nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒09‒23
sixteen papers chosen by

  1. Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge By Bruno de Borger; Ismir Mulalic; Jan Rouwendal
  2. Technical Efficiency and Corporate Structure of Italian Private Hospitals: Evidence from One-step Stochastic Frontier Analysis By Marco Alberto De Benedetto; Antonio Fabio Forgione
  3. The Persistent Effect of a Credit Crunch on Output and Productivity: Technical or Allocative Efficiency? By Patricio Toro
  4. The Spatial Dimension of Import Competition By Gullstrand, Joakim; Knutsson, Polina
  5. Employer-Provided Training and Productivity : Evidence from a Panel of Japanese Firms By Morikawa, Masayuki
  6. Effect of Information Communication and Technology (ICT) on the Performance of Financial Institutions (A Case Study of Barclays Bank, Sunyani Branch) By Kyeremeh, Kwadwo; Prempeh, Kwadwo Boateng; Afful Forson, Matilda
  7. Japan's productivity and GDP growth: The role of GBAORD, public and foreign R&D By Ziesemer, Thomas
  8. Regional Efficiency Dispersion, Convergence, and Efficiency Clusters: Evidence from the Provinces of Indonesia 1990-2010 By Mendez, Carlos
  9. Accounting for Skewed or One-Sided Measurement Error in the Dependent Variable By Millimet, Daniel L.; Parmeter, Christopher F.
  10. The impact of large lending on bank efficiency in U.S.A. By Andriakopoulos, Konstantinos; Kounetas, Konstantinos
  11. Land Tenure Systems and Agricultural Productivity in Gombe Nigeria By Daniel Dabara; Kabir Omotoso Lawal; Augustina Chiwuzie; Olusegun Omotehinshe
  12. Endogenous TFP, business cycle persistence and the productivity slowdown By Schmöller, Michaela; Spitzer, Martin
  13. Firm Dynamics and Productivity Growth during the Industrial Revolution By Reka Juhasz; Mara Squicciarini; Nico Voigtländer
  14. Returns to Scale in U.S. Production, Redux By Mumtaz Ahmad; John Fernald; Hashmat Khan
  15. Quantifying and Accounting for Quality Differences in Services in International Price Comparisons: A Bilateral Price Comparison between United States and Japan By Abe, Naohito; Fukao, Kyoji; Ikeuchi, Kenta; Rao, D.S. Prasada
  16. The Relation of Information Technologies and the Total Factor Productivity in Uruguayan Firms By Miguel Mello Costa

  1. By: Bruno de Borger (University of Antwerp); Ismir Mulalic (Technical University of Denmark); Jan Rouwendal (Vrije Universiteit Amsterdam)
    Abstract: Most studies of the effects of transport infrastructure on the performance of individual firms have focused on marginal expansions of the rail or highway network over time. In this paper, we study the short-run effects of a large discrete shock in the quality of transport infrastructure, viz. the opening of the Great Belt bridge connecting the Copenhagen area with a neighboring island and the mainland of Denmark. We analyse the effect of the opening of the bridge on the productivity of firms throughout the country using a two-step approach: we estimate firm- and year-specific productivity for a large panel of individual firms, using the approaches developed by Levinsohn and Petrin (2003) and De Loecker (2011). Then, controlling for firm-fixed effects, we relate productivity to a calculated measure of accessibility that captures the effect of the opening of the bridge. We find large productivity effects for firms located in the regions near the bridge, especially for relatively small firms in the construction and retail industry. Estimation results further suggest statistically significant but small positive wage effects throughout the country, even in regions far from the bridge. Finally, there is some evidence that the bridge has stimulated new activities in the Copenhagen region at the expense of firms disappearing on the neighboring island Funen.
    Keywords: production functions, productivity, accessibility, agglomeration, transport infrastructure
    JEL: R12 H54 O18
    Date: 2019–09–13
  2. By: Marco Alberto De Benedetto (University of Messina); Antonio Fabio Forgione (University of Messina)
    Abstract: This paper aims to identify the relationship between the output-oriented technical efficiency of Italian private hospitals and their ownership structure. Using the one-step Stochastic Frontier Analysis technique, we explain technical efficiency throughout a set of variables capturing the firm’s shareholder activity, ownership concentration, and managerial ownership. Results suggest that (1) technical efficiency is positively affected by managerial ownership, and (2) private hospitals are more efficient when ownership concentration is low.
    Keywords: Technical Efficiency; Private Health System; Ownership; Stochastic Frontier
    JEL: D24 L25 I10
    Date: 2019–05
  3. By: Patricio Toro
    Abstract: This paper estimates the impact of a credit crunch on output and productivity growth by disentangling two complementary channels: technical and allocative efficiency. Starting from the census of Chilean firms and exploiting a large-scale natural experiment during the 2008-09 crisis, I show that a sharp contraction in credit supply had persistent real effects, as the output of more affected firms did not catch up with that of less affected firms. A negative but moderate effect on firm-level productivity helps to explain this persistence. Also, the dispersion of the marginal productivity of capital increases within more affected firms. In the aggregate, productivity growth explains around a third of the impact of the credit crunch on output growth in the medium run. In turn, allocative efficiency explains twice as much as technical efficiency of productivity growth.
    Date: 2019–09
  4. By: Gullstrand, Joakim (Department of Economics, Lund University); Knutsson, Polina (Department of Economics, Lund University)
    Abstract: Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals large variations across firms and products. Highly productive firms respond to import competition by further improving efficiency, which, in turn, is transmitted to both a lower price and a higher markup. Firms are also more likely to drop fringe products while keeping core ones. Products undercut by low import prices in their proximity respond by lowering prices only, although highly efficient products resist this by a more pronounced improvement in the marginal cost, which, in turn, is transmitted to both a lower price and a higher markup.
    Keywords: Import competition; distance; firm-product performance
    JEL: F14
    Date: 2019–09–10
  5. By: Morikawa, Masayuki
    Abstract: This study presents evidence on the quantitative relationship between employer-provided training and productivity among Japanese firms. The important contributions of this study are its construction of a panel of training stock at the firm-level, its distinction between manufacturing and service firms, and its comparison of the relative contribution of training to productivity and wages. The results indicate, first, that training significantly contributes to the labor productivity of the firm. Second, the estimated elasticity of productivity with respect to training stock is greater for service firms than for manufacturing firms. Third, the elasticities of productivity and wages to training stock are similar in size, meaning that the returns to firms' training investments are shared by their workers in proportion to the wage share of the value-added. These results suggest that policies to promote firms' training investments have the potential to improve productivity and wages, particularly for firms in service sector.
    Keywords: Training, Labor productivity, Wage, Service sector, Intangible assets
    JEL: J24 J31 J53 L80 M53
    Date: 2019–02
  6. By: Kyeremeh, Kwadwo; Prempeh, Kwadwo Boateng; Afful Forson, Matilda
    Abstract: The study sought to examine the contribution of Information and Communication Technology (ICT) on performance of banks in terms of service delivery in financial institutions in Ghana. The high competition in the Ghanaian banking industry has forced rapid changes as a result of technological innovation, increased awareness and demands from customers. The study adopted both exploratory and descriptive research design. Qualitative research method was used in collecting data and data was analyzed qualitatively. The main instrument for collecting data was the structured questionnaire. A sample size of 50 respondents consisting of 8 staff members and 48 customers of Barclays Bank was used for the study. A structured questionnaire was the main data collection instrument. The purposive and systematic sampling techniques were used to obtain the required sample size. The main tool which was used for the data analysis was Statistical Package for Social Sciences. Frequencies and percentages were used to present the data in a tabular form. The limitation affecting the study was time and financial constraints. The study revealed that ICT has an appreciable positive effect on performance due to improved customer service delivery. This affects the growth of Barclays Bank. ATM service flaws such as withdrawal discrepancies, issuance of faulty cards and long time for applied ATM cards to arrive deter most customers from accessing the service. Following from this study, it is recommended, Barclays Bank enhances the performance of their ATMs and their networks to increase customers satisfaction.
    Keywords: Information Communication Technology, service delivery,technological innovation,
    JEL: G2 G20 G21 G24
    Date: 2019–09–12
  7. By: Ziesemer, Thomas (UNU-MERIT)
    Abstract: We analyse the dynamic interaction of Japan's total factor productivity (TFP), GDP, domestic and foreign private and public R&D as well as mission-oriented R&D, GBAORD, in a cointegrated VAR for Japan with data from 1988-2014. Analysis of effects of permanent shocks shows that (i) public R&D, unlike GBAORD, encourages private R&D and TFP, and has high internal rates of return. (ii) Japan's public and private R&D have a statistically significant positive effect on foreign private and public R&D stocks and vice versa. (iii) After transitory GDP shocks, public and private R&D are counter-cyclical and GBAORD is pro-cyclical in Japan.
    Keywords: R&D, productivity, growth, spillovers, vector-auto-regression (VAR)
    JEL: F43 O19 O47 O53
    Date: 2019–09–11
  8. By: Mendez, Carlos
    Abstract: This paper studies efficiency convergence across provinces in Indonesia over the 1990-2010 period. Through the lens of both classical and distributional convergence frameworks, the dispersion dynamics of pure technical efficiency and scale efficiency are contrasted. The results suggest that—on average—there is regional convergence in both measures of efficiency. However, results from the distributional framework indicate the existence of two separate convergence clusters within the pure technical efficiency distribution. Moreover, since scale efficiency is characterized by only one convergence cluster, the two clusters of pure technical efficiency appear to be driving the overall efficiency dynamics of Indonesia.
    Keywords: Efficiency, Convergence, Distribution-based clustering, Nonparametric distribution, Indonesia
    JEL: R11 R12 R58
    Date: 2019–09–11
  9. By: Millimet, Daniel L. (Southern Methodist University); Parmeter, Christopher F. (University of Miami)
    Abstract: While classical measurement error in the dependent variable in a linear regression framework results only in a loss of precision, non-classical measurement error can lead to estimates which are biased and inference which lacks power. Here, we consider a particular type of non-classical measurement error: skewed errors. Unfortunately, skewed measurement error is likely to be a relatively common feature of many outcomes of interest in political science research. This study highlights the bias that can result even from relatively "small" amounts of skewed measurement error, particularly if the measurement error is heteroskedastic. We also assess potential solutions to this problem, focusing on the stochastic frontier model and nonlinear least squares. Simulations and three replications highlight the importance of thinking carefully about skewed measurement error, as well as appropriate solutions.
    Keywords: nonlinear least squares, stochastic frontier, measurement error
    JEL: C18 C51
    Date: 2019–08
  10. By: Andriakopoulos, Konstantinos; Kounetas, Konstantinos
    Abstract: This paper investigates a rather neglected issue in the banking literature regarding the impact of large lending (LL) on the three banks’ performance aspects (cost, profit and productive). Possible influences may arise in the context of banks’ credit risk as trade credit, which is provided by large, creditworthy firms, and it is a method of monitoring and enforcing loan contracts to relatively riskier firms. Indeed, trade credit providers view payments beyond the discount period as a sign of financial difficulty while the option to cut off shipments for nonpayment is a potentially powerful means for a trade creditor to force repayment, especially if a supplier provides its costumer with a product that has no close substitutes. A unique dataset was constructed concerning all USA banks collected from SDI (Statistics on Depository Institutions) report compiled by FDIC (Federal Deposit Insurance Corporation). Our sample contains 7960 banks and tracked yearly for the period 2010 -2017, creating an unbalanced panel of year observations. An econometric framework based on nested non-neutral frontiers, was developed to estimate the influence and the decomposition of large lending on the three banks' performance aspects (cost, profit and productive). Moreover, different types of frontiers aiming at the cost, profit, and production side have been investigated. The empirical findings reveal that the large lending plays a crucial role on banks' technical efficiency. Significant variations among different frontier models, type of bank and size, banks’ ownership structure and macroeconomic conditions appear to be present. By considering all CAMEL (Capital Adequacy Asset Quality Management Earnings Liquidity) parameters we notice that banks’ financial strength affects banks’ efficiency. Some policy implications are derived based on the empirical evidence supporting a safer and sounder banking system can be emerged as banks finance large firms, increasing the willingness of people to save and bank’s attitude to finance profitable investments projects that rise firm’s value and promote economic growth.
    Keywords: JEL classifications: C33; G21; G30
    JEL: C33 G21 G30
    Date: 2019–09–15
  11. By: Daniel Dabara; Kabir Omotoso Lawal; Augustina Chiwuzie; Olusegun Omotehinshe
    Abstract: The purpose of this study is to examine the existing land tenure systems in Gombe state, Nigeria with a view to determining its impact on agricultural productivity in the study area. Land tenure system is concerned with man’s relationship with land, involving intervention in the prevailing pattern of land ownership, control and usage in order to change the structure of holdings, improve land productivity and broaden the distribution of benefits to all. Nigeria is an agrarian nation with over 56.8% of her working force engaged in farming. Agricultural development and productivity has the advantage of provision of more employment and a better base for farm financed welfare in the economy. However, the study revealed that agricultural productivity in Nigeria is hindered by tenure rules such as stipulated in the Nigerian Land Use Act of 1978. Furthermore, land tenure insecurity, political/bureaucratic bottlenecks in land rights acquisition for agricultural purposes are among the pertinent issues and challenges that have contributed to stagnating agricultural productivity in the study area. It was recommended that for a vibrant and sustainable development in the agricultural sector of the economy, a new land tenure reform is imperative. The reform agenda, should carefully consider the pertinent issues and challenges inherent in the present land tenure systems with a view of providing solutions to them and expediting agricultural development and productivity in Nigeria.
    Keywords: Agrarian; agricultural development; land reform; land tenure; tenure security
    JEL: R3
    Date: 2019–01–01
  12. By: Schmöller, Michaela; Spitzer, Martin
    Abstract: This paper analyses the procyclicality of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. Total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession an increase in liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response over the business cycle which helps rationalizing both the negligible fall in inflation during the Great Recession and the sluggish increase of inflation in the subsequent recovery.
    JEL: E24 E32 O31
    Date: 2019–09–18
  13. By: Reka Juhasz (Columbia University); Mara Squicciarini (Bocconi University); Nico Voigtländer
    Abstract: The transition from millennia of stagnating per-capita incomes to sustained economic growth constitutes the most important structural break in economic history. A key feature of the Industrial Revolution was the unprecedented growth in manufacturing productivity. So far, productivity growth during this period has been studied mostly at the country level, or – in some cases – at the aggregate sectoral level. However, theoretical and empirical research over the past decade has pointed to the importance of firm dynamics for understanding aggregate productivity. The dearth of firm-level data has thus far made it impossible to study this channel in the context of the Industrial Revolution. This paper uses a novel dataset of French firms across various industries to study the evolution of firm productivity before and during the onset of industrialization. First, we document a set of novel stylized facts about firms in innovative and traditional sectors during the Industrial Revolution in France. Second, we exploit regional variation to estimate the extent to which different firm dynamics account for different levels of industrialization across France in 1850. Third, we estimate the extent to which productivity gains were driven by firm entry relative to the intensive margin.
    Date: 2019
  14. By: Mumtaz Ahmad (Department of Economics, Carleton University); John Fernald (Department of Economics and Political Science Area, INSEAD); Hashmat Khan (Department of Economics, Carleton University)
    Abstract: We estimate constant returns or slightly decreasing returns at the industry level in the private U.S. economy over the past 30 years, using two separate industry datasets. An intuitive identity linking returns to scale, the markup, and the profit rate, gives an implied markup of approximately 12 percent, smaller than the estimates in the recent literature ranging from 15–40 percent. Put differently, given our estimated profit rate, large markups imply strongly increasing returns, which are not evident in the aggregate data.These findings suggest that approximately constant returns to scale in the U.S. economy are consistent with a relatively small aggregate markup in the post-1990 period.
    Keywords: Returns to scale, profit rates, markups
    JEL: E22 E32
    Date: 2019–09–09
  15. By: Abe, Naohito; Fukao, Kyoji; Ikeuchi, Kenta; Rao, D.S. Prasada
    Abstract: Purchasing power parities (PPPs) from the International Comparison Program (ICP) are used for cross-country comparisons of price levels and real gross domestic product (GDP), household consumption and investment. PPPs from the ICP are also used in compiling internationally comparable output aggregates and making productivity comparisons in the KLEMS initiative. PPP compilation is anchored on the principle of comparing the like with like and price data are collected for goods and services with detailed specifications in the form of structural product descriptions. While this approach works well for goods, it is not effective in the case of services. If differences in service quality exist, these get reflected in the PPPs from the ICP. In this paper, we focus on the USA-Japan bilateral price comparison in the 2014 ICP in the OECD region and estimate bias induced by differences in quality of services in. Service quality is driven by various unobservable factors. In this paper we make use of data on quality differences and consumers’ willingness to pay collected through a specialised survey conducted by the Japan Productivity Center early in 2017. Data are collected from a large sample of 517 respondents from USA and 519 respondents from Japan, covering 28 service items including transport, restaurants, retail services, health and education. Estimates of consumers’ willingness to pay for quality differences in services by the US and Japanese consumers are obtained using standard econometric methodology, these are in turn used in estimating quality adjustment factors that can be applied to price data used in PPP computation. Using the Sato-Vartia index, which has useful analytical and decomposition properties, we find PPP for household consumption (including real estate services) of 113 JPY per US dollar reduces to 104 JPY per dollar after adjusting for quality differences. When real estate services are not included, PPP reduces from 95 JPY to 87 JPY after quality adjustment. The paper also presents labour productivity estimates before and after quality adjustment for a number of service sectors including transport and storage; retail trade; hotels and restaurants; and other subsectors. Our exploratory study demonstrates that adjustment for quality differences in services is feasible and such adjustments are important for making meaningful international price comparisons.
    Keywords: International comparisons, services, quality differences, willingness to pay, Sato-Vartia Index
    JEL: C43 E31 O47
    Date: 2018–03
  16. By: Miguel Mello Costa (Banco Central del Uruguay)
    Abstract: The aim of this article is to determine if the development of information and communication technologies (ICT) had any impact on the productivity of Uruguayan firms. For that, the work exploits the advantages of the data panels to make a dynamic estimation of the total factors productivity (TFP). I used micro-data unbalanced panel for the period 2007-2014 in which 6,492 companies were surveyed. Short-term production functions were estimated for all firms y sectors, distinguishing fixed capital from technological capital and controlling for labour qualification. Results suggest that there are decreasing returns to scale. Technological capital is a factor that contributes to the gross product of Uruguayan firms. Although the period analyzed is characterized by a continuous GDP growth, Total Factor Productivity (TFP) was negative for all sectors. This TFP estimated is not constant for firms but is persistence, consistent with an AR(1) process. There is a positive correlation between ICT utilization and TFP and the performance is heterogeneous between sectors, according to the share of productive factors.
    Abstract: El objetivo de este artículo es determinar si el desarrollo de las tecnologías de la información y la comunicación (TIC) tuvo algún impacto en la productividad de las empresas uruguayas. Para ello, el trabajo explota las ventajas de los paneles de datos realizando una estimación dinámica de la productividad total de los factores (TFP). Utilicé el panel desequilibrado de microdatos para el período 2007-2014 en el que se encuestaron 6.492 empresas. Las funciones de producción a corto plazo se estimaron para todas las empresas y sectores, distinguiendo el capital fijo del capital tecnológico y controlando la calificación laboral. Los resultados sugieren que hay rendimientos decrecientes a escala. El capital tecnológico es un factor que contribuye al producto bruto de las empresas uruguayas. Aunque el período analizado se caracteriza por un crecimiento continuo del PIB, la productividad total del factor (PTF) fue negativa para todos los sectores. Este valor estimado de la PTF no es constante para las empresas, pero es persistente, consistente con un proceso AR (1). Existe una correlación positiva entre la utilización de las TIC y la PTF y el rendimiento es heterogéneo entre los sectores, según la proporción de factores productivos.
    Keywords: TFP, ICT, Productivity, Dynamic Panel Data; Productividad, datos de panel, modelos dinámicos
    JEL: L10 L11 L22 L23 C23
    Date: 2018

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