nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒02‒24
twelve papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Productivity Growth in Romania : A Firm-Level Analysis By Iootty,Mariana; Pena,Jorge O.; De Rosa,Donato
  2. Decomposing the Labor Productivity Gap between Upper-Middle-Income and High-Income Countries By Amin,Mohammad; Islam,Asif Mohammed; Khalid,Usman
  3. The Impact of size and group affiliation in emerging markets: A Cost efficiency analysis of Indian firms By Ramesh Jangili
  4. Quadratic-mean-of-order-r Indexes of Output, Input and Productivity By Hideyuki Mizobuchi; Valentin Zelenyuk
  5. Productivity Growth and Value Chains in Four European Countries By Izabela Karpowicz; Nujin Suphaphiphat
  6. Agglomeration and productivity in South Africa: Evidence from firm-level data By Amusa Hammed; Wabiri Njeri; Fadiran David
  7. Selection and Absolute Advantage in Farming and Entrepreneurship By Alvarez-Cuadrado, Francisco; Amodio, Francesco; Poschke, Markus
  8. Structural transformation, openness, and productivity growth in sub-Saharan Africa By Karimu Suale
  9. Product Market Competition, Productivity, and Jobs : The Case of South Africa By Dauda,Seidu; Nyman,Sara; Cassim,Aalia
  10. Assessing the long-term impact of agricultural research on productivity: Evidence from France By Lemarié, Stéphane; Orozco, Valérie; Butault, Jean-Pierre; Musolesi, Antonio; Simioni, Michel; Schmitt, Bertrand
  11. Productivity Dynamics: The Role Of Competition In A Service Industry. By Thomas Breda; Alex Bryson; John Forth
  12. Investment behavior and firms' financial performance: A comparative analysis using firm-level data from the wine industry By Claudiu Albulescu

  1. By: Iootty,Mariana; Pena,Jorge O.; De Rosa,Donato
    Abstract: This paper examines productivity growth in Romania using balance sheet data for a census of Romanian firms in 2011-17. Three measures of productivity are estimated: labor productivity, revenue total factor productivity, and revenue total factor productivity adjusted for markups. Drawing from these measures, the paper follows a two-step approach to answer two fundamental questions: (i) who are the firms -- and what are their key characteristics -- driving and dragging productivity growth in Romania? and (ii) what are the drivers behind productivity expansion? A first step of the analysis characterizes productivity leaders and laggards, finding that companies at the domestic productivity frontier are older and larger, have higher capital intensity, and pay higher wages. Domestic market leaders charge higher markups, especially in manufacturing, but are not becoming more efficient. A second step of the analysis decomposes aggregate productivity growth and finds that reallocation of market shares to more efficient players has been the main driver in manufacturing but not in services, which are typically more sheltered from competition. At the same time, individual firms are becoming less productive, suggesting that there is scope to improve firm capabilities, particularly in services. These findings suggest a policy agenda for Romania centered on removing distortions to competition and boosting human capital.
    Date: 2019–10–15
  2. By: Amin,Mohammad; Islam,Asif Mohammed; Khalid,Usman
    Abstract: Using firm-level survey data on registered private firms collected by the World Bank's Enterprise Surveys, this paper compares the level of labor productivity in 22 upper-middle-income countries and 11 high-income countries for which comparable data are available. The results show that labor productivity in the upper-middle-income countries is about 57.5 percent lower than in the high-income countries. The productivity difference is robust and holds for firms of different sizes and industries. The analysis uses the Oaxaca-Blinder decomposition to identify the sources of the productivity gap. It finds that the endowment effect and the structural effect contribute roughly equally to the productivity gap. Several firm- and country-level variables determine the productivity gap. The biggest contributors via the endowment effect include tertiary education attainment, law and order, and quality management proxied by international quality certification. Factors that contribute most via the structural effect include market size, secondary education attainment, and law and order. Thus, the results underline the importance of human capital, institutions, and market size for closing the productivity gap between the upper-middle-income and high-income countries.
    Date: 2019–12–03
  3. By: Ramesh Jangili (Indira Gandhi Institute of Development Research; Institute of Economic Growth)
    Abstract: Despite strengthening market discipline and improving overall competition, emerging markets, like India, still have severe information problems. Large firms and group firms in these markets have the potential to gain differential advantage as well as destroy value. We analyse the cost efficiency performance of firms in India: the degree of cost efficiency with respect to firm size and the cost efficiency of firms affiliated to business groups with that of standalone firms. We find that as firm size increases the degree of cost efficiency decreases and standalone firms exhibit better cost efficiency scores when compared with that of group affiliated firms. This supports the view that firms having either market power or involved in explicit or implicit form collusion incur higher costs. Alternatively, firms which do not have market power minimises the cost in a better way.
    Keywords: Cost Efficiency, Size, Group Affiliation, Stochastic Frontier Analysis
    JEL: L25 D24 M21
    Date: 2019–12
  4. By: Hideyuki Mizobuchi (Faculty of Economics, Ryukoku University); Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland)
    Abstract: The use of appropriate index numbers is indispensable for measuring economic phenomena precisely. Various indexes have been proposed in the literature, spanning several centuries. In this paper, we propose the quadratic-mean-of-order-𝑟 indexes of output, input and productivity. Each index is a family of indexes that unify many of the existing indexes, including the most popular ones. We also show that all index number formulae belonging to these families are superlative indexes. This is considered as a generalization of the equivalence of Fisher and Malmquist indexes, shown by Diewert (1992). Our results also give new justifications for output and input comparison and productivity measurement via other interesting indexes such as the implicit Walsh index. We also apply the discussed indexes to the US industry production accounts.
    Keywords: index numbers, superlative index, quadratic-mean-of-order-𝑟 index, Fisher index, Malmquist index, implicit Walsh index, time reversal test
    JEL: C14 D24 E31 O47
    Date: 2020–02
  5. By: Izabela Karpowicz; Nujin Suphaphiphat
    Abstract: Advanced economies have been witnessing a pronounced slowdown of productivity growth since the global financial crisis that is accompanied in recent years by a withdrawal from trade integration processes. We study the determinants of productivity slowdown over the past two decades in four closely integrated European countries, Austria, Denmark, Germany and the Netherlands, based on firm-level data. Participation in global value chains appears to have affected productivity positively, including through its effect on TFP when facilitated by higher investment in intangible assets, a proxy for firm innovation. Other contributors to productivity growth in firms are workforce aging, access to finance, and skills mismatches.
    Date: 2020–01–31
  6. By: Amusa Hammed; Wabiri Njeri; Fadiran David
    Abstract: Using comprehensive, anonymized tax administrative data for the 2008–14 period, we examine firm-level productivity in South Africa. Measures of firm-level productivity are included in a spatial autoregressive model that assesses spillovers from total factor productivity originating from agglomeration economies and the spatial diffusion of productivity shocks.We find that across South Africa’s firms, intermediate inputs have the highest impact on firm productivity. The results from the spatial analysis indicate that for a firm in a particular region, its clustering with other firms, having increased market power, and an extended length of stay in a particular region have a greater impact on productivity than do market conditions and firm-specific characteristics associated with firms located in neighbouring regions or municipalities.
    Keywords: Agglomeration,South Africa,Firm productivity
    Date: 2019
  7. By: Alvarez-Cuadrado, Francisco (McGill University); Amodio, Francesco (McGill University); Poschke, Markus (McGill University)
    Abstract: Output per worker is lower in poor countries than in rich countries, and relatively more so in the agricultural sector. Sorting of heterogeneous workers can contribute to explain this fact if comparative and absolute advantage are aligned in agriculture, implying that average productivity in agriculture increases as the agricultural employment share decreases. We empirically investigate the correlation between comparative and absolute advantage using representative household-level panel data from four Sub-Saharan African countries. Around one third of households engage in both agriculture and non-farming entrepreneurship. We find that more productive farming households are more likely to also engage in non-farm entrepreneurship, allocate more hours to it if they do, and are more likely to enter it if not yet active. All three pieces of evidence imply that comparative and absolute advantage are negatively correlated – misaligned – in agriculture, casting doubt on the importance of selection as a root cause of the agricultural productivity gap.
    Keywords: agricultural productivity gap, selection, entrepreneurship, Africa
    JEL: J24 J31 J43 L26 O11 O13 O40
    Date: 2019–12
  8. By: Karimu Suale
    Abstract: This paper examines the connections of structural change and economic openness to labour productivity growth using a panel data set of 41 countries in sub-Saharan Africa for the period 1991–2015.A dynamic panel model of cross-country productivity growth is estimated using the least squares with dummy variables approach.The results suggest that growth of labour productivity is negatively related to initial levels of labour productivity. Labour productivity growth is also positively related to the shares of labour in industry and services.However, the share of labour in agriculture has no statistically significant relationship with labour productivity growth. Economic openness also appears to have a weak relationship with labour productivity growth.
    Keywords: Economic openness,Labour productivity,Structural transformation,Sub-Saharan Africa
    Date: 2019
  9. By: Dauda,Seidu; Nyman,Sara; Cassim,Aalia
    Abstract: The degree of concentration and market power in South African markets has been the topic of much policy discussion. However, there has been little evidence on what drives market power and the impact of the degree of competition in South African markets on economic outcomes. This paper improves on previous markup estimates for South Africa using a methodology developed by De Loecker and Warzynski (2012) applied to tax administrative data for 2010?14. The paper then explores the firm-level determinants of the estimated markups and assesses the link between competition and firm-level outcomes, including productivity, employment, and wages. The analysis finds that average markups across the economy appear to have risen between 2010 and 2014. Larger firms, higher-intensity exporters, and firms with greater sales shares charge higher markups than comparator firms in South Africa, even after controlling for efficiency. Moreover, lower product market competition has a significant, negative effect on productivity growth, employment growth, and wage growth in South African manufacturing industries. Higher sales-weighted and value-added-weighted average industry-level markups are associated with lower industry-level entry rates. The findings highlight the importance of implementing sound pro-competition government interventions and the significant economic benefits associated with such policies.
    Date: 2019–12–17
  10. By: Lemarié, Stéphane; Orozco, Valérie; Butault, Jean-Pierre; Musolesi, Antonio; Simioni, Michel; Schmitt, Bertrand
    Abstract: This paper analyses the economic impact of agricultural research on productivity in France over the period 1959-2012. Adopting a dynamic time series model, we provide evidence that the impact of French agricultural research is in the range of values estimated for other countries, with the estimated long-run elasticity being 0.16, which corresponds to an internal rate of return of 22%. The estimated elasticity decreases at the beginning of the 1970s. Complementary analyses are developed to take into account the evolution of the priorities of public agricultural research (reorientation towards more fundamental objectives and focus on broader objective than productivity enhancement).
    JEL: Q16 Q18
    Date: 2020–02
  11. By: Thomas Breda (Paris School of Economics); Alex Bryson (University College London, National Institute of Social and Economic Research and Institute for the Study of Labor); John Forth (Cass Business School, NIESR, IZA)
    Abstract: Using panel data for nearly all service providers in a single industry sector, we examine productivity responses to changes in competition in the United States. The sector offers workplace employee representation through trade union branches which compete with one another for union members whose subscriptions they depend on to cover costs. As such, they have an interest in maximising productivity. Ours is the first study to measure service industry productivity using both price and quantity metrics. Consistent with manufacturing studies, we find market entrants have lower prices and higher Total Factor Productivity (TFP) than incumbents. Increased competition from new entrants leads incumbents to reduce the price of union membership; exit rates then rise among incumbents with the lowest prices who are constrained in adjusting their prices downwards. Those with higher TFP have higher survival probabilities. However, increased competition does not induce incumbents to raise their TFP. These findings are consistent with a market in which incumbents learn about market conditions but face high switching costs limiting their ability to invest in the new techniques that underpin the higher TFP of new entrants.
    Keywords: competition; productivity; TFP; trade unions; survival
    JEL: J5 L1 L2 L3
    Date: 2019–12–01
  12. By: Claudiu Albulescu (CRIEF)
    Abstract: This paper assesses the role of financial performance in explaining firms' investment dynamics in the wine industry from the three European Union (EU) largest producers. The wine sector deserves special attention to investigate firms' investment behavior given the high competition imposed by the latecomers. More precisely, we investigate how the capitalization, liquidity and profitability influence the investment dynamics using firm-level data from the wine industry from France (331 firms), Italy (335) firms and Spain (442) firms. We use data from 2007 to 2014, drawing a comparison between these countries, and relying on difference-and system-GMM estimators. Specifically, the impact of profitability is positive and significant, while the capitalization has a significant and negative impact on the investment dynamics only in France and Spain. The influence of the liquidity ratio is negative and significant only in the case of Spain. Therefore, we notice different investment strategies for wine companies located in the largest producer countries. It appears that these findings are in general robust to different specifications of liquidity and profitability ratios, and to the different estimators we use.
    Date: 2020–01

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