nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒05‒20
fourteen papers chosen by

  1. Aggregation of Efficiency and Productivity: From Firm to Sector and Higher Levels By Valentin Zelenyuk
  2. Market constraints, misallocation, and productivity in Viet Nam agriculture By Brandt Loren; Syerst Stephen; Restuccia Diego; Ayerst Stephen
  3. R&D, innovation and productivity By Mohnen, Pierre
  4. Efficiency of the European banks in the aftermath of the financial crisis: A panel stochastic frontier approach By Cândida Ferreira
  5. What a firm produces matters: diversi cation, coherence and performance of Indian manufacturing By Dosi, Giovanni; Mathew, Nanditha; Pugliese, Emanuele
  6. Firm Size and Innovation in the Service Sector By David B. Audretsch; Marian Hafenstein; Alexander S. Kritikos; Alexander Schiersch
  7. Like it or not? The impact of online platforms on the productivity of incumbent service By Alberto Bailin Rivares; Peter Gal; Valentine Millot; Stéphane Sorbe
  8. Brazilian exporters and the rise of Global Value Chains: an empirical assessment By Torres Mazzi, Caio
  9. Immigrant-owned, Local and Global Firms in the Finnish Job and Production Restructuring By Maliranta, Mika; Nurmi, Satu
  10. Local Best Practices for Business Growth By Dalton, Patricio; Rüschenpöhler, Julius; Uras, Burak; Zia, Bilal
  11. Productivity, structural change and skills dynamics: Evidence from a half century analysis in Tunisia and Turkey By Gunes Asik; Ulas Karakoc; Mohamed Ali Marouani; Michelle Marshalian
  12. Does Scale Matter in Community Bank Performance? Evidence Obtained by Applying Several New Measures of Performance By Joseph P. Hughes; Julapa Jagtiani; Loretta J. Mester; Choon-Geol Moon
  13. Productivity growth and finance: The role of intangible assets - a sector level analysis By Lilas Demmou; Irina Stefanescu; Axelle Arquie
  14. Contribution of Foreign Direct Investment to Agricultural Productivity in Nigeria By Edewor, S. E.; Dipeolu, A.O.; Ashaolu O. F.; Akinbode, S.O.; Ogbe, A. O.; Edewor, A.O.; Tolorunju, E. T.; Oladeji S.O.

  1. By: Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: Here we consider various cases where researchers are interested in measuring aggregate efficiency or productivity levels or their changes for a group of decision making units. These could be entire industry composed of individual firms, banks, hospitals, or a region composed of sub-regions or countries, or particular sub-groups of these units within a group, e.g., sub-groups of public vs. private or regulated vs. non-regulated firms, banks or hospitals within the same industry, etc. Such analysis requires solutions to the aggregation problem some theoretically justified approaches that can connect individual measures to aggregate measures. Various solutions are offered in the literature and our goal is to try to coherently summarize at least some of them in this chapter. This material should be interesting not only for theorists but also (and perhaps more so) for applied researchers, as it provides exact formulas and intuitive explanations for various measures of group efficiency, group scale elasticity and group productivity indexes and refers to original papers for more details.
    Keywords: Efficiency, Productivity, Aggregation, Industry Efficiency, Duality.
    JEL: D24 C43 L25
    Date: 2019–05
  2. By: Brandt Loren; Syerst Stephen; Restuccia Diego; Ayerst Stephen
    Abstract: We examine important changes in agriculture in Viet Nam in the context of ongoing structural changes in the economy. We use a household-level panel dataset and a quantitative framework to document the extent and consequences of factor misallocation in agriculture during the period between 2006 and 2016.Despite rapid growth in agricultural productivity and a reallocation of factor inputs to more productive farmers, we find that misallocation across farmers remains high and increased during the period. Reallocation of factor inputs has not been strong enough to accommodate substantial changes in farm productivity over time.Our analysis also reveals important differences between the north and south regions.
    Keywords: Misallocation,Regional characteristics,Agriculture,Productivity,Agricultural productivity
    Date: 2018
  3. By: Mohnen, Pierre (UNU-MERIT, and SBE, Maastricht University)
    Abstract: This paper reviews various technological indicators from innovation inputs to innovation outputs, pointing out their strengths and weaknesses and the consequent caution that is in order when using these data for economic analysis. It briefly explains the theoretical link between innovation and productivity growth and then compares the estimated magnitudes of that relationship using the different innovation indicators.
    Keywords: innovation, productivity, indicators
    JEL: D24 O31 O33 O47
    Date: 2019–05–06
  4. By: Cândida Ferreira
    Abstract: Using panel estimates and Stochastic Frontier Analysis this paper aims to contribute to the analysis of bank efficiency of the European banks in the aftermath of the international financial crisis and the sovereign crisis that seriously affected many EU countries. It also considershypothetical scenarios of exit from the EU of some of the particularly relevant member-states, including the Brexit scenario. The results obtained very clearly demonstrate the existence of statistically significant technical inefficiencies in all considered scenarios. Nevertheless, the results reveal that the exclusion of the Italian banks and of the UK banks from our estimates would be more beneficial to the decrease of the banks’ cost inefficiencies than the exclusion of the French and the German banks. Moreover, the worst scenario in terms of the decrease of the EU banks’ cost inefficiencies would be the exclusion of the banks from the five EU countries that were deeply affected by the international financial and sovereign crises and were obliged to restructure their bank systems, that is, Cyprus, Greece, Ireland, Portugal and Spain.
    Keywords: Bank efficiency; Stochastic Frontier Analysis; EU banking sector; Brexit
    JEL: C33 D24 F36 G21
    Date: 2019–05
  5. By: Dosi, Giovanni (Institute of Economics, Sant'Anna School of Advanced Studies, Pisa); Mathew, Nanditha (UNU-MERIT, and Institute of Economics, Sant'Anna School of Advanced Studies, Pisa, and IBIMET-CNR, Florence); Pugliese, Emanuele (European Commission, Joint Research Centre (JRC), Seville, Institute of Complex Systems, CNR, Rome)
    Abstract: Economic growth and development of a country involves accumulation of knowledge and dynamic capabilities (Cimoli et al., 2009). Past research has begun to investigate the capability accumulation and macro-economic development of countries and sectors (Dosi et al., 1990), also by means of introduction of new products (Hausmann and Rodrik, 2003). In this work, recognizing that firms are the actual domain in which production takes place, we focus on the firm-level process of capability accumulation and diversification in a developing country. We investigate the relationship between diversification (and coherent diversification) and firm performance by employing an extensive database of Indian manufacturing firms with detailed information on product mix of firms. We claim that such an understanding of firms' incentives to diversify is relevant not only for the corporate management, but also for the diversification of countries and thereby its development. First, we explore the reasons behind firms' strategy to diversify, i.e, which firms choose a broad product scope and whether the change in the scope of the firm results in improved performance in terms of firm profitability and sales growth. Second, we look at the idiosyncratic characteristics of different products, by emphasizing the synergies of a product line with respect to the overall product basket of the firm. In this line, we develop a measure that captures the synergies and economies of scope between different products, and observe that the firms' future performance crucially depend on the interactions between the products that comprise its basket. Overall, our results are consistent with an intangible- capabilities model of firm diversification: diversification results in improved firm performance if the firm has underused capabilities and the new production line is able to exploit them.
    Keywords: Diversification, Coherence, Endogenous Switching
    JEL: L25 L60 O30
    Date: 2019–04–18
  6. By: David B. Audretsch (Indiana University Bloomington); Marian Hafenstein (German Institute for Economic Research (DIW Berlin)); Alexander S. Kritikos (German Institute for Economic Research (DIW Berlin), University of Potsdam, IZA (Bonn), IAB (Nuremberg)); Alexander Schiersch (German Institute for Economic Research (DIW Berlin))
    Abstract: A rich literature links knowledge inputs with innovative outputs. However, most of what is known is restricted to manufacturing. This paper analyzes whether the three aspects involving innovative activity - R&D; innovative output; and productivity - hold for knowledge intensive services. Combining the models of Crepon et al. (1998) and of Ackerberg et al. (2015), allows for causal interpretation of the relationship between innovation output and labor productivity. We find that knowledge intensive services benefit from innovation activities in the sense that these activities causally increase their labor productivity. Moreover, the firm size advantage found for manufacturing in previous studies nearly disappears for knowledge intensive services.
    Keywords: MSMEs, R&D, Service Sector, Innovation, Productivity, Entrepreneurship
    JEL: L25 L60 L80 O31 O33
    Date: 2019–05
  7. By: Alberto Bailin Rivares; Peter Gal; Valentine Millot; Stéphane Sorbe
    Abstract: This paper uses a novel empirical approach to assess if the development of online platforms affects the productivity of service firms. We build a proxy measure of platform use across four industries (hotels, restaurants, taxis and retail trade) and ten OECD countries using internet search data from Google Trends, which we link to firm-level data on productivity in these industries. We find that platform development supports the productivity of the average incumbent service firm and also stimulates labour reallocation towards more productive firms in these industries. This may notably reflect that platforms’ user review and rating systems reduce information asymmetries between consumers and service providers, enhancing competition between providers. The effects depend on platform type. “Aggregator” platforms that connect incumbent service providers to consumers tend to push up the productivity of incumbents, while more disruptive platforms that enable new types of providers to compete with them (e.g. home sharing, ride hailing) have on average no significant effect on it. Consistent with this, we find that different platform types affect differently the profits, mark-ups, employment and wages of incumbent service firms. Finally, the productivity gains from platforms are lower when a platform is persistently dominant on its market, suggesting that the contestability of platform markets should be promoted.
    Keywords: competition, digital, google trends, platforms, productivity, services, user rating
    JEL: D24 L13 L80 O33
    Date: 2019–05–21
  8. By: Torres Mazzi, Caio (UNU-MERIT)
    Abstract: This paper studies how production fragmentation has affected the performance of Brazilian exporters in the manufacturing sector. We begin by combining existing classifications of internationally traded products to identify four different categories of goods, of which one ('customised intermediates') we associate more closely with fragmented trade. We then proceed to compare the productivity premium of international traders for these different categories. Our results confirm exporting customised intermediates is associated with a superior performance in comparison to other intermediates; but also highlights a strong influence of sector specificities. We also investigate the existence of learning-by-exporting effects and find no evidence for firms that produce customised intermediates exclusively. However, exports of customised products in general - i.e. both final and intermediate goods - are associated with learning. This result suggests trade in customised intermediates might be associated with learning when firms manage to upgrade their products to other customised goods.
    Keywords: exports, productivity, fragmentation, Global Value Chains
    JEL: F14 F12 O33 O31
    Date: 2019–04–23
  9. By: Maliranta, Mika; Nurmi, Satu
    Abstract: Abstract We examine the growth of real value added, labour input and labour productivity of immigrant-owned firms in Finland in 2007–2016. In our analysis we use the so-called FLOWN (Finnish Longitudinal OWNer-Employer-Employee) data by Statistics Finland that allows linking register information on firms, their owners and employees. As immigrant-owned firms account for a few percent of all firms and about one percent of all labour in the business sector, their contribution to the growth of output and employment must be limited. However, the growth rate of their real value added is markedly stronger than in other firm groups. Their job creation rates are exceptionally high but their job destruction rates are, however, about the same magnitude as in the indigenous-owned firms. The immigrant-owned firms have created a relatively large amount of low productivity and low wage jobs. On an average, their wage growth has been somewhat higher than in other firms, but pro-cyclical variation of wages has been stronger.
    Keywords: Immigrants, Output growth, Employment growth, Productivity growth, Creative destruction
    JEL: J15 J21 J24 E24
    Date: 2019–05–14
  10. By: Dalton, Patricio (Tilburg University, Center For Economic Research); Rüschenpöhler, Julius (Tilburg University, Center For Economic Research); Uras, Burak (Tilburg University, Center For Economic Research); Zia, Bilal
    Abstract: Can best practices of successful business peers influence the efficiency and growth of small-scale enterprises? Does it matter how this information is disseminated? This paper conducts a field experiment among urban retail shop owners in Indonesia to address these research questions. Through extensive baseline quantitative and qualitative assessments, we develop a handbook of local best practices that associates specific business practices with performance and provides detailed implementation guidance informed by exemplary local shop owners. The handbook is distributed to a randomly selected sample of shop owners and is complemented with three experiential learning modules: one group is invited to watch a documentary video on experiences of highly successful peers, another is offered light in-shop assistance on the implementation of the handbook, and a third group is offered both. Eighteen months after the intervention, we find no effect of offering the handbook alone, but significant impact on practice adoption when the handbook is coupled with experiential learning. On business performance we find sizable and significant improvements as well, up to a 35% increase in profits and 16.7% in revenues. The types of practices adopted map these performance improvements to efficiency gains rather than other channels. The analysis suggests these interventions are simple, scalable, and highly cost-effective.
    Keywords: business practices; small-scale enterprises; peer knowledge; efficiency gains; sicoal learning
    JEL: O12 L26 M20 O31 O33 O17 M50
    Date: 2019
  11. By: Gunes Asik; Ulas Karakoc; Mohamed Ali Marouani; Michelle Marshalian
    Date: 2019
  12. By: Joseph P. Hughes (Rutgers University); Julapa Jagtiani (Federal Reserve Bank of Philadelphia); Loretta J. Mester (Federal Reserve Bank of Cleveland); Choon-Geol Moon (Hanyang University)
    Abstract: We consider how size matters for banks in three size groups: small community banks with assets less than $1 billion, large community banks with assets between $1 billion and $10 billion, and midsize banks with assets between $10 billion and $50 billion. To illustrate the differences between these banks and larger banks whose business models are distinctly different, we examine large banks with assets between $50 billion and $250 billion and the largest banks with assets exceeding $250 billion. Community banks have potential advantages in relationship lending compared with large banks. However, increases in regulatory compliance and technological burdens may have disproportionately increased community banks’ costs, raising concerns about small businesses’ access to credit. Our evidence suggests several patterns: (1) while small community banks exhibit relatively more valuable investment opportunities, larger community banks, midsize banks, and larger banks exploit theirs more efficiently and achieve better financial performance; (2) average operating costs that include costs related to regulatory compliance and technology decrease with size; (3) unlike small community banks, large community banks have financial incentives to increase lending to small businesses; and (4) for business lending and commercial real estate lending, compared with small community banks, large community banks, midsize banks, and larger banks assume higher inherent credit risk and exhibit more efficient lending. Thus, concern that small business lending would be adversely affected if small community banks find it beneficial to increase their scale is not supported by our results.
    Keywords: community banking, scale, financial performance, small business lending
    JEL: G21 L25
    Date: 2019–05–14
  13. By: Lilas Demmou; Irina Stefanescu; Axelle Arquie
    Abstract: Investment in intangible assets has become an increasingly important driver of productivity growth in OECD countries. Facing stronger informational asymmetries and harder to value collateral, intangible investment is subject to more severe financial constraints and relies more on internal rather than external capital. To test the hypothesis that the availability of finance, and financial development in particular, is more important for productivity growth in sectors that are intensive in intangible assets, an empirical analysis is carried over a panel of 32 countries and 30 industries, from 1990 to 2014. Overall, results confirm that the impact of financial development on labour productivity is not uniform across sectors. It varies based on country-specific institutional settings and sector-specific characteristics such as the intangible asset intensity, financial structure and external financial dependence. Policies and institutional settings may relax financial constraints by: i) altering the overall composition of finance; ii) encouraging competition and iii) strengthening the legal environment in which businesses operate.
    Keywords: Financial Development, Intangible assets, Productivity Growth
    JEL: G10 G21
    Date: 2019–05–17
  14. By: Edewor, S. E.; Dipeolu, A.O.; Ashaolu O. F.; Akinbode, S.O.; Ogbe, A. O.; Edewor, A.O.; Tolorunju, E. T.; Oladeji S.O.
    Abstract: Over the past few years, Nigeria has been faced with a series of policy changes and political instability that has somewhat led to the incidence of capital flight from Nigeria. This study sought to examine the contribution of Foreign Direct Investment (FDI) into the Agricultural Sector. The study made use of annual time series of some macroeconomic variables and agricultural productivity spanning the period 1990 to 2016. The data was analysed using descriptive statistics and Multiple Regression Model. The data was further tested for stationarity using the Augmented Dicky-Fuller unit root test where it was ascertained that the entire hypothesized variable were stationary were significant(p<0.01) at first difference. The study revealed that the amount allocated to agricultural sector declined steadily over the years with all-time highest in the 90's. Similarly, the determinants of agricultural productivity include exchange rate, interest rates, GDP and FDI inflow into the agricultural sector. The study therefore recommends that an enabling environment be created through stable macroeconomic policies (monitoring of interest and exchange rates) and political stability be promoted so as to attract both domestic and foreign investors to the country.
    Keywords: Agricultural and Food Policy, Productivity Analysis
    Date: 2017–10

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