nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒04‒01
fifteen papers chosen by

  1. Impacts of droughts on agricultural productivity and profitability in New Zealand: A micro-level study By Pourzand, Farnaz; Noy, Ilan
  2. The Effect of Productivity and Innovation on the Competitiveness of Batik SMEs in West Java Indonesia By Yana Hendayana
  3. Do companies benefit from public research organizations? The impact of the Fraunhofer Society in Germany By Comin, Diego; Licht, Georg; Pellens, Maikel; Schubert, Torben
  4. Productivity Dynamics during Major Crises in Japan: A Quantile Approach By ADACHI Yusuke; OGAWA Hikaru; TSUBUKU Masafumi
  5. Changing Business Cycles: The Role of Women’s Employment By Stefania Albanesi
  6. Quality and its Impact on Efficiency By Cinzia Daraio; Léopold Simar; Paul W. Wilson
  7. Effects of multilevel policy mix of public R&D subsidies: Empirical evidence from Japanese local SMEs By Okamuro, Hiroyuki; Nishimura, Junichi
  8. Sources and implications of resource misallocation: new evidence from firm-level marginal products and user costs By Simone Lenzu; Francesco Manaresi
  9. Trends in dairy herd genetic, production and reproductive performance and impact on farm profit By Shepard, Richard; Malcolm, Bill
  10. The Effect of Corporate Governance on Financial Performance in Non-Financial LQ-45 Firms Listed on the Indonesian Stock Exchange from 2012 to 2017 By Erika Jimena Arilyn
  11. A Short Note on Aggregating Productivity By David Baqaee; Emmanuel Farhi
  12. Market Power and Innovation in the Intangible Economy By De Ridder, M.
  13. Land Consolidation as Technical Change: Impacts On-farm and Off-farm in Rural Vietnam By Nguyen, Huy Quynh
  14. Technological change, energy, environment and economic growth in Japan By Besstremyannaya, Galina; Dasher, Richard; Golovan, Sergei
  15. Autonomy of profit rate distribution and its dynamics from firm size measures: A statistical equilibrium approach By Oh, Ilfan

  1. By: Pourzand, Farnaz; Noy, Ilan
    Abstract: Droughts are expected to become more frequent and more severe under all climate change scenarios. They are predicted, in turn, to result in a significant increase in the associated cost to the agricultural sector in New Zealand. This paper explores how drought hazards affected agricultural productivity and economic performance for different sectors (sheep and beef farming and dairy farming) between 2007 and 2016. We combine agricultural and financial farm-level panel data from Statistics New Zealand’s Longitudinal Business Database (LBD) with the drought index produced by the National Institute of Water and Atmospheric Research (NIWA). We estimate a set of fixed-effects panel regressions and find that drought events have negative impact on the agricultural productivity across all sectors, where the most vulnerable sector is dairy farming. Dairy sector’s operating profit is significantly reduced through increasing in operating cost due to proving feed for livestock during drought events. Results also show that droughts affect farms’ financial indicators such as their interest coverage, return on capital, business equity and debt to income ratio.
    Keywords: Agribusiness
    Date: 2019–02
  2. By: Yana Hendayana (Universitas Pendidikan Indonesia, Universitas Widyatama, Bandung, Indonesia Author-2-Name: Suryana Author-2-Workplace-Name: Universitas Pendidikan Indonesia, Bandung, 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 – This research aims to test the effect of productivity and innovation toward competitiveness of batik SMEs in West Java. Methodology/Technique – The study uses Partial Least Square (PLS) for data analysis, as well as an explanatory method and simple random sampling. Findings – The results of the data testing show that competitiveness is effected by productivity and innovation by 71.7%. Novelty – The objective of this study is to analyse the gap in productivity and innovation and its effect on the competitiveness of batik SMEs in West Java Indonesia. Batik centre in West Java was developed by the government in collaboration with the private sector to increase the level of production of batik SMEs. In reality, there is a gap in productivity between written batik and stamped batik. Written batik design innovations and production methods need to be improved to compete and survive in the batik industry. Porter (1995:5) describes competition as the core of the success or failure of firms. Productivity of written batik has declined in the past 5 years. From recent BPS data, processed by the Pusdatin Ministry of Industry 2017, the industry has declined by around 10% per year between 2012 and 2017. Type of Paper: Empirical
    Keywords: Productivity; Innovation; Competitiveness; Batik; Small and Medium Enterprises.
    JEL: M10 M11 M19
    Date: 2019–03–04
  3. By: Comin, Diego; Licht, Georg; Pellens, Maikel; Schubert, Torben
    Abstract: Among available policy levers to boost innovation, investment in applied research organisations has received little empirical attention. In this paper, we analyse the case of the Fraunhofer Society, the largest public applied research organization in Germany. We analyse whether project interaction with Fraunhofer affects the performance and strategic orientation of firms. To that end, we assemble a unique dataset based on the confidential Fraunhofer-internal project management system and merge it with the German contribution to the Community Innovation Survey (CIS), which contains panel information on firm performance. Using instrumental variables that exploit the scale heteroscedasticity of the independent variable (Lewbel, 2012), we identify the causal effects of Fraunhofer interactions on firm performance and strategies. We find a strong, positive effect of project interaction on growth in turnover and productivity. In particular, we find that a one percent increase in the size of the contracts with FhG leads to an increase in growth rate of sales by 1.3 percentage points, and to an increase in the growth rate of productivity by 0.8 percentage points in the short-run. We also provide evidence of considerable long-run effects accumulating to 18% growth in sales and 12% growth in productivity over the course of 15 years. More detailed analyses reveal, amongst others, that the performance effects become stronger the more often firms interact with Fraunhofer and that interactions aiming at generation of technology have a stronger effect than interactions aiming merely at the implementation of existing technologies. Finally, we provide evidence on the macroeconomic productivity effects of Fraunhofer interactions on the German economy. Our results indicate that doubling Fraunhofer revenues from industry (+€ 0.68 bn.) would increase overall productivity in the German economy by 0.55%.
    Keywords: innovation,R&D,diffusion,applied research,Fraunhofer
    JEL: O33 O38
    Date: 2019
  4. By: ADACHI Yusuke; OGAWA Hikaru; TSUBUKU Masafumi
    Abstract: This paper presents a new approach to estimating changes in firm productivity. Particular focus is placed on how productivity changed before, during, and after recessions accompanied by crises, using micro data on Japanese manufacturing firms. We depart from the traditional method of comparing (weighted) average productivity before and after a crisis and apply the quantile approach, which estimates the changes in the productivity distribution of surviving firms. The main results indicate that crises have different impacts on firms with different initial productivity levels. First, when productivity improves the industry as a whole, productivity growth is relatively high for firms with lower productivity. Second, in the event of major crises, the productivity decline is more pronounced for firms with lower productivity, whereas the impact on firms with higher productivity is relatively small. Finally, the productivity level required to survive in the market did not rise at the times of crisis and therefore we did not find that firms with low productivity were particularly forced to withdraw from the market.
    Date: 2019–03
  5. By: Stefania Albanesi (University of Pittsburgh)
    Abstract: This paper studies the impact of changing trends in female labor supply on productivity, TFP growth and aggregate business cycles. We find that the growth in women’s labor supply and relative productivity added substantially to TFP growth from the early 1980s, even if it depressed average labor productivity growth, contributing to the 1970s productivity slowdown. We also show that the lower cyclicality of female hours and their growing share can account for a large fraction of the reduced cyclicality of aggregate hours during the great moderation, as well as the decline in the correlation between average labor productivity and hours. Finally, we show that the discontinued growth in female labor supply starting in the 1990s played a substantial role in the jobless recoveries following the 1990-1991, 2001 and 2007-2009 recessions. Moreover, it depressed aggregate hours, output growth and male wages during the late 1990s and mid 2000s expansions. These results suggest that continued growth in female employment since the early 1990s would have significantly improved economic performance in the United States.
    Keywords: female employment, business cycles, productivity slowdown, great moderation, jobless recoveries
    JEL: E17 E32 E37 J11 J21
    Date: 2019–03
  6. By: Cinzia Daraio (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Léopold Simar (Institut de Statistique, Biostatistique et de Sciences Actuarielles, Universite´ Catholique de Louvain, Louvain-la-Neuve, Belgium); Paul W. Wilson (Department of Economics and School of Computing, Division of Computer Science, Clemson University,Clemson, South Carolina, USA)
    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
  7. By: Okamuro, Hiroyuki; Nishimura, Junichi
    Abstract: Regional innovation policies have been implemented in several countries. In Japan, controlled decentralization of traditionally centralized innovation policy is ongoing, so that we can observe multilevel policy mix of public R&D subsidies by national, prefecture and city governments. Based on original survey data and financial data of manufacturing SMEs, we empirically estimate their TFP (Total Factor Productivity) and investigate the effects of public R&D subsidies by national, prefecture and city governments. We employ firm-level fixed effect panel estimation in order to control for the effects of any time-invariant factors. We find that only the prefecture subsidy has a positive and significant impact on the TFP of recipient firms, while interactive effect with city subsidy is also positive and significant, if we consider remaining effects after subsidy period. These results suggest that multilevel policy mix of R&D subsidies significantly increase recipients' productivity and that this effect if durable.
    Keywords: R&D subsidy, local authority, multilevel policy mix, SMEs, policy evaluation
    JEL: H71 O38 R58
    Date: 2019–03
  8. By: Simone Lenzu (NYU Stern); Francesco Manaresi (Bank of Italy)
    Abstract: Using micro-data on firm-specific borrowing costs and wages, we demonstrate that distortions in firms’ policies can be empirically measured using firm-level gaps between marginal revenue products and user costs (MRP-cost gaps). We estimate MRP-cost gaps for 4.7 million firm-year observations in Italy between 1997 and 2013: their variation is closely related to the extent of credit and labor market frictions. Using the MRP-cost gaps, we assess the scope of input misallocation in Italy, and its impact on aggregate output and total factor productivity (TFP). The Italian corporate sector could produce 6% to 8% more output by reallocating resources toward higher-value users. Output losses from misallocation are larger (i) during episodes of financial instability, (ii) in non-manufacturing industries, (iii) in areas with less developed institutions and (iv) among high-risk firms. We highlight an important gain/risk tradeoff: gains from reallocation might come at the expense of increasing aggregate financial fragility, because maximizing reallocation gains requires a transfer of resource from large, old, and low-risk firms toward small, young, and high-risk firms.
    Keywords: total factor productivity, economic development, policy distortions
    JEL: O16 O40 E24
    Date: 2019–03
  9. By: Shepard, Richard; Malcolm, Bill
    Abstract: There is little sound information about the impact of cow genetic selection programs on whole farm profit. We analyse aggregate industry data to identify trends in dairy herd genetic, production and reproductive performance. We model genetic distribution within herds over time from a long-term genetic selection program and use a representative whole-farm bioeconomic (simulation) model to explore the impact of herd genetic change on profit of the case farm. Analysis of an industry herd recording database reveals an average annual rate of increase in Balanced Production Index (BPI) of 7 units for the herd (2.9 and 10.1 for the bottom and top BPI quartiles) and 10.8 BPI units for artificial insemination sires used within herds. Modelling these trends for herds with an age-cohort BPI range average of 43 units of BPI and 20% cohort attrition rates show that the natural range between bottom and top BPI quartiles expands gradually but remains between 75–100 units in most herds across 50 years of selection. Bioeconomic modelling found an average of around $2,500 extra contribution to farm profit per annum for the 250-cow herd representative farm, with the herd achieving an annual rate of increase in herd BPI of around 10 units per year. These findings indicate that comparing performance of BPI quartiles within herds provides almost no insight into impacts of genetic selection on farm profit. Applying more widely the findings and insights from modelling genetic gain in representative pasture-based dairy farm suggests it is likely that that on many, or even most dairy farms, the gains in profit from cow genetic selection may be modest. Good advice to dairy farmers would be to (i) have realistic expectations about the role of genetic gain in their business; (ii) evaluate returns from investment in herd genetics; and (iii) compare expected returns from investments into all limiting factors present on the farm.
    Keywords: Livestock Production/Industries
    Date: 2019–02
  10. By: Erika Jimena Arilyn (Trisakti School of Management, Jakarta - Indonesia Author-2-Name: Beny Author-2-Workplace-Name: Trisakti School of Management, Jakarta - Indonesia Author-3-Name: Emir Kharismar Author-3-Workplace-Name: Trisakti School of Management, Jakarta - 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 research is conducted in order to determine what factors in corporate governance affect the financial performance of a firm. Methodology/Technique – Financial performance, as the dependent variable, is measured by Return on Asset (ROA), while the independent variables (corporate governance) are measured using Board Independence, Board Size, Dividend, Firm Size, and Financial Leverage. The sampling method used in this research is purposive sampling. The requirements for the sample of this research are the non – financial firms included in LQ-45 from 2012 to 2017 that publish annual reports that are available to the public. The research method used in this paper is a quantitative method. Panel data analysis technique and E-views tools were also used. Findings – The results indicate that firm size and percentage of board independence has no effect on financial performance, while board size, dividends, and financial leverage all effect financial performance. Novelty – The study adds to the literature of corporate government and firm performance in emerging countries. Type of Paper: Empirical.
    Keywords: Board Independence; Board Size; Dividends; Firm Size; Financial Leverage; Financial Performance.
    JEL: M40 M48 M49
    Date: 2019–03–22
  11. By: David Baqaee; Emmanuel Farhi
    Abstract: This paper provides two simple and economically-interpretable decompositions for aggregate productivity analysis in the presence of distortions and in general equilibrium. In the process, we propose a new “distorted” Solow residual which, contrary to the traditional Solow residual, accurately measures changes in aggregate productivity in disaggregated economies with distortions. Our formulas apply to any collection of producers ranging from one isolated producer to an industry or to an entire economy. They can be useful for empiricists and theorists alike. Potential applications of these formulas include: (1) decomposing aggregate productivity into its microeconomic sources, separating technical and allocative efficiency; (2) aggregating microeconomic estimates (for example, from natural experiments) to assess macroeconomic effects; (3) constructing and interpreting aggregate counterfactuals. Despite their simplicity, the formulas are general, allowing for production networks, multi-product firms, and non-constant returns. They are also entirely nonparametric. They only assume market clearing and cost minimization.
    JEL: E0 L0
    Date: 2019–03
  12. By: De Ridder, M.
    Abstract: Productivity growth has stagnated over the past decade. This paper argues that the rise of intangible inputs (such as information technology) can cause a slowdown of growth through the effect it has on production and competition. I hypothesize that intangibles create a shift from variable costs to endogenous fixed costs, and use a new measure to show that the share of fixed costs in total costs rises when firms increase ICT and software investments. I then develop a quantitative framework in which intangibles reduce marginal costs and endogenously raise fixed costs, which gives firms with low adoption costs a competitive advantage. This advantage can be used to deter other firms from entering new markets and from developing higher quality products. Paradoxically, the presence of firms with high levels of intangibles can therefore reduce the rate of creative destruction and innovation. I calibrate the model using administrative data on the universe of French firms and find that, after initially boosting productivity, the rise of intangibles causes a 0.6 percentage point decline in long-term productivity growth. The model further predicts a decline in business dynamism, a fall in the labor share and an increase in markups, though markups overstate the increase in firm profits.
    Keywords: Business Dynamism, Growth, Intangibles, Productivity, Market Power
    Date: 2019–03–25
  13. By: Nguyen, Huy Quynh
    Abstract: This paper studies whether land consolidation – reduction of land fragmentation – promotes or hinders the Vietnamese government’s policy objectives of encouraging agricultural mechanization and stimulation of the off-farm rural economy. It does this by viewing land consolidation as a form of technical change, making it possible to apply the insights developed in the economic literature on technical change. This treatment reveals that the impacts of land consolidation depend partly on its factor bias and partly on the degree to which labor is substitutable in production for other factors. At a theoretical level, if a technical change is factor neutral, it will reduce off-farm labor supply and slow rural structural transformation away from agriculture; if it is labor-augmenting and the elasticity of substitution between factors is low enough, the opposite effects are predicted. The paper studies these issues empirically for rice production in Vietnam, focusing on the impact that consolidation of rice land has on rice production, machinery use, and labor allocation. The findings confirm that land consolidation raises both farm productivity and farm income and stimulates increased machinery use. It also reduces farm labor supply, lowers labor intensity in farming, and thereby releases more farm labor to off-farm development, consistent with government policy objectives. Based on these findings, the paper concludes that land consolidation should be encouraged through development of land ownership rights and the promotion of land rental markets.
    Keywords: Crop Production/Industries
    Date: 2019–02
  14. By: Besstremyannaya, Galina; Dasher, Richard; Golovan, Sergei
    Abstract: A considerable amount of research has shown that a carbon tax combined with research subsidies may be regarded as optimal policy for encouraging the spread of low-carbon technologies for the benefit of society. The paper exploits the macroeconomic approach of endogenous growth models with technological change in order to make a comparative assessment of the impact of such policy measures on economic growth in the US and Japan in the medium and long term. Our estimates reveal several important differences between Japanese and US energy firms: lower elasticity of the innovation production function in R&D expenditure, lower probability of radical innovation, and predominance of dirty technologies in Japan. This may explain our quantitative findings of stronger reliance on carbon tax in Japan as opposed to research subsidies in the US.
    Keywords: endogenous growth,technological change,innovation,carbon tax,energy
    JEL: O11 O13 O47 Q43 Q49
    Date: 2019
  15. By: Oh, Ilfan
    Abstract: This paper presents an empirical analysis of the distributional and dynamic properties of firm profit rates, measured by returns on assets, using panel data on 1095 long-lived Japanese (non-financial) listed firms over the 1971-2012 period. In particular, this paper tests the validity of statistical equilibrium approach of Alfarano et al. (2012), by investigating whether the two representative firm size measures of total assets and total sales are the significant determinants of key parameters ruling over the distributional outcome and stochastic motion of firm profit rates: a system-wide aver- age rate of profit, a system-wide dispersion measure of profit rates, and an idiosyncratic noise factor reecting individual firm characteristics. Employing information-theoretic model selection approach and standard panel data econometric techniques which control for both unobserved individual firm heterogeneity and time effects, this paper finds: (i) under the various levels of aggregation using the two size measures as firm classification instruments, the empirical density of profit rates is well described by the Laplace distribution; (ii) the key parameters characterizing the profit rate distribution and its dynamics are independent of the movements in firm size measures. These findings confirm the fundamental predictions from statistical equilibrium approach and the finding (ii) implies that firm competition is an autonomous system, immune to the size of individual firms.
    Keywords: diffusion process,firm size,Laplace distribution,long-lived firms,profit rate dynamics,statistical equilibrium
    JEL: C23 C52 D22
    Date: 2019

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