nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒03‒02
sixteen papers chosen by

  1. Cities, value chains, and dairy production in Ethiopia By Vandercasteelen, Joachim; Minten, Bart; Tamru, Seneshaw
  2. Environmental regulation and productivity growth: main policy challenges By Roberta De Santis; Cecilia Jona Lasinio; Piero Esposito
  3. Environmental Taxes and Productivity: Lessons from Canadian Manufacturing By Akio Yamazaki
  4. Targeting Inputs: Experimental Evidence from Tanzania By Gine,Xavier; Barboza Ribeiro,Bernardo; Valley,Ildrim
  5. Misallocation or Mismeasurement? By Mark Bils; Peter J. Klenow; Cian Ruane
  7. Import Competition, Heterogeneous Preferences of Managers, and Productivity By Cheng Chen; Claudia Steinwender
  8. FIRM PRODUCTIVITY GAINS IN A PERIOD OF SLOW TRADE LIBERALIZATION: EVIDENCE FROM BRAZIL By Xavier Cirera; Daniel Lederman; Juan A. Máñez Castillejo; María E. Rochina Barrachina; Juan A. Sanchis-Llopis
  9. Efficiency of European Universities: A Comparison of Peers By Lars Herberholz; Berthold U. Wigger
  10. European industrial eco-efficiency under different pollutants' scenarios and heterogeneity structures. Is there a definite direction? By Kounetas, Konstantinos; Stergiou, Eirini
  11. Testing the Superstar Firm Hypothesis By Alexander Schiersch; Caroline Stiel
  12. Sources of Manufacturing Productivity Growth in Africa By Jones,Patricia; Lartey,Emmanuel Kwasi Koranteng; Mengistae,Taye Alemu; Zeufack,Albert G.
  13. The vanishing interest income of Chinese banks By Kauko, Karlo
  15. Industrialization on a Knife's Edge : Productivity, Labor Costs and the Rise of Manufacturing in Ethiopia By Caria,Stefano
  16. Casting a Shadow : Productivity of Formal Firms and Informality By Amin,Mohammad; Ohnsorge,Franziska Lieselotte; Okou,Cedric Iltis Finafa

  1. By: Vandercasteelen, Joachim; Minten, Bart; Tamru, Seneshaw
    Abstract: This paper explores the spatial heterogeneity in dairy production in the highland production area around the capital of Ethiopia, Addis Ababa. We look at how urban proximity – defined as the travel time from the farm to the central market of Addis Ababa – affects the production decisions of Ethiopian dairy farmers. We sampled 870 households from the major rural production zones around Addis Ababa, where villages were stratified according to their distance to Addis Ababa. Using an instrumental variable approach, we find evidence of strong spatial heterogeneity in dairy milk productivity in Ethiopia. With each additional hour of travel time, the milk productivity per cow is reduced by almost 1 liter per day, a reduction by 26 percent on average. This spatial heterogeneity in milk productivity reflects a pronounced spatial variation in dairy production decisions (producing liquid milk or processed dairy products), the application of modern inputs, and marketing. When trying to disentangle the mechanisms through which urban proximity affects dairy productivity, we show that the effect of travel time mainly runs through farmers’ inclusion into ‘modern’ value chains and more specifically through their access to commercial milk buyers. This finding holds when we control for prices, indicating that access to commercial value chains are an important determinant of dairy productivity. However, as only a limited number of farmers now have access to such value chains in these settings, measures to make dairy value chains more inclusive to remote farmers can have important economic development benefits for them.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; supply chain; milk production; urban areas; towns; food prices; rural-urban food supply chain; urbanization; dairy industry; milk products; cities; dairy production
    Date: 2019
  2. By: Roberta De Santis (ISTAT); Cecilia Jona Lasinio (ISTAT); Piero Esposito (LUISS)
    Abstract: In this paper, we empirically analyse the environmental regulation-productivity nexus for 14 OECD countries in the period 1990-2013. Our findings support the hypothesis that environmental policies have a productivity growth enhancing effect through innovation as suggested by Porter and Van Der Linde (1995). We provide evidence that both market and non-marked based policies foster labour and multifactor productivity growth and that the positive association is better captured by environmental adjusted productivity indicators. Moreover, we find that productivity increases resulting from changes in the environmental regulation pass through a stimulus to capital accumulation and this effect is concentrated in high ICT intensive countries. Overall, the need to speed up the transition towards a “green economy” for environmental protection purposes can be seen also as an opportunity to improve competitiveness generating a virtuous circle between innovation and environmental friendly production techniques.
    Keywords: Inenvironmental regulation, productivity, innovation, Porter hypothesis,
    JEL: D24 Q50 Q55 O47 O31
    Date: 2020
  3. By: Akio Yamazaki (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: This paper investigates how environmental taxes affect manufacturing productivity by examining British Columbia’s revenue-neutral carbon tax. I develop a new hypothesis, the “Productivity Dividend Hypothesis,†to show that environmental taxes can positively affect productivity by recycling tax revenues to reduce corporate income taxes. This revenue-recycling increases investment and could raise productivity more than environmental taxes lower productivity by diverting resources from production. I evaluate this hypothesis using detailed confidential plant-level data. I find that the carbon tax lowers productivity, although this is offset to some extent by the revenue-recycling. For some plants, the policy generates a net gain in productivity.
    Date: 2020–02
  4. By: Gine,Xavier; Barboza Ribeiro,Bernardo; Valley,Ildrim
    Abstract: Input subsidy programs (ISP) often have two conflicting targeting goals: selecting individuals with the highest marginal return to inputs on efficiency grounds, or the poorest individuals on equity grounds, allowing for a secondary market to restore efficiency gains. To study this targeting dilemma, this paper implements a field experiment where beneficiaries of an ISP were selected via a lottery or a local committee. In lottery villages, the study finds evidence of a secondary market as beneficiaries are more likely to sell inputs to non-beneficiaries. In contrast, in non-lottery villages, the study finds evidence of displacement of private fertilizer sales yet no elite capture. The impacts of the ISP on agricultural productivity and welfare are limited, suggesting that resources should be directed at complementary investments, such as improving soil quality and irrigation.
    Date: 2019–09–16
  5. By: Mark Bils; Peter J. Klenow; Cian Ruane
    Abstract: The ratio of revenue to inputs differs greatly across plants within countries such as the U.S. and India. Such gaps may reflect misallocation which hinders aggregate productivity. But differences in measured average products need not reflect differences in true marginal products. We propose a way to estimate the gaps in true marginal products in the presence of measurement error. Our method exploits how revenue growth is less sensitive to input growth when a plant’s average products are overstated by measurement error. For Indian manufacturing from 1985–2013, our correction lowers potential gains from reallocation by 20%. For the U.S. the effect is even more dramatic, reducing potential gains by 60% and eliminating 2/3 of a severe downward trend in allocative efficiency over 1978–2013.
    Date: 2020–02
  6. By: Mumba, Moses
    Keywords: Crop Production/Industries, Productivity Analysis
    Date: 2019–08
  7. By: Cheng Chen; Claudia Steinwender
    Abstract: When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.
    Keywords: import competition, productivity, family firms, managers
    JEL: D22 D23 F14 L21 L22
    Date: 2019
  8. By: Xavier Cirera (The World Bank Group.); Daniel Lederman (The World Bank Group.); Juan A. Máñez Castillejo (University of Valencia and ERICES.); María E. Rochina Barrachina (University of Valencia and ERICES.); Juan A. Sanchis-Llopis (University of Valencia and ERICES.)
    Abstract: Existing literature recognizes the potential roles played by trade policy and firms’ exposure to international trade as potential determinants of productivity. A strand of the literature sheds light on the effects of trade policy changes on firm-level productivity. Another, studies the relationship between trading status (exporting goods or importing intermediates, but usually not both simultaneously) and firm-level TFP dynamics. However, analyses that integrate both strands are scarce. This paper studies the effects of import tariffs (on outputs and inputs) and firms’ trade status on productivity by assessing how the impact of trade policy on firm productivity depends on firms’ trade status. The empirics use data on the Brazilian industrial sectors (manufacturing and mining firms) during 2000-2008. After estimating firm level total factor productivity (TFP) using updated methodologies, the paper estimates the impacts of both trade policy and trade status on TFP dynamics. The results suggest that trade liberalization (through reductions in input or output import tariffs) increases TFP. However, the impact of trade policy on TFP spreads among all firms, what is consistent with the existence of spillovers from trading firms to other firms or with the notion that liberalization exerts competitive pressures on all firms, regardless of their initial exposure to international trade. In addition, even after controlling for import tariffs and fluctuations of the real effective exchange rate, there is still evidence of both learning-by-exporting and learning-by-importing effects.
    Keywords: Brazil; TFP; output/input tariffs; exporters; input importers
    JEL: F13 F14 F15 D24 C33 C14
    Date: 2020–02
  9. By: Lars Herberholz; Berthold U. Wigger
    Abstract: The European higher education landscape has become increasingly integrated causing competition among universities that is no longer bound to national borders. In view of this development, the present paper investigates the relative efficiency of 450 European universities between 2011 and 2014. The novelty of our approach lies in its extended coverage of university outputs and in the thorough peer-group selection process that accounts for high diversity in subject profiles. More specifically, assignment to peer-groups builds on proximity in subject space to ensure valid comparisons between universities. Exploring potential efficiency drivers, we uncover considerable effect heterogeneity between subject clusters, which is indicative of distinct technologies and calls for carefully designed policy measures. Yet institutional size and the ability to seek external funding are largely identified to be primary efficiency drivers.
    Keywords: university efficiency, peer selection, data envelopment analysis, clustering
    JEL: H52 I23 I28
    Date: 2020
  10. By: Kounetas, Konstantinos; Stergiou, Eirini
    Abstract: Eco-efficiency has intensified the attention of policymakers in the last decades as the ability to create more goods and services with less impact on the environment consists an instrument towards sustainability. In this paper we utilize data of 14 industries from 27 European countries from 1995 to 2011 to estimate distinct objectives of economic and ecological performance by utilizing directional distance functions under a metafrontier framework. Our results reveal that the existence of a unified technology set causes large differences in the industrial eco-efficiency levels while energy intensive industries can be characterized as the most eco-inefficient .Although the speed of eco-efficiency convergence increases throughout the years, the case of CO2 emissions presents an erratic behavior compared to the other pollutants. Thus, a decomposition of industrial CO2 emissions can be considered as a further subject of research in our study in order to identify the drivers of this change through time.
    Keywords: Eco-efficiency, Metafrontier, Spillovers, Catch-up, Kaya Identity, European Industries.
    JEL: D24 Q5 Q53 Q57
    Date: 2020–02–04
  11. By: Alexander Schiersch; Caroline Stiel
    Abstract: The superstar firms model provides a compelling explanation for two simultaneously occurring phenomena: the rise of concentration in industries and the fall of labor shares. Our empirical analysis confirms two of the underlying assumptions of the model: the market share increases and the labor share decreases with increasing firm-level total factor productivity, providing support for the superstar firms’ hypothesis. However, we find no evidence for the underlying mechanism of the model, the distribution of fixed labor costs. Instead, we observe increasing returns to scale that also explain lower labor shares of larger firms.
    Keywords: superstar firms, total factor productivity, labor share, market share, firm size
    JEL: D24 E20 L11
    Date: 2020
  12. By: Jones,Patricia; Lartey,Emmanuel Kwasi Koranteng; Mengistae,Taye Alemu; Zeufack,Albert G.
    Abstract: This paper investigates the sources of growth in manufacturing productivity in Cote D?Ivoire, Ethiopia and Tanzania in comparison with the case of Bangladesh. Based on the analysis of establishment census data since the mid-1990s, it finds that reallocation of market share between firms contributed substantially to productivity growth in each of the four countries, although to a varying extent. In Ethiopia, the impact of market share reallocations among survivors tended to be larger than those associated with increases in within-plant productivity. In addition, plant closure (or exit) boosted productivity more than new plant openings (or entry) did in the sense that the relative productivity of survivors (or continuing plants) was higher relative to that of closing plants (or exit cases) than it was relative to the productivity of newly opening plants (or new entrants). Reallocation of market share plays an important role in raising aggregate productivity in Côte d?Ivoire as well. But the pattern here is opposite to that in Ethiopia in that in Côte d?Ivoire entering (or newly opening) plants have larger impact on aggregate productivity growth than closing (or exiting) plants. Unlike the case with Cote D?Ivoire and of Ethiopia, the reallocation of market share among surviving plants is a smaller source of manufacturing productivity growth in Tanzania than the new plant openings and plant closure. The data suggest that the reallocation of market share among surviving plants and exiting plants has larger impact on productivity growth in Bangladesh than the productivity gap between new plants and survivors, as in the case of Ethiopia.
    Keywords: Construction Industry,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,General Manufacturing,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,International Trade and Trade Rules,Transport Services,Oil Refining&Gas Industry,Labor Markets
    Date: 2019–08–19
  13. By: Kauko, Karlo
    Abstract: Chinese banks likely have more non-performing loans (NPLs) than officially reported. As hidden NPLs earn no interest income, loan quality problems may erode the gross interest income of banks. Using stochastic frontier analysis, we estimate the interest income of a hypothetical profit-maximising Chinese bank with no credit quality problems. Taking the deviation of actual interest income from the calculated efficient income, we then attempt to reveal the amount of hidden NPLs in Chinese banks. Our results uncover a substantial weakening in the quality of Chinese bank loan portfolios in 2016. Big banks are found to have the largest reservoirs of hidden NPLs. Dependence on interbank funding also seems to be a determinant in the size of hidden NPL portfolios.
    JEL: G21 O53
    Date: 2020–02–05
  14. By: Romain RESTOUT; Olivier CARDI; Romain RESTOUT
    Abstract: Motivated by recent evidence pointing at an increasing contribution of asymmetric shocks across sectors to economic fluctuations, we explore the sectoral composition effects of technology shocks biased toward the traded sector. Using a panel of seventeen OECD countries over the period 1970-2013, our VAR evidence reveals that a permanent increase in traded relative to non-traded TFP lowers the traded hours worked share by shifting labor toward the non-traded sector, and has an expansionary effect on the labor income share in both sectors. Our quantitative analysis shows that the open economy version of the neoclassical model can reproduce the reallocation and redistributive effects we document empirically once we allow for technological change biased toward labor together with additional specific elements. Calibrating the model to country-specific data, the model can account for the cross-country dispersion in the reallocation and redistributive effects we document empirically once we let factor-biased technological change vary across sectors and between countries. Finally, we document evidence which supports our hypothesis of factor-biased technological change as we find empirically that countries where capital-intensive industries contribute more to the increase in traded TFP are those where capital relative to labor efficiency increases.
    Keywords: Sector-biased technology shocks; Factor-augmenting efficiency; Open economy; Labor reallocation; CES production function; Labor income share.
    JEL: E25 E32 F11 F41
    Date: 2019
  15. By: Caria,Stefano
    Abstract: The latest push for industrialization in Ethiopia has attracted much academic and public interest. This paper assesses Ethiopia's competitiveness and attractiveness as an investment destination by comparing domestic productivity and input costs to a sample of manufacturing exporting countries. The paper documents that, in a comparison with Kenya, India or Vietnam, the labor cost advantage of Ethiopian firms is more than offset by low productivity. However, Ethiopia appears competitive when compared to Bangladesh. Capital, firm size, or sectoral composition do not explain the low productivity of the Ethiopian manufacturing sector. Ethiopian firms, however, have worse management, particularly in the area of labor management. The paper concludes by discussing the potential for labor interventions to increase productivity and create the condition for further industrialization.
    Keywords: Food&Beverage Industry,General Manufacturing,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,Plastics&Rubber Industry,Skills Development and Labor Force Training,Labor Markets,Private Sector Economics,Macroeconomics and Economic Growth,Economic Policy, Institutions and Governance
    Date: 2019–08–13
  16. By: Amin,Mohammad; Ohnsorge,Franziska Lieselotte; Okou,Cedric Iltis Finafa
    Abstract: Using firm-level survey data for a large cross section of countries, the paper assesses the gap in labor productivity between formal and informal firms in developing countries for which comparable data are available. It also investigates the impact of competition from informal firms on the labor productivity of formal firms. The results show that on average, the labor productivity of informal firms is about one-fourth that of formal firms. Moreover, the labor productivity of formal firms that face competition from informal firms is about 75 percent of the average labor productivity of formal firms that do not experience informal competition. This suggests that competition from the informal sector can erode formal firms'market share and the resources available to boost productivity where formal firms shoulder the additional cost of regulatory compliance. These findings are robust to a range of firm and country characteristics as well as checks for endogeneity concerns.
    Keywords: Labor Markets,Employment and Unemployment,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,General Manufacturing,Educational Sciences
    Date: 2019–07–22

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