nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒03‒25
twelve papers chosen by

  1. Misallocation in the Market for Inputs: Enforcement and the Organization of Production By Johannes Boehm; Ezra Oberfield
  2. Does environmental heterogeneity affect the productive efficiency of grid utilities in China? By Xiao-Yan Liu; Li-Qiu Liu; Bai-Chen Xie; Michael G. Pollitt
  3. Technological catch-up to the national and regional frontier: Firm-level evidence for India By Shubin Yang; Sandra Lancheros; Chris Milner
  4. Institutions and Performance of Regulated Firms: Evidence from Electric Utilities in the Indian States By Tooraj Jamasb; Manuel Llorca; Pavan Khetrapal; Tripta Thakur
  5. The Wage-Productivity Nexus in the World Factory Economy By Giovanni Dosi; Maria Enrica Virgillito; Xiaodan Yu
  6. Quality and its Impact on Efficiency By Cinzia Daraio; Leopold Simar; Paul W. Wilson
  7. Sectoral and Skill Contributions to Labor Productivity in Asia By Helble, Matthias; Long, Trinh; Le, Trang
  8. Farm performance and investment decisions: evidence from the French (Brittany) dairy sector By Loïc Levi; Laure Latruffe; Aude Ridier
  9. Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms? By Prempeh, Kwadwo Boateng; Peprah – Amankona, Godfred
  10. Hospital competition and technology adoption: An econometric analysis of imaging technology in Japan By GOTO Rei; KATO Hirotaka
  11. The Impact of Technological Change By Bolboaca, Maria
  12. Shadow Pricing of Electric Power Interruptions for Distribution System Operators in Finland By Sinan Küfeoglu; Niyazi Gündüz; Hao Chen; Matti Lehtonen

  1. By: Johannes Boehm (Département d'économie); Ezra Oberfield (Princeton University)
    Abstract: The strength of contract enforcement determines how firms source inputs and organize production. Using microdata on Indian manufacturing plants, we show that production and sourcing decisions appear systematically distorted in states with weaker enforcement. Specifically, we document that in industries that tend to rely more heavily on relationship-specific intermediate inputs, plants in states with more congested courts shift their expenditures away from intermediate inputs and appear to be more vertically integrated. To quantify the impact of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The equilibrium organization of production and the network structure of input-output linkages arise endogenously from the producers’ simultaneous cost minimization decisions. We identify the structural parameters that govern enforcement frictions from cross-state variation in the first moments of producers’ cost shares. A set of counterfactuals show that enforcement frictions lower aggregate productivity to an extent that is relevant on the macro scale.
    Keywords: Production networks; Intermediate inputs; Misallocation; Productivity; Contract enforcement; Value chains
    JEL: E23 O11 F12
    Date: 2018–08
  2. By: Xiao-Yan Liu (College of Management and Economics, Tianjin University, Tianjin, China); Li-Qiu Liu (College of Management and Economics, Tianjin University, Tianjin, China); Bai-Chen Xie (College of Management and Economics, Tianjin University, Tianjin, China - Energy Policy Research Group (EPRG), Judge Business School, University of Cambridge); Michael G. Pollitt (Energy Policy Research Group (EPRG), Judge Business School, University of Cambridge)
    Keywords: Grid industry; Efficiency estimation; Stochastic frontier analysis; Environmental heterogeneity; China
    JEL: L94
    Date: 2018–06
  3. By: Shubin Yang; Sandra Lancheros; Chris Milner
    Abstract: This paper studies productivity convergence to the regional and national frontiers among manufacturing firms in India, using panel data over the period 1999 to 2010. We find evidence of convergence by lagging firms to both their national and regional frontiers, with faster convergence to the national frontier than to their regional frontier. We examine the effects of export behaviour on this process of convergence, and the results demonstrate that exporting promotes productivity growth but slows down the convergence process since export firms tend to be nearer to frontiers. We also investigate the effect of outward FDI (OFDI) on firms’ productivity growth and convergence. Likewise, the results show that OFDI facilitates firms’ productivity growth but decelerates the speed of convergence.
    Keywords: Productivity convergence, technology frontiers, globalisation
    Date: 2019
  4. By: Tooraj Jamasb (Durham University Business School, Durham University); Manuel Llorca (Durham University Business School, Durham University); Pavan Khetrapal (Department of Electrical Engineering, National Institute of Technology, MANIT-Bhopal, India); Tripta Thakur (Department of Electrical Engineering, National Institute of Technology, MANIT-Bhopal, India)
    Keywords: Quality of state institutions; electricity distribution in India; heteroscedastic stochastic frontier models; inefficiency determinants.
    JEL: D22 L51 L94 O43
    Date: 2018–03
  5. By: Giovanni Dosi; Maria Enrica Virgillito; Xiaodan Yu
    Abstract: This paper highlights new findings on the wage-productivity nexus in the World Factory Economy. After presenting the long-run macro-elasticity characterizing the phase of Chinese economic development since the eighties, we look at the wage-productivity nexus from a micro level perspective using a detailed firm-level dataset covering the period of ownership restructuring (1998-2007). A few results are quite robust under different estimation strategies. First, throughout the impressive Chinese economic miracle, elasticities of real wages to productivities - that is the ratios of rates of variations of the former to the latter - are always positive both under pooled and longitudinal estimates, both at firm- and sectoral-levels. Second, such elasticities are dramatically low, and falling in many distinct phases since the late seventies. That is, even in the manufacturing sector, the distribution of gains from the impressive labour productivity growth appears to be markedly uneven. Finally, third, governance institutions seem to matter a lot, with the majority of ownership types exhibiting firm-specific wage determination processes. The low elasticities of wages to productivity are plausibly the consequence of the massive flow of migrant workers from the rural areas to the coasts, somewhat resembling the early phase of the English Industrial Revolution with the pattern of enclosure in the country-side and massive migrations to the industrial towns.
    Keywords: Wage; Productivity; Distributions; Chinese Industrialization
    Date: 2019–03–18
  6. By: Cinzia Daraio; Leopold Simar; Paul W. Wilson
    Abstract: The issue of quality and its relationship with efficiency and performance is a crucial operational issue in many fields of study including production economics, operations research, engineering and business management. In this paper we provide a methodology for identifying latent quality factors, estimate their statistical significance and analyze their impact on the performance of the production process. This methodology is based on up-to-date computational methods and statistical tests for directional distances. We illustrate the approach using real data to evaluate the performance of European Universities.
    Keywords: Nonparametric efficiency; performance assessment; quality; benchmarking; directional distances; conditional efficiency; observed and unobserved heterogeneity; separability condition; European universities.
    Date: 2019–03–20
  7. By: Helble, Matthias (Asian Development Bank Institute); Long, Trinh (Asian Development Bank Institute); Le, Trang (Asian Development Bank Institute)
    Abstract: Using a decomposition approach on data collected by the Asian Productivity Organization (APO) as well as World Input-Output data, we show that in most Asian economies the services sector makes the largest contribution to labor productivity. Furthermore, we find evidence of a major reallocation of labor from agriculture directly to services, bypassing the manufacturing sector. This finding challenges the traditional view that countries in their economic development need to have their workforce employed first in manufacturing before switching to services. Lastly, the paper studies how different skill levels contribute to labor productivity growth. We find that high-skilled workers have contributed most to overall labor productivity growth in developing Asia. In services, high-skilled workers have mainly driven labor productivity, indicating that upskilling and training are instrumental in services-led development.
    Keywords: labor productivity; manufacturing; services; skills
    JEL: J21 O11
    Date: 2019–03–07
  8. By: Loïc Levi; Laure Latruffe; Aude Ridier
    Abstract: The objective of this paper is to investigate the role of farm performance in farmers’ investment decisions with a theoretical model accounting for adjustment costs and performance. The model is estimated on a balanced sample of specialised dairy farms in Brittany (western France) between 2005 and 2014. Two types of farms are considered: with high and with low capital intensity. The results show that spreading investment over time is, on average, an optimal strategy for maintaining performance in the presence of adjustment costs. In addition, the effect of performance on investment behaviour differs between the two farm types.
    Keywords: farm investment, performance, adjustment cost model, dairy sector, France
    JEL: Q12 D92
    Date: 2019
  9. By: Prempeh, Kwadwo Boateng; Peprah – Amankona, Godfred
    Abstract: This paper analyses the relationship between working capital management and profitability of firms in the context of developing economies. A balanced panel of 11 manufacturing companies quoted on the Ghana Stock Exchange was used. The study covered the period 2011 to 2017. The relationship between working capital management and profitability was tested using dynamic panel regression (Arellano-Bond Estimation) technique. The study revealed that there is a significant positive linear relationship between working capital management and firms’ profitability. The findings also reveal the existence of a concave quadratic relationship between working capital management and firms’ profitability. Hence, an optimal level which maximises the profitability of manufacturing firms in Ghana exists. This implies that, there is an optimal level at which working capital management maximises firm’s profitability, therefore, managers need to ensure that they operate within the limits of the optimal level by implementing an effective and efficient working capital management policy. Also, the practice of an aggressive working capital management policy maximises a firm’s profitability.
    Keywords: working capital management, cash conversion cycle, dynamic panel regression, manufacturing firms, Profitability.
    JEL: G0 G00 G3
    Date: 2018–11–08
  10. By: GOTO Rei; KATO Hirotaka
    Abstract: The aim of this study is to examine the relationship between the competition between hospitals in Japan and the investment in specialists and advanced medical technologies, which are a major determinant of costs and quality in health care. We focus the analysis on the adoption of computed tomography (CT) and magnetic resonance imaging (MRI) scanners, as well as on the number of full-time radiologists working in each medical institution. Hospitals are evaluated based on the total availability of services, including both radiologists and cutting-edge imaging equipment, rather than on the availability of individual services. Therefore, in this study, we measure the adoption of advanced imaging technologies at both the aggregate and the single-technology levels. Based on an instrumental variable approach, we find that competition is positively correlated to the overall adoption of advanced imaging technologies, higher performance CT scanners, and to the number of radiologists. Additionally, we examine whether this relationship varies with governance structure of hospitals. The results suggest that private hospitals are particularly sensitive to competition in comparison to non-private hospitals.
    Date: 2019–03
  11. By: Bolboaca, Maria
    Abstract: In this paper, I introduce novel measures of technological change, based on counts of books in the field of technology and technological standardization, in an otherwise standard vector autoregressive model, to show the relative importance of unanticipated productivity shocks, technology shocks, and anticipated productivity (news) shocks, in driving macroeconomic fluctuations. The results indicate that news shocks play a more important role than technology shocks at business cycle frequencies, while in the medium- to long-run technology shocks take the lead. Unanticipated productivity shocks do not seem to be a significant source of aggregate fluctuations regardless of the forecast horizon.
    Keywords: productivity shock, technology shock, news shock, business cycle, structural vector autoregressive model
    JEL: C32 E32 O33
    Date: 2019–02
  12. By: Sinan Küfeoglu (Energy Policy Research Group, Judge Business School, University of Cambridge); Niyazi Gündüz (Department of Electrical Engineering and Automation, Aalto University, Espoo, Finland.); Hao Chen (Center for Energy and Environmental Policy, Beijing Institute of Technology, Beijing, China.); Matti Lehtonen (Department of Electrical Engineering and Automation, Aalto University, Espoo, Finland.)
    Keywords: power interruption; distribution system operator; interruption cost; shadow price
    JEL: L42
    Date: 2018–08

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