nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2019‒09‒30
twelve papers chosen by

  1. Dynamic Productivity Decomposition with Allocative Efficiency By Kaoru Hosono; Miho Takizawa
  2. Are Small Farms Really more Productive than Large Farms? By Fernando Aragon Sanchez; Diego Restuccia; Juan Pablo Rud
  3. Measuring Productivity Growth in the Presence of Adjustment Costs, Markups and Variable Capacity Utilization By Diego Comin; Antonella Trigari; Javier Quintana Gonzalez; Tom Schmitz
  4. Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation By Gregory Casey
  5. Misallocation and risk sharing By Hengjie Ai; Anmol Bhandari; Chao Ying; Yuchen Chen
  6. Economies of Diversification in Microfinance: Evidence from Quantile Estimation on Panel Data By Malikov, Emir; Hartarska, Valentina; Mersland, Roy
  7. The Effect of High-Tech Clusters on the Productivity of Top Inventors By Moretti, Enrico
  8. #MeToo meets the mutual fund industry: Productivity effects of sexual harassment By Cici, Gjergji; Hendriock, Mario; Jaspersen, Stefan; Kempf, Alexander
  9. What makes employees in modern offices happy and productive: the effects of internal and external office environment By Ieva Augutyte Kvedaraviciene; Rta Kazlauskait
  10. Productivity and Trade Dynamics in Sudden Stops By Felipe Benguria; Felipe Saffie; Hidehiko Matsumoto
  11. A stochastic frontier analysis approach for estimating market power in the major U.S. meat export markets By Panagiotou, Dimitrios; Stavrakoudis, Athanassios
  12. Evidence for and modelling of a decreasing long-run elasticity of substitution between clean and dirty energy By Anthony Wiskich

  1. By: Kaoru Hosono (Gakushuin University); Miho Takizawa (Gakushuin University)
    Abstract: We propose a novel approach to decomposing aggregate productivity growth into changes in technical efficiency, allocative efficiency, and variety of goods as well as relative efficiency of entrants and exiters. We measure technical efficiency by the aggregate production possibility frontier and allocative efficiency by the distance from the frontier. Applying our approach to establishment- and firm-level datasets from Japan, we find that the allocative efficiency among survivors declined during the banking crisis period, while the technical efficiency declined during the Global Financial Crisis period. Furthermore, we find that both entrants and exiters were likely to be more efficient than survivors.
    Keywords: Productivity decomposition, Allocative efficiency, Japan.
    JEL: D24 O40 O47
    Date: 2019–09
  2. By: Fernando Aragon Sanchez (Simon Fraser University); Diego Restuccia (University of Toronto); Juan Pablo Rud (Royal Holloway, University of London)
    Abstract: We revisit the long-standing empirical evidence of an inverse relationship between farm size and productivity using rich micro data from Uganda. We show that farm size is nega- tively related with yields (output per hectare), as commonly found in the literature, but positively related with farm productivity (a farm-specific component of total factor pro- ductivity). These conflicting results do not arise because of omitted variables such as land quality, measurement error in output or inputs, or specification issues. Instead, we reconcile the findings emphasizing decreasing returns to scale in farm production and farm-specific distortions. We exploit regional variation in land tenure regimes in Uganda in evaluating the role of farm-specific distortions. Our findings point to the limited value of yields (or land productivity) in establishing the size-productivity relationship. More generally, we highlight farm size as an ineffective instrument for policy implementation since size is deeply con- founded by distortions in developing countries.
    Date: 2019
  3. By: Diego Comin (Dartmouth College); Antonella Trigari (Università Bocconi); Javier Quintana Gonzalez (Bocconi University, Milan); Tom Schmitz (Bocconi University)
    Abstract: Standard growth accounting measures of Total Factor Productivity (TFP) growth do not take into account changes in factor utilization. Currently, the leading way to deal with this problem, introduced by Basu, Fernald and Kimball (2006), is to use changes in hours per worker as a proxy for unobserved changes in factor utilization. In this paper, we show that this proxy is problematic for a range of European countries. We propose using an alternative proxy, based on surveys of firm capacity utilization. We show that this yields new insights on TFP growth in the Great Recession, especially in Southern Europe.
    Date: 2019
  4. By: Gregory Casey (Williams College)
    Abstract: I build a quantitative model of economic growth that can be used to evaluate the impact of environmental policy interventions on final-use energy consumption, an important driver of carbon emissions. In the model, energy demand is driven by endogenous and directed technical change (DTC). Energy supply is subject to increasing extraction costs. Unlike existing DTC models, I consider the case where multiple technological characteristics are embodied in each capital good, a formulation conducive to studying final-use energy. The model is consistent with aggregate evidence on energy use, efficiency, and prices in the United States. I examine the impact of new energy taxes and compare the results to the standard Cobb-Douglas approach used in the environmental macroeconomics literature, which is not consistent with data. When examining a realistic and identical path of energy taxes in both models, the DTC model predicts 22% greater cumulative energy use over the next century. I also use the model to study the macroeconomic consequences of R & D subsidies for new energy efficient technologies. I find large rebound effects that undo short-term reductions in energy use.
    Keywords: Energy, Climate Change, Directed Technical Change, Growth
    JEL: H23 O33 O44 Q43 Q55
    Date: 2019–09
  5. By: Hengjie Ai (University of Minnesota); Anmol Bhandari (University of Minnesota); Chao Ying (University of Minnesota); Yuchen Chen (University of Minnesota)
    Abstract: This paper shows that factor misallocation is closely tied to the risk-sharing avenues available to firm owners. In contrast to the commonly studied bond-only economy with collateral constraints (for example Moll (2014)), we find that the degree of misallocation is increasing in persistence of the idiosyncratic risk when firms have access to state-contingent contracts. The possibility to transfer wealth from high productivity states to low productivity states allows firm owners to trade off efficient allocation of consumption against efficient allocation of capital. We show that for reasonable values of risk aversion, insurance needs more than offset production efficiency concerns and thereby generates large capital misallocation.
    Date: 2019
  6. By: Malikov, Emir; Hartarska, Valentina; Mersland, Roy
    Abstract: Prior studies of the diversification-driven cost savings from the joint provision of credit and deposits in microfinance usually ignore the multi-way heterogeneity across MFIs which vary substantially in size, business model, target clientele and operate in diverse environments. Using a quantile panel data model with correlated effects capable of accommodating multiple heterogeneity, we show that the typical measurement of economies of diversification at the mean provides an incomplete and distorted picture of their magnitude and prevalence in the industry. While we find statistically significant estimates, they are modest for most small-size MFIs but are quite substantial for large-scale institutions.
    Keywords: cost, diversification, microfinance institutions, quantile regression
    JEL: G15 G21 L33 O16
    Date: 2019
  7. By: Moretti, Enrico (University of California, Berkeley)
    Abstract: The high-tech sector is increasingly concentrated in a small number of expensive cities, with the top ten cities in "Computer Science", "Semiconductors" and "Biology and Chemistry", accounting for 70%, 79% and 59% of inventors, respectively. Why do inventors tend to locate near other inventors in the same field, despite the higher costs? I use longitudinal data on top inventors based on the universe of US patents 1971 - 2007 to quantify the productivity advantages of Silicon-Valley style clusters and their implications for the overall production of patents in the US. I relate the number of patents produced by an inventor in a year to the size of the local cluster, defined as a city x research field x year. I first study the experience of Rochester NY, whose high-tech cluster declined due to the demise of its main employer, Kodak. Due to the growth of digital photography, Kodak employment collapsed after 1996, resulting in a 49.2% decline in the size of the Rochester high-tech cluster. I test whether the change in cluster size affected the productivity of inventors outside Kodak and the photography sector. I find that between 1996 and 2007 the productivity of non-Kodak inventors in Rochester declined by 20.6% relative to inventors in other cities, conditional on inventor fixed effects. In the second part of the paper, I turn to estimates based on all the data in the sample. I find that when an inventor moves to a larger cluster she experiences significant increases in the number of patents produced and the number of citations received. Conditional on inventor, firm, and city _ year effects, the elasticity of number of patents produced with respect to cluster size is 0.0662 (0.0138). The productivity increase follows the move and there is no evidence of pre-trends. IV estimates based on the geographical structure of firms with laboratories in multiple cities are statistically similar to OLS estimates. In the final part of the paper, I use the estimated elasticity of productivity with respect to cluster size to quantify the aggregate effects of geographical agglomeration on the overall production of patents in the US. I find macroeconomic benefits of clustering for the US as a whole. In a counterfactual scenario where the quality of U.S. inventors is held constant but their geographical location is changed so that all cities have the same number of inventors in each field, inventor productivity would increase in small clusters and decline in large clusters. On net, the overall number of patents produced in the US in a year would be 11.07% smaller.
    Keywords: agglomeration, spillovers
    JEL: J01 R00
    Date: 2019–09
  8. By: Cici, Gjergji; Hendriock, Mario; Jaspersen, Stefan; Kempf, Alexander
    Abstract: Sexual harassment, a widespread problem in the workplace, arguably keeps female employees from optimally employing their human capital. We show that removing or diminishing this friction improves productivity. Specifically, using the male-dominated fund industry as our testing ground, we show that productivity of female mutual fund managers significantly increased after the Harvey Weinstein scandal and the onset of the #MeToo movement. Evidence from lawsuits and organizational changes at several fund companies also suggests that reducing the threat of sexual harassment improves productivity. Our results have important implications for the policy debate on workforce diversity and costs of sexual harassment.
    Keywords: sexual harassment,mutual fund performance,gender discrimination,organizational frictions,human capital
    JEL: G23 J21 J71 M50
    Date: 2019
  9. By: Ieva Augutyte Kvedaraviciene; Rta Kazlauskait
    Abstract: Effects of the office environment on employee well-being and performance have been analysed quite extensively. Nevertheless, the existing knowledge is rather fragmented, with majority of studies addressing some specific aspects of the physical environment and lacking a more comprehensive understanding of the effects of the physical environment on employee well-being and performance. Besides a vast majority of prior research investigates the effects of the internal environment, while studies of the external environment have only gained research attention in the past few years. In this study we look into the effects of both internal and external physical environment as well as overall satisfaction with the physical environment on employee motivation, job satisfaction, cooperation and self-perceived performance quality and accuracy. To test the above relationships, we conducted a survey of employees (n=274) working in modern offices (A and B class built or fully renovated not earlier than 2000). The results showed that there is a positive relationship between internal environment and all dependent variables under this study, while the external environment is positively related with motivation, cooperation and self-perceived performance. There is also a positive association between overall satisfaction with the physical environment all four dependent variables. In addition, our results show no significant association between office type and employee well-being and performance, while perceived privacy was found to be positively associated with job satisfaction and cooperation.
    Keywords: internal and external environment; modern offices; Performance; Well-Being
    JEL: R3
    Date: 2019–01–01
  10. By: Felipe Benguria (University of Kentucky); Felipe Saffie (University of Maryland); Hidehiko Matsumoto (Bank of Japan)
    Abstract: This paper studies productivity and trade dynamics during sudden stop episodes. Sudden stops of capital inflows to emerging economies are characterized by deep recessions, slow recoveries, sharp devaluations, and reversals in the trade balance. We develop a framework to capture these salient features of sudden stops. The model features endogenous productivity and trade dynamics, and endogenous sudden stops. In this environment, firm and product entry and exit into domestic and export markets play a key role in shaping the dynamic response of the economy to a sudden stop. We discipline the model using unique firm-product level data in both domestic and export markets from a census of manufacturing firms in an emerging economy. The calibrated model matches the key stylized facts of sudden stops and their aftermath. In addition, we show that the models’ predictions are consistent with the dynamics of firms’ product portfolios during the Chilean sudden stop of 1998.
    Date: 2019
  11. By: Panagiotou, Dimitrios; Stavrakoudis, Athanassios
    Abstract: The present study estimates the degree of market power in the major U.S. beef and pork export destinations. The recently developed stochastic frontier (SF) estimator is used. Estimations of market and time specific Lerner indices are provided. Balanced panel data between 1980-2011 were employed. The average Lerner index is 39% for the U.S. beef exports and is the highest in the markets of ASEAN, Hong Kong/China, Japan, South Korea and Taiwan. For the U.S. pork exports, the average Lerner index is 16% and is the highest in the markets of Mexico and Taiwan.
    Keywords: Stochastic frontier; market power; U.S. meat exports
    JEL: D21 L22 L66
    Date: 2018–09–22
  12. By: Anthony Wiskich
    Abstract: A review of the literature indicates a decreasing long-run elasticity of substitution between clean and dirty inputs as the share of clean inputs rises. In the power sector, which is the largest contributor to greenhouse gas emissions, integrating intermittent clean energy supply becomes increasingly difficult as the clean share rises. This paper describes a simple structural model of electricity generation which: demonstrates how the elasticity falls as the clean share rises; can replicate the range of results from the electricity literature; considers the effects of storage, and; facilitates estimation of a suitable production function. A bimodal production function with two elasticity regimes - an elasticity above 8 up to a 50 to 70 per cent clean share and an elasticity below 3 beyond this share – can replicate results well from the structural model.
    Keywords: Elasticity of substitution, climate change, energy, electricity, production function
    JEL: O33 O44 Q30 Q54 Q56 Q58
    Date: 2019–09

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