nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒06‒17
twenty papers chosen by

  1. Measuring Irish Agricultural Eciency with undesirable outputs: A Malmquist-Luenberger Index Approach using farm-level data By Kaiser, Alexander; Schaffer, Axel; McCormack, Michele; Buckley, Cathal
  2. Environmental technical efficiency and phosphorus pollution abatement cost in dairy farms : A parametric hyperbolic distance function approach By Adenuga, Adewale Henry; Davis, John; Hutchinson, George; Patton, Myles; Donnellan, Trevor
  3. The Industry Anatomy of the Transatlantic Productivity Growth Slowdown By Gordon, Robert J; Sayed, Hassan
  4. Network Utilities Performance and Institutional Quality: Evidence from the Italian Electricity Sector By Golnoush Soroush; Carlo Cambini; Tooraj Jamasb; Manuel Llorca
  5. Sources of Labor Productivity Growth in the German Brewing Industry By Giannis Karagiannis; Magnus Kellermann; Klaus Salhofer
  6. Measuring trends and persistence in capital and labor misallocation By Maurice Bun; Jasper de Winter
  7. A Meta Analysis of Farm Efficiency: Evidence from the Production Frontier Literature By Bravo-Ureta, Boris E.; Jara-Rojas, Roberto; Lachaud, Michee A.; Moreira, Victor H.
  8. The Role of Nonemployers in Business Dynamism and Aggregate Productivity By Pedro Bento; Diego Restuccia
  9. Testing the Quiet Life Hypothesis in the African Banking Industry By Simplice A. Asongu; Nicholas M. Odhiambo
  10. The Effect of Imported Intermediate Inputs on Firm Performance: Firm and Establishment Level Evidence from Japan (Japanese) By KIM YoungGak; INUI Tomohiko
  11. Creativity-Enhancing Technological Change in the Production of Scientific Knowledge* By Link, Al; Scott, John
  12. Cropping system diversification in Eastern and Southern Africa: Identifying policy options to enhance productivity and build resilience By Maggio, Giuseppe; Sitko, Nicholas J.; Ignaciuk, Ada
  13. Effects of Outside Directors on Firms' Investment Behavior and Performance: Evidence from a Quasi-Natural Experiment in Japan (Japanese) By MORIKAWA Masayuki
  14. Technical progress and structural change: a long-term view By Nuvolari, Alessandro; Russo, Emanuele
  15. The impact of alternative agri-environmental policy instruments on the economic and environmental performance of dairy farms on the island of Ireland By Adenuga, Adewale Henry; Davis, John; Hutchinson, George; Patton, Myles; Donnellan, Trevor
  16. Credit Supply and Productivity Growth By Francesco Manaresi; Nicola Pierri
  17. Baumol versus Engel: Accounting for 100 years (1885-1985) of Structural Transformation in Japan By Fukao, Kyoji; Paul, Saumik
  18. Wasted windfalls: Inefficiencies in health care spending in oil rich countries By Michael Keller
  19. Public policy reforms to further improve Portuguese export performance By Ben Westmore; Paula Adamczyk
  20. Tenure security, investment and the productivity of agricultural farms in the communal area of Kavango West region of Namibia: Any evidence of causality? By Uchezuba, D.; Amaambo, P.; Mbai, S.

  1. By: Kaiser, Alexander; Schaffer, Axel; McCormack, Michele; Buckley, Cathal
    Abstract: Increasing agricultural production efficiency is a common economic strategy for dealing with the conflict of growing demands and environmental pressures. The application of Nitrogen is exemplary for this conflict, boosting yields on the one hand, while having negative impacts on soil and surrounding ecosystems, such as eutrophication. An all-things-considered analysis of progress in productivity must therefore account for environmental pressures as well. In this paper we apply the Malmquist-Luenberger index, a non-parametric measure of productivity, which allows for the inclusion of undesirable outputs into efficiency measurement. We then compare it to the standard Malmquist Productivity Index to assess if increasing eco-efficiency is a suitable strategy towards sustainable agriculture. The empirical analysis, based on NFS Irish farm level data from 2006 to 2016, shows an increasing trend both in efficiency and in eco-efficiency, with differences in technological change and among farm types indicating a future potential for dairy farms to increase eco-efficiency.
    Keywords: Agricultural and Food Policy, International Development
    Date: 2019–04–15
  2. By: Adenuga, Adewale Henry; Davis, John; Hutchinson, George; Patton, Myles; Donnellan, Trevor
    Abstract: The dairy sector is an important sector in Northern Ireland being the single largest contributor to its agricultural economy. However, the sector contributes more to soil phosphorus (P) surplus compared to other agricultural sectors. Consequently, the goal of this research is to analyse the environmental technical efficiency of dairy farms making use of a novel parametric hyperbolic distance function approach. The model is able to internalise P surplus as undesirable output in the dairy production process by treating desirable and undesirable outputs asymmetrically, thereby allowing for the maximum expansion of the desirable output and an equi-proportionate contraction of the undesirable output. The stochastic production frontier model is analysed simultaneously with an inefficiency model to explain variability in efficiency scores assuming the existence of heteroskedasticity in the idiosyncratic error term. Additionally, we estimated the shadow price and pollution cost ratio of P surplus in dairy farms. Our results showed that the average environmental technical efficiency estimates for dairy farms in Northern Ireland is 0.93. Intensification resulting in increased use of concentrates feed was found to be negatively related to environmental technical efficiency. We also found that age of the farmer and share of milk output have a positive relationship with environmental technical efficiency.
    Keywords: Environmental Economics and Policy, Livestock Production/Industries
    Date: 2019–04–15
  3. By: Gordon, Robert J; Sayed, Hassan
    Abstract: By merging KLEMS data sets and aggregating over the ten largest Western European nations (EU-10), we are able to compare and contrast productivity growth up through 2015 starting from 1950 in the U.S. and from 1972 in the EU-10. Data are provided at the aggregate level, as well as for 16 industry groups within the total economy and 11 manufacturing subindustries. The analysis focuses on outcomes over four time intervals: 1950-72, 1972-95, 1995- 2005, and 2005-15. We interpret the EU-10 performance as catching up to the U.S. in stages, with its rapid growth of 1950-72 representing a delayed adoption of the inventions that propelled U.S. productivity growth in the first half of the 20th century, and the next EU-10 stage for 1972-95 as imitating the U.S. outcome for 1950-72. A striking finding is that for the total economy the "early-to-late" productivity growth slowdown from 1972-95 to 2005-15 in the EU-10 (-1.68 percentage points) was almost identical to the U.S. slowdown from 1950-72 to 2005-15 (-1.67 percentage points). There is a very high EU-U.S. correlation in the magnitude of the early-to-late slowdown across industries. This supports our overall theme that the productivity growth slowdown from the early postwar years to the most recent decade was due to a retardation in technical change that affected the same industries by roughly the same magnitudes on both sides of the Atlantic.
    Keywords: industry decomposition; Productivity Growth; Technological change
    JEL: E01 E24 O33 O47 O51 O52
    Date: 2019–05
  4. By: Golnoush Soroush (Department of Management, Politecnico di Torino, Italy); Carlo Cambini (Department of Management, Politecnico di Torino, Italy); Tooraj Jamasb (Durham University Business School, Durham University, UK); Manuel Llorca (Durham University Business School, Durham University, UK)
    Keywords: Institutional quality, stochastic frontier analysis, electricity distribution in Italy, cost efficiency, inefficiency determinants
    JEL: D22 L51 L94 O43
    Date: 2019–04
  5. By: Giannis Karagiannis (University of Macedonia, Department of Economics); Magnus Kellermann (The Bavarian State Research Center for Agriculture); Klaus Salhofer (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development)
    Abstract: We decompose aggregate industry labor productivity growth into seven distinct components: input deepening, technical change, technical efficiency, scale effect, between-firm reallocation, effects from exits and entry. The first four components measure the productivity growth within a firm. The latter three components capture industry dynamics. Applied to a sample of 118 small and medium sized breweries in Germany over 13 years, we found that within-firm effects, in particular technical change and the scale effect, clearly dominated the effects from industry restructuring.
    Keywords: labor productivity, productivity growth, structural change, brewing industry, Germany
    JEL: D24 J24 L16 O12
    Date: 2019–06
  6. By: Maurice Bun; Jasper de Winter
    Abstract: We analyze trends and persistence in the misallocation of labor and capital using firm-level panel data for the Netherlands in the period 2001-2017. We use the dispersion in marginal revenue products of labor and capital to measure the extent of misallocation. Compared to a counterfactual efficient allocation we find that misallocation has had a sizable negative impact on aggregate productivity. Especially capital misallocation has increased over time. The relatively high and rising capital misallocation is caused by a combination of small, highly productive firms facing relatively high capital wedges and large and unproductive firms facing relatively low capital wedges. Exploiting a panel data error components model we find that capital misallocation has a much more permanent character than labor misallocation. Moreover, it is the permanent component of capital misallocation that has increased over time. Finally, we show that in our sample the measurement of misallocation is largely insensitive to capital adjustment costs and alternative specifications of the production function. The contribution of heterogeneous markups to observed misallocation, however, is non-negligible.
    Keywords: misallocation; panel data; persistence; productivity
    JEL: C23 D24 O47
    Date: 2019–06
  7. By: Bravo-Ureta, Boris E.; Jara-Rojas, Roberto; Lachaud, Michee A.; Moreira, Victor H.
    Abstract: This study updates previous meta-analysis of farm-level frontier function studies in order to provide a detailed systematic and comprehensive analysis of the effects that different studyspecific attributes have on mean technical efficiency (MTE) scores. Before presenting the technical efficiency (TE) analysis, we provide an overview of the evolution of key methodological approaches that have been developed and applied to measure and examine TE. A detailed descriptive analysis is then performed for a meta-dataset that includes 408 farm level TE studies, published between 1981 and mid-2014. Some studies report several MTEs, resulting in 900 observations or cases. A key result from the descriptive analysis is that the Average of the Mean Technical Efficiencies (AMTE) reported for all studies is 74.2%. The AMTE across methodological attributes tend to be quite similar but several significant differences are observed when comparisons are made across geographical regions, income levels, and types of product. The paper goes on to report the results of meta-regressions estimated using the fractional regression procedure, which is well suited for dependent variables that are defined on the unit interval or as a fraction (between 0 and 1), as is the case with TE. In the concluding section, we provide some thoughts concerning recent work that uses stochastic production frontier methodologies to evaluate the impact of developments projects while addressing biases from observable and unobservable variables.
    Keywords: Agricultural and Food Policy, Research Methods/ Statistical Methods
    Date: 2017–07–07
  8. By: Pedro Bento; Diego Restuccia
    Abstract: A well-documented observation of the U.S. economy in the last few decades has been the steady decline in the net entry rate of employer firms, a decline in business dynamism, suggesting a possible connection with the recent slowdown in aggregate productivity growth. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Notwithstanding the decline in the growth of employer firms, we show that the total number of firms, which includes nonemployer businesses, has increased in the U.S. economy since the early 1980s. We interpret this trend, along with the evolution of the employment distribution across firms, through the lens of a standard theory of firm dynamics. The model implies that firm dynamics have contributed to an average annual growth rate of aggregate productivity of at least 0.26% since the early 1980s, over one quarter of the productivity growth of 1% in the data. Further, our implied measure of productivity growth moves closely over time with measured productivity growth in the data.
    Keywords: Nonemployers, employer firms, business dynamism, productivity, TFP.
    JEL: O1 O4 O5 E02 E1
    Date: 2019–06–17
  9. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The Quiet Life Hypothesis (QLH) is the pursuit of less efficiency by firms. In this study, we assess if powerful banks in the African banking industry are increasing financial access. The QLH is therefore consistent with the pursuit of financial intermediation inefficiency by large banks. To investigate the hypothesis, we first estimate the Lerner index. Then, using Two Stage Least Squares, we assess the effect of the Lerner index on financial access proxied by loan price and loan quantity. The empirical evidence is based on a panel of 162 banks from 42 African countries for the period 2001-2011. The findings support the QLH, although quiet life is driven by the below-median Lerner index sub-sample. Policy implications are discussed.
    Keywords: Financial access; Bank performance; Africa
    JEL: D40 G20 G29 L10 O55
    Date: 2018–01
  10. By: KIM YoungGak; INUI Tomohiko
    Abstract: Under the recent rapid development of production fragmentation across countries, there is a growing number of studies that examines the effect of international outsourcing and offshoring decisions on the domestic operations of firms. According to the Global Value Chain Index (GVCI) developed by OECD, the participation rate of Japanese firms in global value chains increased from 29.3 % in 1995 to 47.7% in 2007. RIETI-TID database shows that Japanese parts and product imports from China increased from 5.8 billion US dollars in 2000 to 25.0 billion US dollars in 2016. This paper examines the effect of increases in imported intermediate input use goods on firm outcomes, especially exports. First, we examine the effect on firm productivity, and we find a positive relationship between increases in imported intermediate input use goods and productivity level. When we separate the analysis by import source regions, a positive relationship is observed from imports from North America and Europe, but no relationship is found in the case of imports from China. These results indicate that firms benefit from the technology spillover effects from the advanced countries by importing from them. Our analysis also indicates that the increase in imports supports the improvement of resource allocation within firms. Next, we analyze the effect of the increase of imported inputs on both extensive margin and intensive margin of firm exports, controlling for the productivity of firms and establishments, finding a positive relationship in both cases. These results imply that imported inputs have a positive impact on firm exports both through productivity improvement and reduced intermediate input price. We also examine the effect of imported inputs on the number of employees, but we find no significant effect.
    Date: 2019–03
  11. By: Link, Al (University of North Carolina at Greensboro, Department of Economics); Scott, John (Dartmouth College)
    Abstract: We view scientific publications as a measure of technical knowledge. Using the Solow method of functional decomposition and scientific publication data from the National Institute of Standards and Technology, we find that 79 percent if the increase of scientific publications per unit of scientific personnel is explained by an increase in federal R&D capital per unit of scientific personnel. We describe the unexplained or residual 21 percent as a measure of creativity-enhancing technological change, a phenomenon that offers a way to reverse the perceived slowing of the productivity of science. The explained 79 percent offers a possible metric for federal laboratories' mandated reporting of a ROI to federal R&D. Understanding the drivers of the residual 21 percent could enable public policy to mitigate the resource constraints caused by the breakdown of exponential growth of the resources devoted to science.
    Keywords: scientific publications; technological change; R&D; knowledge production function;
    JEL: O33 O38
    Date: 2019–06–17
  12. By: Maggio, Giuseppe; Sitko, Nicholas J.; Ignaciuk, Ada
    Abstract: Crop diversification is an important policy objective to promote climate change adaptation, yet the drivers and impacts of crop diversification vary considerably depending on the specific combinations of crops a farmer grows. This paper examines adoption determinants of seven different cropping systems in Malawi, Zambia and Mozambique, and the impact of their adoption on maize productivity and income volatility ' using a multinomial endogenous treatment effect model. These cropping systems consist in different combinations of four categories of crops: dominate staple (maize), alternative staples, legumes, and cash-crops. The study finds that relative to maize mono-cropping systems, the vast majority of systems have either neutral or positive effects on maize productivity, and either reduce or have neutral effects on crop income volatility. In particular, cropping systems that include legumes produce better outcome in most cases than those that feature cash crops...
    Keywords: Crop Production/Industries, Productivity Analysis
    Date: 2018–09–28
  13. By: MORIKAWA Masayuki
    Abstract: This study, focusing on the recent quasi-exogenous increase in the number of outside (independent) directors among listed firms, presents empirical evidence on the impact of outside (independent) directors on investments and firm performance. Using a panel of Japanese firms, we make comparisons between listed and unlisted firms and instrumental variable estimations to examine causal relationships. According to the findings, rapid increase in the number of outside directors among listed firms does not promote positive investments and risk-taking behavior. In addition, it does not have significant impact on profitability or productivity of the firms. However, since the time horizon of the analysis is limited to up to two years after the change in the board structure, long-term impacts are beyond the scope of this study.
    Date: 2019–05
  14. By: Nuvolari, Alessandro (Institute of Economics, Scuola Superiore Sant’Anna, Pisa); Russo, Emanuele (Institute of Economics, Scuola Superiore Sant’Anna, Pisa)
    Abstract: Along the development path, countries experience large transformations in their economic structure as productive resources move towards different economic activities. “Modern economic growth” is also associated with a self-sustained process of technical change which leads to the emergence of new products and sectors characterized by different scopes for productivity gains and demand growth. In this paper we study the interactions between structural change and technological progress from a long-term perspective. We first analyze the secular patterns of structural change across agriculture, manufacturing and services using historical data in the attempt to test some broad conjectures concerning sectoral reallocations at different stages of development (i.e. the so-called Petty-Clark law) and discuss the specific role of manufacturing as an engine of growth. Second, we provide an overview of the literature on sectoral innovation patterns as well as of recent evidence linking structural transformations and sector-specific technological opportunities to aggregate productivity growth. In the final part we present productivity decompositions using a sectoral innovation taxonomy to study the contribution of different groups of activities characterized by heterogeneous innovation patterns. Our results suggest that structural change towards knowledge-intensive activities provides a source of productivity growth in both developing and advanced countries. In turn, this points at the need for a more disaggregated analysis of structural change to capture the diversity in the rate and direction of technical progress across sectors.
    Keywords: Long-run development, structural change, technical change, productivity growth
    JEL: O10 O14 O30
    Date: 2019–06–12
  15. By: Adenuga, Adewale Henry; Davis, John; Hutchinson, George; Patton, Myles; Donnellan, Trevor
    Abstract: Nitrogen (N) surplus is an important environmental issue on the island of Ireland (Northern Ireland and the Republic of Ireland), with dairy farms contributing more compared to other agricultural sectors. As a result, there has been increased demand for efficient policy measures to improve the economic and environmental performance of dairy farms in both countries. In this study, we employed the positive mathematical programming (PMP) optimization modelling framework to simulate the economic and environmental impact of two alternative agri-environmental policy instruments on different dairy farm types. Specifically, the study considers the effects of N surplus tax and agri-environmental nutrient application standard in which farms are not allowed to apply more than 170Kg of livestock N manure per hectare on dairy farms. The results of the analyses showed that the effects agri-environmental policy instruments vary across the two countries and clusters of dairy farms, resulting in clear differential effects on farm structure and N surpluses. The study concluded that in situations where the nutrient surplus is already high, as with the large farms clusters in this study, the use of manure application standards will be more effective in limiting nutrient surplus to soils compared to the use of nutrient surplus tax.
    Keywords: Environmental Economics and Policy, Livestock Production/Industries
    Date: 2019–04–15
  16. By: Francesco Manaresi; Nicola Pierri
    Abstract: We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.
    Date: 2019–05–17
  17. By: Fukao, Kyoji; Paul, Saumik
    Abstract: This paper examines the drivers of the long-run structural transformation in Japan. We use a dynamic input-output framework that decomposes the reallocation of the total output across sectors into two components: the Engel effect (demand side) and the Baumol effect (supply side). To perform this task, we employ 13 seven-sector input-output tables spanning 100 years (1885 to 1985). The results show that the Engel effect was the key explanatory factor in more than 60% of the sector-period cases in the pre-WWII period, while the Baumol effect drove structural transformation in more than 75% of such cases in the post-WWII period. Detailed decomposition results suggest that in most of the sectors (agriculture, commerce and services, food, textiles and transport, communication and utilities), changes in private consumption were the dominant force behind the demand-side explanations. The Engel effect was found to be the strongest in the commerce and services sector, which contributed to the rapid growth of GDP in Japan throughout the 20th century
    Keywords: long-run structural transformation, the Engel effect, Baumol’s cost disease effect, sectoral productivity growth
    JEL: O40 O10
    Date: 2019–05
  18. By: Michael Keller (Department of Economics, University of Sussex, Brighton, UK)
    Abstract: This paper uses Stochastic Frontier Analysis (SFA) to determine whether oil rents drive inefficiency in the healthcare sector. SFA simultaneously estimates a production function for health outputs and the determinants of inefficiency in production. Using a sample of 119 countries covering the period 2000 to 2015, unexpectedly high oil revenues are shown to increase inefficiency. Oil rents hinder countries in reaching their potential life expectancy. Exploiting exogenous variation in the international oil price reveals that causality runs from oil rents to inefficiency. The effect varies with institutions, sex and age. The effect is more pronounced in democracies, and women and children are affected more. Transparency and inequality are potential mechanisms.
    Keywords: Oil windfalls, health expenditure, stochastic frontier analysis
    JEL: H51 I15 Q33 Q38
    Date: 2019–06
  19. By: Ben Westmore; Paula Adamczyk
    Abstract: Portugal’s export performance over the past decade has been impressive, helping to reduce external imbalances. This partly owed to a sequence of structural reforms that benefited the productivity of the export sector and led to an increase in its size. Nonetheless, exports as a share of GDP and the stock of foreign direct investment remain below that of other comparable small European economies. Further shifting the orientation of the economy to the external sector is vital for Portugal given the strong link between trade openness and GDP per capita. To do this, policymakers must ensure that policy settings incentivise exporting firms to expand and improve their competitiveness, both through lower price and improved quality. For example, regulatory barriers that reduce competition in professional services should be lowered to improve the cost and quality of intermediate inputs. Increasing the efficiency of domestic infrastructure is also key, especially through competition-enhancing reforms to the port sector. To further differentiate and improve Portuguese export products, skills in the business sector need to be enhanced through better-targeted lifelong learning opportunities. At the same time, there is a need to focus innovation policies on raising the participation of small and medium enterprises in innovative activities.
    Keywords: competitiveness, export performance, foreign direct investment, infrastructure, innovation, lifelong learning, regulatory reforms
    JEL: F43 G38 H25 O31 O43
    Date: 2019–06–25
  20. By: Uchezuba, D.; Amaambo, P.; Mbai, S.
    Abstract: The study aims to determine causality amid the decision to apply for leasehold land right, increased farm investment, and total farm productivity on livestock farms in the Kavango West region of Namibia. Various econometric models have been used to model these relationships in the literature. However, there is a growing concern that methods which do not explicitly account for the endogeneity of regressors and which are used to investigate the relationship between property rights and the economic activities on agricultural farms often produce bias estimates that are inefficient and inconsistent. This study applied an instrumental variable (IV) regression using a survey data of 510 farmers to correct for endogeneity. A test of endogeneity of tenure security, investment, and farm productivity in the various models shows that tenure security is exogenous to farm investment decision and farm productivity. On the other hand, farm investment decision was found to be exogenous to farm productivity, which implies that farmers make investment decisions given a secure tenure right that enhances their productivity on the farm. Overall, there was no evidence to support reverse causality in any of the tests. These findings highlight the importance of secure property rights as being a stimulus for increased agricultural investment and productivity.
    Keywords: Agricultural and Food Policy, Productivity Analysis
    Date: 2019–04–15

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