Statistics and Applied Economics. Av. Diagonal 690, 08034 Barcelona, Spain. Tel.(+34) 934 021 412.); Rosina Moreno (AQR-IREA Research Group, University of Barcelona. Av. Diagonal 690 - 08034 Barcelona (Spain). Tel. +34934021823 - Fax +34934021821.)
    Abstract: Much has been said about the role that technological networking activities play on the innovative performance of firms, but little is known about the relevance of the context where the firm is locate shaping the efficiency of such networking activities. In this article we hypothesize that the transformation of firms' networking activities into innovation may vary depending on the regional environment in which the firm is located. For Spanish manufactures in the period 2000-12 and through the use of a multilevel framework, we obtain that after controlling for the firm's characteristics, the regional context has not only a direct effect on firms' innovation performance, but it also conditions the returns to firms' networking activities, although differently in the case of cooperation and outsourcing. Cooperating in innovation activities is more beneficial for those firms located in a knowledge intensive region, whereas R&D outsourcing seems to be more profitable for firms in regions with a low knowledge pool.
    Keywords: Technological cooperation, R&D Outsourcing, Local Knowledge Spillovers; Multilevel; Panel data; Spanish Firms, Manufactures. JEL classification: D21, D22, O31, R10, R15
    Date: 2019–02
  7. By: Ricardo Martínez (Department of Economic Theory and Economic History, University of Granada.); Antonio Villar (Department of Economics, Universidad Pablo de Olvide.)
    Abstract: We propose in this paper a general framework for evaluation problems in which the outcome range of the variable can be partitioned into a series of levels that may have different meaning or importance, as they may represent qualitatively different results. Measures of poverty, excellence, inclusion or overall performance indicators are particular cases of this type of problems. We focus on the case of additive functions, to facilitate the discussion. This framework is applied to the analysis of educational poverty, excellence and overall performance of 15-year old students, according to the PISA 2015 data for all 68 participating countries and large economies. The analysis provides insights on the differences between countries that are not captured by the average test scores. In addition, we find out that the measures we propose result in rankings of countries different from that of the test scores.
    Keywords: social evaluation, education, poverty, excellence, PISA, OECD countries.
    JEL: H7 I2 I3 J1
    Date: 2019–02–05
  8. By: Grodecka, Anna (Research Department, Central Bank of Sweden); Kenny, Seán (Lund University); Ögren, Anders (Lund University)
    Abstract: This paper contributes to literature on bank distress using the Swedish experience of the international 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 impact 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: 2018–10–01
  9. By: António Afonso; Ana Venâncio
    Abstract: We investigate the effect of a local territorial reform, which reduced the number of parishes, on municipality spending efficiency in the period 2011-2016. We build a composite output indicator and use Data Envelopment Analysis (DEA) to compute efficiency scores, which we then analyze through a second stage regression with socio-demographic, economic factors and the reform. We find efficiency gains for around 10% of municipalities overall. In Alentejo and in Centro, more than 50% of the municipalities improved efficiency. The second stage results show that the reform did not improve local spending efficiency in Mainland Portugal, particularly in the Norte region.
    Keywords: public spending efficiency, local government, data envelopment analysis (DEA), local organizational reform
    JEL: C14 H72 R50
    Date: 2019–02
  10. By: Di Nola, Alessandro; Kocharkov, Georgi; Vasilev, Aleksandar
    Abstract: We evaluate the relative importance of aggregate labor productivity versus income taxes and social contributions for tax compliance in an economy with a large degree of informality. Empirical evidence points out that tax evasion in Europe happens through partially concealing wages and profits in formally registered enterprises. To this end, we build a model in which employer-employee pairs of heterogeneous productive capacities make joint decisions on the degree of tax evasion. The quantitative model is used to analyze the case of Bulgaria which has the largest informal economy in Europe and underwent a number of important tax reforms over the period 2000-2014, including the introduction of a flat income tax in 2008. The estimation strategy relies on matching the empirical series for the size of the informal economy and other aggregate outcomes for 2000-2014. Our counterfactual experiments show that the most important factor for the changing size of the informal economy is labor productivity, which accounts for more than 75% of the change. The variation in corporate income tax accounts for the rest. We find that the 2008 flat tax reform did not play any visible role in coping with informality.
    Keywords: Envelope wages, hidden production, informal economy, flat tax reform
    JEL: E6 E65 H24 H26
    Date: 2018
  11. By: Giacomo Rodano (Bank of Italy); Enrico Sette (Bank of Italy)
    Abstract: This note shows the consequences of different methodological choices for the estimates of the incidence of zombie firms in Italy. We use as a benchmark the influential measure proposed by the OECD (Adalet McGowan et al. 2017a and 2017b) which identifies zombie firms based on a combination of firm age and values of the interest coverage ratio (operating profits to interest expenses). We show that a key decision is whether operating profits are taken before or after amortization and depreciation and we argue that using profits after amortization and depreciation has several undesirable characteristics: i) it overestimates the share of capital “trapped” into zombie firms, and, to a smaller extent, the share of zombie firms; ii) it is worse in predicting the future performance of firms; iii) it is more likely to classify as zombies in a given year firms which invested heavily in previous years and amortized that investment quickly (for example to enjoy tax breaks); iv) it is especially inappropriate for cross-country comparisons.
    Keywords: zombie firms, productivity, misallocation
    JEL: D24 L25 O47
    Date: 2019–01
  12. By: Pedro Carneiro (Institute for Fiscal Studies and University College London); Kai Liu (Institute for Fiscal Studies); Kjell G. Salvanes (Institute for Fiscal Studies and Norwegian School of Economics)
    Abstract: We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We fi nd that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage fi rms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.
    Date: 2018–07–11
  13. By: Rolf Färe (Department of Economics, Oregon State University and Department of Agricultural and Resource Economics, University of Maryland, USA); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: In this paper we consider justifications for the equally-weighted arithmetic averaging for the Luenberger indicators with respect to two different references.
    Keywords: Luenberger Productivity Indicators.
    Date: 2019–02
  14. By: Sherrill Shaffer; Laura Spierdijk
    Abstract: The aggregate Lerner index is a popular composite measure of multi-product banks’ market power, based on the assumption that banks’ single aggregate output factor is total assets. This study identifies three limitations of the aggregate Lerner index that potentially distort its interpretation as a composite measure of market power. We investigate the empirical relevance of these limitations for a sample of U.S. banks covering the years 2011–2017. We establish an economically relevant bias in the value of the aggregate Lerner index and show that this bias may also affect regressions that use the Lerner index as a dependent or explanatory variable.
    Keywords: multi-product banks, market power, Lerner index, consistent aggregation
    JEL: D43 L13 G21
    Date: 2019–02

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