nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒09‒16
seventeen papers chosen by

  1. Misallocation at the Industry Level By Berthold Herrendorf; Akos Valentinyi; Richard Rogerson
  2. Towards an Institutional Interpretation of TFP Changes in China By Wu, Harry X.
  3. Revisiting Intangible Capital and Labour Productivity Growth, 2000-2015: Accounting for the Crisis and Economic Recovery in the EU By Roth, Felix
  4. Estimating Stochastic Ray Production Frontiers By Mike Tsionas; Marwan Izzeldin; Arne Henningsen; Evaggelos Paravalos
  5. Benchmarking with uncertain data: a simulation study comparing alternative methods By Jens Leth Hougaard; Pieter Jan Kerstens; Kurt Nielsen
  6. Intellectual Capital and Research Performance of Universities in Taiwan By Hsiu-Hsi Liu; Yu-Chuan Chen
  7. Direct and Indirect Effects based on Changes-in-Changes By Martin Huber; Mark Schelker; Anthony Strittmatter
  8. Cost and Return on Investment from Rice RD41 Farming of the Farmers in Samchuk District, Suphanburi Province, Thailand By Pathompong Kookkaew
  9. Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data By Cesar E. Tamayo; Jose E. Gomez-Gonzalez; Oscar M. Valencia
  10. Technology Adoption in Agrarian Societies: the Effect of Volga Germans in Imperial Russia By Timur Natkhov; Natalia Vasilenok
  11. Financial Access and Productivity Dynamics in Sub-Saharan Africa By Simplice Asongu
  12. Labor protection laws and the drain on productivity: Evidence from India By Daniel Schwab
  13. Baumol versus Engel: Accounting for 100 years (1885‒1985) of Structural Transformation in Japan By Fukao, Kyoji; Paul, Saumik
  14. Under Pressure? Performance Evaluation of Police Officers as an Incentive to Cheat: Evidence from Drug Crimes in Russia By Ekaterina Travova
  15. The influence of environment regulation on marine economy efficiency: evidence from China By Hairong Mu
  16. Employment Protection, Capital Investments and Labor Productivity By Johanna Kemper
  17. On measures of the stringency of environmental policy By Abay Mulatu

  1. By: Berthold Herrendorf (Arizona State University); Akos Valentinyi (University of Manchester); Richard Rogerson (Princeton University)
    Abstract: It is well known that cross-country differences in productivity are large. One explanation offered by the literature suggests that poor countries do not allocate their factors of production to their most efficient uses; see for example Restuccia and Rogerson (2008). This explanation has given rise to a large literature that investigates the importance of misallocation as a source of aggregate productivity differences across countries. The standard approach in the literature is to quantify the effect of misallocation on aggregate productivity by comparing the actual allocation of the factors of production across firms or industries to the efficient allocation or to the actual allocation in a benchmark country, typically to the United States. A common feature of these studies is the assumption that production factors are homogenous, in that firms and industries use the same types of capital and the same types of labour. The primary reason for this homogeneity assumption is constraints in the data: firm level data only includes the total value of the capital stock and the total number of workers or hours, but not the different types of capital or labour; an exception is Herrendorf and Schoellman 2018 who carefully try to take differences in the sectoral types of labor into account. This project aims to quantify the effect of differences in within each production factor on misallocation. The level of investigation is two-digit industries, because detailed data on capital stocks and labor are available at this level of disaggregation. We start by using KLEMS data for the United States, which has information on factor inputs in the form of 9 different asset types in real USD, and 192 different labour types measured in hours for 65 industries for 1947 and 2014. We calculate the efficient allocation of capital and labor across industries, and quantify the aggregate productivity loss due to misallocation. We then redo the exercise with industry level aggregate data on capital and labor. Preliminary analysis suggests that the measured efficiency loss due to misallocation is considerably smaller if we use the more disaggregated capital stock that takes differences in the types of capital and the types of labor into account. The next step of our analysis is to repeat this exercise for middle and low-income countries, for which detailed KLEMS data exists, and compare the results with those for the US.
    Date: 2019
  2. By: Wu, Harry X.
    Abstract: This research note reiterates the productivity theory in the Solow growth accounting framework to explore an institutional interpretation of changes in total factor productivity. In theory, total factor productivity or TFP growth is a costless gain in output, which captures the effect of positive externalities caused by spillovers of technological and organizational changes in a perfect market system. This provides a yardstick to gauge institutional effect on output in an imperfect market system if all inputs are properly measured. Using the Chinese case, I show that an integrated approach a la Jorgenson and Griliches (1967) that ensures a consistency between theory, methodology and measurement can facilitate empirical exercises even with data problems, and a so-constructed TFP index for China can satisfactorily reproduce China's post-reform productivity path with institutional interpretations.
    Keywords: Total factor productivity (TFP) growth, Factor reallocation effect on TFP growth, Institution, Economic reform
    JEL: C80 H70 O40 P30
    Date: 2019–08
  3. By: Roth, Felix
    Abstract: This paper aims to revisit the relationship between intangible capital and labour productivity growth using the largest, up-to-date macro database (2000-2015) available to corroborate the econometric findings of earlier work and to generate novel econometric evidence by accounting for times of crisis (2008-2013) and economic recovery (2014-2015). To achieve these aims, this paper employs a cross-country growth accounting econometric estimation approach using the largest, up-to-date database available encompassing 16 EU countries over the time-period 2000- 2015. The paper accounts for times of crisis (2008-2013) and of economic recovery (2014-2015). It separately estimates the contribution of three distinct dimensions of intangible capital: i) computerized information, ii) innovative property and iii) economic competencies. First, when accounting for intangibles, the paper finds that these have become the dominant source of labour productivity growth in the EU, explaining 56 percent of growth. Second, when accounting for times of crisis (2008-2013), in contrast to tangible capital, the paper detects a solid positive relationship between intangibles and labour productivity growth. Third, when accounting for the economic recovery (2014-2015), the paper finds a highly significant and remarkably strong relationship between intangible capital and labour productivity growth. This paper corroborates the importance of intangibles for labour productivity growth and thereby underlines the necessity to incorporate intangibles into today's national accounting frameworks in order to correctly depict the levels of capital investment being made in European economies. These levels are significantly higher than is currently reflected in official statistics.
    Keywords: intangible capital,labour productivity growth,crisis,recovery,European Union
    JEL: C23 G01 O34 O47 O52
    Date: 2019
  4. By: Mike Tsionas (Department of Economics, Lancaster University Management School); Marwan Izzeldin (Department of Economics, Lancaster University Management School); Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen); Evaggelos Paravalos (Department of Economics, Athens University of Economics and Business (Greece))
    Abstract: In this paper, we consider the stochastic ray production function that has been revived recently by Henningsen et al. (2017). We use a profit-maximizing framework to resolve endogeneity problems that are likely to arise, as in all distance functions, and we derive the system of equations after incorporating technical inefficiency. As technical inefficiency enters non-trivially into the system of equations and the Jacobian is highly complicated, we propose Monte Carlo methods of inference. We illustrate the new approach using US banking data and we also address the problems of missing prices and selection of ordering for outputs.
    Keywords: Stochastic ray production frontier, Technical inefficiency, Profit maximization, Bayesian inference
    JEL: C11 C13 D24
    Date: 2019–09
  5. By: Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen; Economics, NYU Shanghai); Pieter Jan Kerstens (Department of Food and Resource Economics, University of Copenhagen); Kurt Nielsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We consider efficiency measurement methods in the presence of uncertain input and output data, and without the (empirically problematic) assumption of convexity of the production technology. In particular, we perform a simulation study in order to contrast two well-established methods, IDEA and Fuzzy DEA, with a recently suggested extension of Fuzzy DEA in the literature (dubbed the HB method). We demonstrate that the HB method has important advantages over the conventional methods, resulting in more accurate efficiency estimates and narrower bounds for the efficiency scores of individual Decision Making Units (DMUs): thereby providing more informative results that may lead to more effective decisions. The price is computational complexity. Although we show how to significantly speed up computational time compared to the original suggestion, the HB method remains the most computationally heavy method among those considered. This may limit the use of the method in cases where efficiency estimates have to be computed on the fly, as in interactive decision support systems based on large data sets.
    Keywords: data envelopment analysis, data uncertainty, fuzzy, imprecise data envelopment analysis, simulation
    JEL: C61 D24
    Date: 2019–09
  6. By: Hsiu-Hsi Liu (National Academy for Educational Research); Yu-Chuan Chen (National Taiwan Normal University)
    Abstract: The main purpose of this study is to examine the concept of Intellectual capital in higher education institutions/universities, justify its importance and its impact on their research output and performance. This study analyzes the impact of Intellectual Capital on university research performance in Taiwan and also compares the intellectual capital of two selected universities. This is an important study of the intellectual research area because the growing interest in intellectual capital has been extended from the firms to higher education institutions during the last decade. The major function of a university is exploring and transmitting knowledge which is acquired through research and education. Therefore assessing university research performance and its intellectual capital is a complex and critical issue. Furthermore intellectual capital has become a major driver for sustainable competitive advantage in all the organizations. A literature review is used to describe the intellectual capital, its components and research performance of the universities; it also highlighted the researchers? contributions in this area of study. The study uses exploratory approach to develop the conceptual model and raised these research questions with respect to it; Is there a significant impact of intellectual capital and its components on research performance of the university?, which university NTU or NCKU has the greater intellectual capital. These research questions were investigated through empirical research using a case study approach on two large general public sectors universities in Taiwan i.e. NTU and NCKU. Secondary data was used and collected for the study. Descriptive, Ratio and correlation analysis were used to study the intellectual capital of the universities and its impact on their research performance. Our descriptive and Ratio analysis found that NTU has higher and positive values in the all indicators of human, structural and relational capital, which shows that NTU has greater intellectual capital than the NCKU. The results of these techniques also showed that intellectual capital has a significant impact on research performance of the university in general. According to the findings all the components of intellectual capital also has a significant impact on research performance of the university, although human capital was ranked first and most important, followed by structural capital while relational capital ranked last among the components. Additionally the effect of human capital was most influential whereas relational capital did not have a significant impact. The results of this study are useful for the Universities to understand the value of their intellectual capital and exploit them for innovations and efficiency augmentation.
    Keywords: Intellectual Capital, Human Capital, Structural capital, Relational capital, Research performance
    Date: 2019–07
  7. By: Martin Huber; Mark Schelker; Anthony Strittmatter
    Abstract: We propose a novel approach for causal mediation analysis based on changes-in-changes assumptions restricting unobserved heterogeneity over time. This allows disentangling the causal effect of a binary treatment on a continuous outcome into an indirect effect operating through a binary intermediate variable (called mediator) and a direct effect running via other causal mechanisms. We identify average and quantile direct and indirect effects for various subgroups under the condition that the outcome is monotonic in the unobserved heterogeneity and that the distribution of the latter does not change over time conditional on the treatment and the mediator. We also provide a simulation study and an empirical application to the Jobs II programme.
    Date: 2019–09
  8. By: Pathompong Kookkaew (Rajamangala University of Technology Suvarnabhumi)
    Abstract: The purposes of this research study were 1) to study cost and return on investment from rice RD41 farming of the farmers in Samchuk district, Suphanburi province 2) to analyze cost and return on investment from rice RD41 farming of the farmers in this area. The sample of 10 farmers who were member of Samchuk Agricultural Cooperative having rice farms which the area between 10 to 50 rai, drawn by the method of purposive sampling because the management methods of rice farm did not different. The study was conducted by collecting data and analyzing the data obtained by in-depth interviews, the tool was interview questions. Quantitative data were analyzed using the following cost, profit, Net profit to cost ratio, Net profit to sales ratio, Return on investment and break-even point. Results of cost and return indicated that total average cost was 4,420.25 baht per rai, while average net profit was 1,209.86 per rai. Net profit to cost ratio was 26.37%, while net profit to sales ratio was 20.01%. Return on investment (ROI) was 22.54% and break-even point was 0.21 tons per rai. Cost of rice RD41 comprised 3 important costs which were 12.06% of raw material cost, 35.59% of labor cost and 52.35% of overhead cost.
    Keywords: Cost, Return, Ratio, Rice RD41, Rice cultivation
    JEL: D24 M19 Q19
    Date: 2019–07
  9. By: Cesar E. Tamayo; Jose E. Gomez-Gonzalez; Oscar M. Valencia
    Keywords: Bank competition, market power, Boone, Lerner, Colombia, cost of firm finance, loan-level data.
    JEL: G21 D22 O16
    Date: 2019–09–03
  10. By: Timur Natkhov (National Research University Higher School of Economics); Natalia Vasilenok (National Research University Higher School of Economics)
    Abstract: This paper examines technology adoption in pre-industrial societies. We use the case of a technologically advanced and spatially concentrated German minority in Saratov province of the Russian Empire to study adoption patterns among Russian peasants in late 19th–early 20th century. We find that distance from German colonies predicts the prevalence of heavy ploughs, fanning mills and wheat sowing among Russians, who traditionally sowed rye and plowed with wooden ard (sokha). We show a significant rise in labor productivity in agriculture resulting from the adoption of heavy ploughs. However, we find no evidence for the adoption of non-codified knowledge like blacksmithing, carpentry, textile manufacture, tanning and other artisan skills. Hence, the adoption of advanced tools does not necessary induce the diffusion of skills required to produce those tools. This may well be the key to the problem of slow technological convergence
    Keywords: technology adoption, economic development, agriculture, Russian Empire
    JEL: N33 N53 I15 O15
    Date: 2019
  11. By: Simplice Asongu (Yaoundé/Cameroon)
    Abstract: The purpose of this study is to investigate whether enhancing financial access influences productivity in Sub-Saharan Africa. The research focuses on 25 countries in the region with data for the period 1980-2014. The adopted empirical strategy is the Generalised Method of Moments. The credit channel of financial access is considered and proxied by private domestic credit while four main total factor productivity (TFP) dynamics are adopted for the study, namely: TFP, real TFP, welfare TFP and real welfare TFP. It is apparent from the findings that enhancing financial access positively affects welfare TFP whereas the effect is not significant on TFP, real TFP and welfare TFP. Policy implications are discussed. The study complements the extant literature by engaging hitherto unemployed dynamics of TFP in Sub-Saharan Africa.
    Keywords: Economic Output; Financial Development; Sub-Saharan Africa
    JEL: E23 F21 F30 O16 O55
    Date: 2019–01
  12. By: Daniel Schwab (Department of Economics and Accounting, College of the Holy Cross)
    Abstract: Employment protection legislation (EPL) is designed to promote security for workers by placing restrictions on firing, but it generates unintended consequences. With India as a setting, I argue that EPL shifts jobs from younger to older workers in two ways: by discouraging the hiring of unproven young workers and by preventing the firing of low-productivity workers. The identification strategy is motivated by Rajan and Zingales (1998): I assume that EPL is more binding in those manufacturing sectors where the involuntary separation rate in other countries is high. The data show that older workers are more likely to have formal jobs, and the effect is strongest in high-firing sectors, which indicates EPL shifts jobs from young to old. Additionally, EPL reduces plant-level total productivity (TFP), and this effect is seen only in plants which are large enough to fall within the purview of EPL, which provides a useful placebo test.
    Keywords: Unemployment, labor security
    JEL: J83 J60
    Date: 2019–08
  13. 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: 2019–06
  14. By: Ekaterina Travova
    Abstract: This paper provides an empirical analysis of possible manipulations of amounts of seized drugs, based on a unique dataset that contains full information on drug crimes in Russia reported during 2013-2014. First, using a standard bunching estimator, I investigate the incentives for police officers to manipulate and find that the motivation most likely arises from the officers’ performance evaluation system. Second, applying a novel bunching technique, I determine that police officers are more likely to manipulate the drug amounts seized from repeat offenders. The overall effect of manipulation is an additional year of incarceration, and this is not dependent on a guilty plea.
    Keywords: drug crimes; police discretion; performance evaluation; incentives;
    JEL: H11 H76 K14 K42
    Date: 2019–04
  15. By: Hairong Mu (Harper Adams University)
    Abstract: With the depletion of terrestrial resources and the development of marine science and technology, marine economy has become a new growth pole in the world economic development. After more than ten years of hard work, many coastal areas have seen significant improvements in their ecological environment. As an important marine country, China is not an exception. To analyze the influence of eco-environment governance policies on marine economy, this paper quantifies the relationship between environmental regulation and marine economic efficiency for 11 provinces (or municipalities) in China's coastal areas. The Super-Efficiency Slacks-Based Measure (SE-SBM) model is used to illustrate the marine economic efficiency considering undesired outputs. The results of the system Generalized Moment Method (GMM) regression support a U-shaped relationship between the two variables, with one threshold effect of the environmental regulation intensity. It is also verified the implementation of the environmental regulation policy has a time-lag effect. During the process of implementation, industrial structure optimization, scientific and technological innovation have different impacts on marine economy. The paper concludes with detailed explanation for the effects of environmental regulation and policy on marine economy development in China. Policymakers can use these insights to formulate appropriate environment policies that aim to realize marine ecological civilization.
    Keywords: environmental regulation; marine economic efficiency; threshold effect
    JEL: E60 K32 Q00
    Date: 2019–07
  16. By: Johanna Kemper (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: In the this paper, I analyze the effect of Employment Protection Legislation (EPL) on investments in physical capital and labor productivity by exploiting the fact that small establishments in Germany below a given size threshold are exempted from certain parts of EPL. I do this by means of an Regression Discontinuity Design (RDD) and using establishment-level data for the period 1994-2012. Following the implications of the theoretical literature, I also analyze whether or not EPL affects the employment margin and conduct an implicit test for the possibility of a negative impact of EPL on investments due to hold-up by using linked employer-employee data. I do not find a statistically significant threshold effect on any of these outcomes– also not when analyzing the effect of EPL by industry. The results of EPL on investments and labor productivity are consistent with the predictions of the literature that states if EPL does not affect the employment margin, it should also not impact any other margin of non-labor adjustment.
    Keywords: Keywords: Employment protection, investments, labor productivity
    JEL: J08 J65 J24
    Date: 2017–11
  17. By: Abay Mulatu (Coventry University)
    Abstract: Adequately measuring the stringency of national environmental regulation is a crucial issue in the empirical literature on the link between environmental policy and economic performance such as productivity, export competitiveness and foreign investment flows. As Levinson (2008, p. 1) argues, ?The problem is not merely one of collecting the appropriate data; merely conceiving of data that would represent it is difficult?. The empirical literature on the link between environmental regulation and economic outcomes contains various proxies of stringency of environmental regulation. The divergent nature of these proxies is arguably a major factor for the mixed evidence witnessed in this literature (Millimet and Roy 2016 ; Mulatu 2017 , 2018 ). The construction or use of the various measures of stringency is seldom preceded by a discussion of what exactly stringency is. In this paper, we develop a simple analytical model ? based on the Environmental Kuznets Curve ? that captures the idea of relative stringency as a differential preference with respect to the environment. The model serves as a general framework to estimate a measure of national environmental standards for a selected group of countries.
    Keywords: Environmental-Regulation, Environmental Kuznets Curve, Co2 emissions
    Date: 2019–07

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