nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒06‒10
twenty papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Identifying Sri Lanka’s Sources of Growth: The Application of Primal and Dual Total Factor Productivity Growth Accounting Approaches By Ranpati Dewage Thilini Sumudu Kumari; Sam Hak Kan Tang
  2. Les performances économiques de l’élevage européen : de la « compétitivité coût » à la « compétitivité hors coût » By Vincent Chatellier; Pierre Dupraz
  3. The Joint Estimate of Singleton and Longitudinal Observations: a GMM Approach for Improved Efficiency By Randolph Luca Bruno; Laura Magazzini; Marco Stampini
  4. Economic Cross-Efficiency By Aparicio, J.; Zofío, J.L.
  5. Les banques coopératives ont-elles été plus performantes pendant les crises récentes ? By Ouafa Ouyahia
  6. Estimation of stochastic frontier panel data models with spatial inefficiency By Federico Belotti; Giuseppe Ilardi; Andrea Piano Mortari
  7. 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
  8. Does Low Skilled Immigration Increase Profits? Evidence from Italian Local Labour Markets By Giorgio Brunello; Elisabetta Lodigiani; Lorenzo Rocco
  9. Money and the Measurement of Total Factor Productivity By Diewert, Erwin; Fox, Kevin J.
  10. The impacts of environmental regulations on competitiveness By Dechezlepretre, Antoine; Sato, Misato
  11. Convergence of labour productivity in agriculture of the European Union By Gołaś, Zbigniew Jan
  12. The production and economic results of dairy farms belonging to the European dairy farmers in 2016 By Kołoszycz, Ewa; Świtłyk, Michał
  13. Do Physicians Influence Each Other’s Performance? Evidence from the Emergency Department By Saghafian, Soroush; Imanirad, Raha; Traub, Stephen J.
  14. Not Evidence for Baumol’s Cost Disease By Akinwande Atanda; W. Robert Reed
  15. The persistent institutional effect of liberal colonialism: Evidence from China's financial policies By Fu, Tong; Wei, Zhongmei; Jian, Ze
  16. Exact tests on returns to scale and comparisons of production frontiers in nonparametric models By Anders Rønn-Nielsen; Dorte Kronborg; Mette Asmild
  17. Relaxing credit constraints in emerging economies: the impact of public loans on the productivity of Brazilian manufacturers By Lage de Sousa, Filipe; Ottaviano, Gianmarco I. P.
  18. Economic size and production efficiency of farms specializing in field crops in Poland By Skarżyńska, Aldona
  19. Do unit labour costs matter? A decomposition exercise on European data By Piton, Sophie
  20. MANAGING TRADE: EVIDENCE FROM CHINA AND THE US By Nicholas Bloom; Kalina Manova; John Van Reenen; Stephen Teng Sun; Zhihong Yu

  1. By: Ranpati Dewage Thilini Sumudu Kumari (Economics Discipline, Business School, The University of Western Australia and Central Bank of Sri Lanka); Sam Hak Kan Tang (Economics Discipline, Business School, The University of Western Australia)
    Abstract: This study aims to identify how much of economic growth is driven by improvement in Total Factor Productivity (TFP) in Sri Lanka, a small open economy, in comparison to other Asian economies. To examine this, aggregate TFP growth was calculated for Sri Lanka by using both primal and dual growth accounting frameworks. The study covers the period 1980-2016 and eight sub-periods, classified according to distinctive socio-economic-politico changes. For the whole period, TFP growth accounts for 45 percent of the total output growth. The annual average TFP growth rates under the primal and dual approaches are 2.3 percent and 3.6 percent, respectively. Though the growth accounting framework has limitations, the results were robust enough to draw comparative conclusions with those of other Asian countries. Sri Lanka’s TFP growth under both methods has been positive and higher than some Asian countries, except for China. Further, though Indonesia and Sri Lanka have similar per capita GDP levels, Sri Lanka’s TFP growth has been higher than that of Indonesia. Additionally, we show that the two growth drivers in Sri Lanka have been capital accumulation and productivity growth.
    Keywords: Dual Approach, Growth Accounting, Primal Approach, Sources of Growth, Sri Lanka, Total Factor Productivity
    JEL: D24 E22 E23 F43 O47
    Date: 2019
  2. By: Vincent Chatellier; Pierre Dupraz
    Abstract: [in French] The European Union (EU) has, since a long time, an important role in the international livestock industry chains, both in terms of production and trade. In spite of a strong restructuring movement, mainly due to factor productivity gains, European livestock brings together farms that are still very heterogeneous in terms of productive combinations, size, social structuring, intensification and economic performance. To document this, data from the Farm Accountancy Data Network (FADN) is used to analyze the diversity of structural and economic situations of farms specializing in the production of milk, beef and pigs/poultry, for the ten most productive EU Member States in animal production. This step is necessary for identifying the main levers for improving the economic performance of European animal productions. Two types of levers are distinguished. The first concerns the « cost competitiveness ». It refers successively to the substitution of production factors, economies of scale, the geographical concentration of production, the structuring of production chains and the impact of agricultural policies. The second concerns the « non-cost competitiveness ». It covers the sanitary quality of animal productions, the differentiation of products and production processes, and the required conditions for farmers to capture some of the generated value-added.
    Keywords: livestock, livestock production, competitiveness, economic performance, FADN
    JEL: Q10 Q13 Q18
    Date: 2019
  3. By: Randolph Luca Bruno (School of Slavonic and East European Studies, University College London); Laura Magazzini (Department of Economics (University of Verona)); Marco Stampini (Social Protection and Health Division, Inter-American Development Bank)
    Abstract: We devise an innovative methodology that allows exploiting information from singleton and longitudinal observations for the estimation of fixed effects panel data models. The approach can be applied to join cross-sectional data and longitudinal data, in order to increase estimation efficiency, while properly tackling the potential bias due to unobserved individual characteristics. Estimation is framed within the GMM context and we assess its properties by means of Monte Carlo simulations. The method is applied to an unbalanced panel of firm data to estimate a Total Factor Productivity regression based on the renown Business Environment and Enterprise Performance Survey (BEEPs) database. Under the assumption that the relationship between observed and unobserved characteristics is homogeneous across singleton and longitudinal observations (or across different samples), information from longitudinal data is used to "clean" the bias in the unpaired sample of singletons. This reduces the standard errors of the estimation (in our application, by approximately 8-9 percent) and has the potential to increase the significance of the coefficients.
    Keywords: Panel Data, Efficient Estimation, Unobserved Heterogeneity, GMM
    JEL: C23 C33 C51
    Date: 2018–05
  4. By: Aparicio, J.; Zofío, J.L.
    Abstract: This paper is concerned with introducing a series of new concepts under the name of Economic Cross-Efficiency, which is rendered operational through Data Envelopment Analysis (DEA) techniques. To achieve this goal, from a theoretical perspective, we connect two key topics in the efficiency literature that have been unrelated until now: economic efficiency and cross-efficiency. In particular, it is shown that, under input (output) homotheticity, the traditional bilateral notion of input (output) cross-efficiency for unit l, when the weights of an alternative counterpart k are used in the evaluation, coincides with the well-known Farrell notion of cost (revenue) efficiency for evaluated unit l when the weights of k are used as market prices. This motivates the introduction of the concept of Farrell Cross-Efficiency (FCE) based upon Farrell’s notion of cost efficiency. One advantage of the FCE is that it is well defined under Variable Returns to Scale (VRS), yielding scores between zero and one in a natural way, and thereby improving upon its standard cross-efficiency counterpart. To complete the analysis we extend the FCE to the notion of Nerlovian cross-inefficiency (NCI), based on the dual relationship between profit inefficiency and the directional distance function. Finally, we illustrate the new models with a recently compiled dataset of European warehouses.
    Keywords: Data Envelopment Analysis, Cross-efficiency, Farrell (Cost) Efficiency, Nerlove (Profit) Inefficiency, Warehousing
    Date: 2019–05–27
  5. By: Ouafa Ouyahia
    Abstract: This paper compares the profitability of European cooperative banks with that of non-cooperative banks over the period 2005-2014 using the generalized method of moments (SYS-GMM). We consider traditional measures of bank performance which are: return on assets (ROA), return on equity (ROE), and net interest margin (NIM). Even if these measures are not adapted to cooperative banks, they remain the most used in the literature. Our results show that cooperative banks are no more or less performant than the rest of banks when the entire period is considered. However, the sovereign debt crisis in Europe had a relatively greater effect on the performance of cooperative banks as a whole, unlike the 2008 crisis. Conversely, systemic co-operative banks appear to be relatively more performant during the sovereign debt crisis. However, no distinction is made between systemic cooperative banks and other banks during the 2008 financial crisis.
    Keywords: Performance, cooperative banks, the 2008 financial crisis, the sovereign debt crisis in Europe
    JEL: G21 P13
    Date: 2019
  6. By: Federico Belotti (CEIS & DEF University of Rome "Tor Vergata"); Giuseppe Ilardi (Bank of Italy); Andrea Piano Mortari (CEIS, University of Rome "Tor Vergata")
    Abstract: This paper proposes a stochastic frontier panel data model in which unit-specific inefficiencies are spatially correlated. In particular, this model has simultaneously three important features: i) the total inefficiency of a productive unit depends on its own inefficiency and on the inefficiency of its neighbors; ii) the spatially correlated and time varying inefficiency is disentangled from time invariant unobserved heterogeneity in a panel data model à la Greene (2005); iii) systematic differences in inefficiency can be explained using exogenous determinants. We propose to estimate both the "true" fixed- and random-effects variants of the model using a feasible simulated composite maximum likelihood approach. The finite sample behavior of the proposed estimators are investigated through a set of Monte Carlo experiments. Our simulation results suggest that the estimation approach is consistent, showing good finite sample properties especially in small samples.
    Keywords: Stochastic frontiers model; Spatial inefficiency; Panel data, Fixed-effects model
    JEL: C13 C23 C15
    Date: 2019–05–30
  7. By: Gunes Asik (Tobb Economics and Technology University, Turkey); Ulas Karakoc (Humboldt University Berlin, Germany); Mohamed Ali Marouani (UMR « Développement et Société », IEDES / Université Paris1-Panthéon-Sorbonne, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL); Michelle Marshalian (University of Paris, Dauphine (PSL) and DIAL, France)
    Abstract: This article explores the contribution of structural change and the skill upgrading of the labor force to productivity in Tunisia and Turkey in the institutional context of the post-World War II period. Our growth decomposition shows that productivity is mainly explained by intra-industry changes for both countries during the import substitution period. Structural change played an important role in Turkey for a longer period of time than in Tunisia. Based on an instrumental variable regression setting, we find evidence that overall, the change in the share of high-educated workers had a causal impact on productivity levels in Turkey, but no such relation was found in Tunisia. Secondly, we show that this productivity increase has mainly been driven by the reallocation of higher educated labor between sectors rather than the absorption of highly educated workers within sectors. In Tunisia we do not find evidence of links between education demand and productivity. Moreover, the evidence from the instrumental variable regressions show that when we exclude the government sector in Tunisia, the overall skills upgrading is negatively associated with productivity growth, suggesting a downward return to educated labor demand over time.
    Keywords: Productivity, Skills, Structural change, Tunisia, Turkey, MENA.
    JEL: J24 L16 N15 N17
    Date: 2019–05
  8. By: Giorgio Brunello (University of Padova, IZA, Cesifo and ROA); Elisabetta Lodigiani (University of Padova and LdA); Lorenzo Rocco (University of Padova and IZA)
    Abstract: We study the effects of low skilled immigration on firm profits, average wages, capital and total factor productivity (TFP) by combining firm-level and local labour market data from Italy. We find that low skilled immigration increases profits. This effect is small on average, larger for small firms and considerably larger for firms operating in local labour markets with a higher than median share of (before sample) low skilled employment. In these areas, substitution effects reduce average wages much more than elsewhere. Low skilled immigration has increased profits by lowering average wages and by increasing the capital stock, with no effect on TFP.
    Date: 2019–05–28
  9. By: Diewert, Erwin; Fox, Kevin J.
    Abstract: Firms have greatly increased their cash holdings since the mid-1990s. These holdings have an opportunity cost; i.e., allocating firm financial capital into monetary deposits means that investment in real assets is reduced. Traditional measures of Total Factor Productivity (TFP) do not take into account these holdings of monetary assets. Given the recent large increases in these holdings in the U.S. and other advanced economies, it is expected that adding these monetary assets to the list of traditional sources of capital services will reduce the TFP of the business sector. We measure this effect for the U.S. corporate and non-corporate business sectors.
    Keywords: Productivity, money, national accounts, capital services Here.
    JEL: D24 E01 E41
    Date: 2019–05–31
  10. By: Dechezlepretre, Antoine; Sato, Misato
    Abstract: This article reviews the empirical literature on the impacts of environmental regulations on firms’ competitiveness, as measured by trade, industry location, employment, productivity and innovation. The evidence shows that environmental regulations can lead to statistically significant adverse effects on trade, employment, plant location and productivity in the short run, in particular in a well-identified subset of pollution- and energy-intensive sectors, but that these impacts are small relative to general trends in production. At the same time, there is evidence that environmental regulations induce innovation in clean technologies, but the resulting benefits do not appear to be large enough to outweigh the costs of regulations for the regulated entities. As measures to address competitiveness impacts are increasingly incorporated into the design of environmental regulations, future research will be needed to assess the validity and effectiveness of such measures, and to ensure they are compatible with the environmental objectives of the policies.
    JEL: J1
    Date: 2017–07
  11. By: Gołaś, Zbigniew Jan
    Abstract: Labour productivity is commonly considered as one of the most important parameters of development of economies, because it is conductive to reduction of costs, increase in supply of cheaper goods and services, higher dynamics of the market and higher purchasing power of societies, their wealth and competitive ability. But labour productivity is – at the backdrop of the EU countries – highly diversified, including in particular in agriculture where its level is much lower than in other sectors of the economy. The main objective of the presented paper is to examine and assess the changes in labour productivity in the EU agriculture in the context of the diversity of its level and dynamics of change underlying the identification of labour productivity convergence/divergence processes taking place in agriculture. The labour productivity convergence processes in the EU agriculture were analysed based on data from the period between 2005 and 2016, by testing two its basic types, namely sigma and beta convergence. The analysis applied statistical measures describing the degree of labour productivity differentiation in agriculture of the EU countries and cross-sectional regression function. The research showed that sigma and beta convergence exist in general in the EU-28 countries and in the group of the new Member States (UE-13). In the group of old Member States, however, no sigma convergence/divergence was identified, but statistically significant beta divergence was noted.
    Keywords: Agricultural Finance, International Development, International Relations/Trade, Labor and Human Capital
    Date: 2019
  12. By: Kołoszycz, Ewa; Świtłyk, Michał
    Abstract: The objectives of the work were to check the possibility of obtaining data from the FADN system for the EDF survey and to compare the economic results achieved by dairy farms from the selected EU countries in 2016. The additional objective was to determine the profitability threshold for milk production at the level of general and full costs. The average data was used for the analysis within EDF and the Polish group and their tercyl separated due to the total cost of milk production. The average national results within EDF in 2016 were also analyzed. Measures for the evaluation of the results was the level of agricultural income, and income from management and risks in the dairy industry. Two break even points of producing 100 kg of milk expressed by total and full costs were also assessed. The lowest total cost of production was incurred by the farm with large scale production, expressed as the number of cows in the herd and milk yield per cow. In addition, these farms were characterised by greater participation of grassland than arable land in forage area, of which more than half was rented. Polish and Irish farms were characterised by the lowest total costs in milk production out of the analyzed countries. Based on the results relying on opportunity costs of own factors in milk production, it should be noted that the Polish farm obtained the lowest entrepreneur income. Apart from Irish farms, milk production in the analyzed countries in 2016 was unprofitable.
    Keywords: Agribusiness, Agricultural and Food Policy, Industrial Organization, International Relations/Trade
    Date: 2019
  13. By: Saghafian, Soroush (Harvard Kennedy School); Imanirad, Raha (Harvard Business School); Traub, Stephen J. (Mayo Clinic Arizona)
    Abstract: Understanding potential ways through which physicians impact each other's performance can yield new insights into better management of hospitals' operations. We use evidence from Emergency Medicine to study whether and how physicians who work alongside each other during same shifts affect each other's performance. We find strong empirical evidence that physicians affect each other's speed and quality, and scheduling diverse peers during the same shift could have a positive net impact on the operations of a hospital Emergency Department (ED). Specifically, our results show that a faster (slower) peer decreases (increases) the average speed of a focal physician compared to a same-speed peer. Similarly, a higher- (lower-) quality peer decreases (increases) a focal physician's average quality. Furthermore, the presence of a less-experienced peer improves a focal physician's average speed. However, in contrast to the conventional wisdom, we do not find any evidence that more-experienced physicians can affect the performance of their less-experienced peers. We investigate various mechanisms that might be the driving force behind our findings, including psychological channels such as learning, social influence, and homophily as well as resource spillover. We identify resource spillover as the main driver of the effects we observe and show that, under high ED volumes (i.e., when the shared resources are most constrained), the magnitude of the observed effects increases. While some of these observed effects tend to be long-lived, we find that their magnitudes are fairly heterogeneous among physicians. In particular, our results show that newly-hired and/or high-performing physicians are typically more influenced than others by their peers. Finally, we draw conclusions from our results and discuss how they can be utilized by hospital administrators to improve the overall performance of physicians via better scheduling patterns and/or training programs that require physicians to work during same shifts.
    Date: 2019–05
  14. By: Akinwande Atanda; W. Robert Reed (University of Canterbury)
    Abstract: In his 2008 Journal of Health Economics paper, Jochen Hartwig claimed that Baumol’s Cost Disease (BCD) theory could explain observed increases in health care expenditures in OECD countries. This paper replicates Hartwig’s results and demonstrates that he tested the wrong hypothesis. When one tests the correct hypothesis, Hartwig’s conclusions are not supported. Rather than providing evidence in favor of BCD, Hartwig’s estimation procedures, when applied correctly, strongly reject BCD as an explanation for health expenditure increases for the OECD data he examined.
    Keywords: Baumol's cost disease, health care expenditures, health care costs, OECD, panel data
    JEL: I11 J30 E24
    Date: 2019–05–01
  15. By: Fu, Tong; Wei, Zhongmei; Jian, Ze
    Abstract: The effect of liberal colonialism on the allocation of capital persists to this day. As Lange et al. (Colonialism and development: A comparative analysis of Spanish and British colonies. 2006) define and suggest, the authors exploit the colonial history of China during 1896-1911 with qualitative evidence to measure liberal colonialism. They document that liberal colonialism promotes the subsequent efficiency of financial policies on capital allocation in 2004 through the quality of economic institutions.
    Keywords: liberal colonialism,economic institutions,allocative efficiency
    JEL: P34 N45 P26
    Date: 2019
  16. By: Anders Rønn-Nielsen (Center for Statistics, Department of Finance, Copenhagen Business School); Dorte Kronborg (Center for Statistics, Department of Finance, Copenhagen Business School); Mette Asmild (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: When benchmarking production units by non-parametric methods like data envelopment analysis (DEA), an assumption has to be made about the returns to scale of the underlying technology. Moreover, it is often also relevant to compare the frontiers across samples of producers. Until now, no exact tests for examining returns to scale assumptions in DEA, or for test of equality of frontiers, have been available. The few existing tests are based on asymptotic theory relying on large sample sizes, whereas situations with relatively small samples are often encountered in practical applications. In this paper we propose three novel tests based on permutations. The tests are easily implementable from the algorithms provided, and give exact significance probabilities as they are not based on asymptotic properties. The first of the proposed tests is a test for the hypothesis of constant returns to scale in DEA. The others are tests for general frontier differences and whether the production possibility sets are, in fact, nested. The theoretical advantages of permutation tests are that they are appropriate for small samples and have the correct size. Simulation studies show that the proposed tests do, indeed, have the correct size and furthermore higher power than the existing alternative tests based on asymptotic theory.
    Keywords: Data Envelopment Analysis (DEA), returns to scale, equality of production frontiers, exact tests, permutations
    JEL: C12 C14 C44 C46 C61 D
    Date: 2019–05
  17. By: Lage de Sousa, Filipe; Ottaviano, Gianmarco I. P.
    Abstract: In emerging economies credit constraints are often perceived as one of the most important market frictions hampering firm productivity growth in manufacturing. Huge amount of public money is devoted to the removal of such constraints but its effectiveness is still subject to an intense policy debate. This paper contributes to this debate by analyzing the effects of the Brazilian Development Bank (BNDES) loans. Exploiting the unique features of a dataset on BNDES loans to Brazilian manufactures, it finds that credit constraints facing Brazilian manufacturing firms are real, in particular for firms that apply to BNDES repeatedly, and BNDES support has allowed granted firms to match the performance of similar unconstrained firms but not to outperform them.
    Keywords: Credit constraints; Firm productivity; Public loans; BNDES
    JEL: G28 H25 O38
    Date: 2017–11–15
  18. By: Skarżyńska, Aldona
    Abstract: The article presents the economic results and production efficiency for farms specializing in field crops classified by economic size classes. The FADN UE data from 2010 and 2015 were used for the analysis. The income from the farm was a measure of the economic situation. The assessment of production efficiency was carried out at the production and technical level, the profitability of current assets as well as the cost consumption and economic efficiency of production were examined. The debt of farms was also analyzed. Income from the farm without subsidies for operating activities in economic size classes 1-5 successively increased, while for farms in the sixth class there was a strong decline in it, as a result income was a negative value. In 2010, the subsidies covered the loss on production and ensured a certain amount of income, while in 2015 the loss was only partially covered (in 95%). The highest income without subsidies per 1 ha of arable land was obtained on farms from the third and fourth economic size classes (in 2010: EUR 267 and EUR 201, respectively, in 2015 – EUR 161 and EUR 193). Farm production in the third and fourth classes also stand out in terms of production efficiency, while in sixth class of farms, the efficiency was the lowest. Together with the increase in the economic size of farms, their debt increased. In all groups, the liabilities were mostly long-term loans, but its smallest share was found in the sixth class of farms. This means that significant funds were allocated to finance the current operations of these farms.
    Keywords: Agricultural and Food Policy, Crop Production/Industries, International Development
    Date: 2019
  19. By: Piton, Sophie (Bank of England)
    Abstract: From the introduction of the euro up to the 2008 global financial crisis, macroeconomic imbalances widened among Member States. This divergence took the form of strong differences in the dynamics of unit labour costs. This paper asks why this happened. Is it the result of distortionary public spending, or the consequence of economic integration? To answer this question, this paper builds a theoretical framework that provides a decomposition of the growth in unit labour costs into various effects of economic integration and policy intervention. Using a novel dataset, it then measures the contribution of each effect in 12 countries of the euro area from 1995 to 2015. Results show that the process of economic integration was an important driver of increasing unit labour costs in peripheral economies before the global financial crisis.
    Keywords: Economic integration; productivity; structural change; non-tradable sector; macroeconomic imbalances; capital flows; growth accounting; euro area
    JEL: E65 F41 O33 O41 O47 O52
    Date: 2019–05–24
  20. By: Nicholas Bloom; Kalina Manova; John Van Reenen; Stephen Teng Sun; Zhihong Yu
    Abstract: We present a heterogeneous-firm model in which management ability increases both production efficiency and product quality. Combining six micro-datasets on management practices, production and trade in Chinese and American firms, we find broad support for the model's predictions. First, better managed firms are more likely to export, sell more products to more destination countries, and earn higher export revenues and profits. Second, better managed exporters have higher prices, higher quality, and lower quality-adjusted prices. Finally, they also use a wider range of inputs, higher quality and more expensive inputs, and imported inputs from more advanced countries. The structural estimates indicate that management is important for improving production efficiency and product quality in both countries, but it matters more in China than in the US, especially for product quality. Panel analysis for the US and a randomized control trial in India suggest that management exerts causal effects on product quality, production efficiency, and exports. Poor management practices may thus hinder trade and growth, especially in developing countries.
    Date: 2019–05

This nep-eff issue is ©2019 by Angelo Zago. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.