nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒04‒13
fifteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Structural accounting: an empirical assessment of cross-country differences in productivity By Dario Diodato
  2. Why is productivity slowing down? By Goldin, Ian; Koutroumpis, Pantelis; Lafond, François; Winkler, Julian
  3. Structural Transformation, Industrial Specialization, and Endogenous Growth By Paula Bustos; Juan Manuel Castro Vincenzi; Joan Monras; Jacopo Ponticelli
  4. Technical Progress and Induced Innovation in China: A Variable Profit Function Approach By Wong, Gary; Fleisher, Belton M.; Zhao, Min Qiang; McGuire, William H.
  5. Disparities in Regional Productivity, Capital Accumulation, and Efficiency across Indonesia: A Convergence Clubs Approach By Mendez-Guerra, Carlos; Kataoka, Mitsuhiko
  6. Firm-level total factor productivity convergence in German electricity and gas industry By Claudiu Albulescu; Serban Miclea
  7. Market Power and Cost Efficiency in the African Banking Industry By Simplice A. Asongu; Rexon T. Nting; Joseph Nnanna
  8. Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity? By Bardaka, Ioanna; Bournakis, Ioannis; Kaplanoglou, Georgia
  9. The Productivity Impact of Business Visits across Industries By Piva, Mariacristina; Tani, Massimiliano; Vivarelli, Marco
  10. Structural Changes in Japanese SMEs: Business Dynamism in Aging Society and Inter-Firm Transaction Network By Gee Hee HONG; ITO Arata; SAITO Yukiko; Thi-Ngoc Anh NGUYEN
  11. Profitability in emerging markets: Efficiency or market power? A Study of Indian firms By Ramesh Jangili
  12. Subdued Potential Growth: Sources and Remedies By Sinem Kilic Celik; M. Ayhan Kose; Franziska Ohnsorge
  13. Financial Access and Productivity Dynamics in Sub-Saharan Africa By Simplice A. Asongu
  14. Impact of Multinational Enterprises on Competition, Productivity and Trade Spillovers across European Firms By Jan Hanousek; Evzen Kocenda; Pavla Vozarova
  15. Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam By Ni, Bin; Kato, Hayato

  1. By: Dario Diodato
    Abstract: This paper proposes a method to decompose cross-country differences in productivity (TFP) into a technological component - depending on the overall productivity of a country - and an allocation component, which depends on whether factors of productions are allocated to productive or unproductive industries. Using a sample of over 2 million fims from 30 countries, the analysis estimates that 1/4 of inequality between countries is due to the Composition effect, while 3/4 to the Place effect. Moreover, once accounting for heterogeneity at the subnational level, I find that the Composition effect may be as high as 50%.
    Keywords: total factor productivity, factor allocation, structural change
    JEL: O14 O33 O47
    Date: 2020–04
  2. By: Goldin, Ian; Koutroumpis, Pantelis; Lafond, François; Winkler, Julian
    Abstract: The recent decline in aggregate labor productivity growth in leading economies has been widely described as a puzzle, even a paradox, leading to extensive research into possible explanations. Our review confirms the magnitude of the slowdown and finds that it is largely driven by a decline in total factor productivity and capital deepening. Disaggregation reveals that a significant part of the slowdown is due to sectors that experienced the large benefits from ICTs in the previous period, and that an increasing gap between frontier and laggard firms suggests slower technology diffusion and increasing misallocation of factors. We evaluate explanations that attempt to reconcile the paradox of slowing productivity growth and technological change, including mismeasurement, implementation lags for technologies, and creative destruction processes.
    Keywords: productivity growth; secular stagnation; economic growth;
    JEL: D24 E66 O40
    Date: 2020–03–19
  3. By: Paula Bustos (CEMFI, Centro de Estudios Monetarios y Financieros); Juan Manuel Castro Vincenzi (University of Princeton); Joan Monras (Universitat Pompeu Fabra); Jacopo Ponticelli (Northwestern University)
    Abstract: The introduction of new technologies in agriculture can foster structural transformation by freeing workers who find occupation in other sectors. The traditional view is that this increase in labor supply in manufacturing can lead to industrial development. However, when workers moving to manufacturing are mostly unskilled, this process reinforces a country's comparative advantage in low-skill intensive industries. To the extent that these industries undertake less R&D, this change in industrial composition can lead to lower long-run growth. We provide empirical evidence of this mechanism using a large and exogenous increase in agricultural productivity due to the legalization of genetically engineered soy in Brazil. Our results indicate that improvements in agricultural productivity, while positive in the short-run, can generate specialization in less-innovative industries and have negative effects on productivity in the long-run.
    Keywords: Agricultural productivity, skill-biased technical change, labor mobility, genetically engineered soy, Brazil.
    JEL: J43 O13 O14 O33 Q15 Q16
    Date: 2019–03
  4. By: Wong, Gary (University of Macau); Fleisher, Belton M. (Ohio State University); Zhao, Min Qiang (Xiamen University); McGuire, William H. (University of Washington Tacoma)
    Abstract: We propose a new methodology to estimate empirically the input price-induced technical change and total factor productivity (TFP) growth in China. Our primary goal is to test Hicks' induced innovation hypothesis by examining whether technical change in China has been induced by sharp increase in input prices that have accompanied its rapid economic growth. Utilizing the idea of a firm's two-stage optimization problem, we develop a new parametric form of the variable profit function wherein the derived input demand and output supply functions can be easily constrained to be regular, and the functional structure is parsimonious in the number of parameters. Applying this methodology to Chinese time series data for 1986–2015, we find that not only is wage-induced innovation significant and quantitatively important, but also that it substantially buffers a long-term decline in TFP growth that would otherwise be quite substantial. We conclude that China's economic growth is predominantly driven by wage-induced innovation along with massive injection of heavily subsidized physical inputs in public works and huge investment in industrial sectors.
    Keywords: induced innovation, total factor productivity, variable profit functions, China
    JEL: D22 D24 O30 O53
    Date: 2020–02
  5. By: Mendez-Guerra, Carlos; Kataoka, Mitsuhiko
    Abstract: This paper studies the evolution of regional disparities in labor productivity, capital accumulation, and efficiency across Indonesian provinces over the 1990-2010 period. Through the lens of a non-linear dynamic factor model, we first test the hypothesis that all provinces would eventually converge to a common steady-state path. We reject this hypothesis and find that the provincial dynamics of labor productivity are characterized by two convergence clubs. We next evaluate the dynamics of the proximate determinants of labor productivity and find some mixed results. On the one hand, physical and human capital accumulation are characterized by four and two convergence clubs, respectively. On the other hand, efficiency is characterized by a unique convergence club. The paper concludes suggesting that based on the provincial composition of each club and the common low level of efficiency across Indonesia, considerable improvements in both capital accumulation and efficiency are still needed to reduce regional disparities and accelerate productivity growth.
    Keywords: Regional productivity, Capital Accumulation, Efficiency, Convergence clubs, Indonesia
    JEL: R10 R11 R58
    Date: 2020–03–28
  6. By: Claudiu Albulescu (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers); Serban Miclea
    Abstract: This paper investigates the degree of total factor productivity convergence for the German electricity and gas firms. We use different approaches to compute the productivity level and several old and new panel unit root tests from the second generation to check the existence of a convergence process. For robustness purpose we compare the convergence between small and medium-sized enterprises and large companies. Our findings show the existence of the convergence process in terms of total factor productivity, result confirmed by all categories of tests we use. Therefore, an innovation transfer is recorded between German electricity and gas firms, transfer that is slightly higher for small and medium-sized enterprises. JEL codes: D24, O33
    Keywords: total factor productivity,convergence,panel unit root tests,firm-level data,German electricity and gas industry
    Date: 2020–03–20
  7. By: Simplice A. Asongu (Yaounde, Cameroon); Rexon T. Nting (University of Wales, London, UK); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: Purpose- In this study, we test the so-called ‘Quiet Life Hypothesis’ (QLH) which postulates that banks with market power are less efficient. Design/methodology/approach- We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001-2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity. Findings- The empirical evidence does not support the QLH because market power is positively associated with cost efficiency. Originality/value- Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.
    Keywords: Finance; Savings banks; Competition; Efficiency; Quiet life hypothesis
    JEL: E42 E52 E58 G21 G28
    Date: 2019–01
  8. By: Bardaka, Ioanna; Bournakis, Ioannis; Kaplanoglou, Georgia
    Abstract: Departing from the expansionary austerity literature, this study assesses empirically whether fiscal consolidation propagates changes in the supply side of the economy that can potentially influence total factor productivity (TFP). Using a panel dataset of 26 OECD countries over the period 1980–2016 and employing panel vector autoregressive and panel cointegration techniques, we present evidence of both short-run and long-run negative effects of fiscal consolidation on TFP. The short-run impact is disproportionately more damaging for the TFP of low debt countries, while, contrary to the expansionary austerity thesis, our empirical results would advise against spending-driven fiscal consolidation, since such consolidation undermines capacity, due to the importance of government spending in shaping productive capital. Our results have serious policy implications for the implementation and design of fiscal adjustment programmes.
    Keywords: Total factor productivity, Fiscal consolidation, OECD countries, Austerity, Growth
    JEL: C23 E62 H68
    Date: 2020–02–19
  9. By: Piva, Mariacristina (Università Cattolica del Sacro Cuore); Tani, Massimiliano (University of New South Wales); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: This paper builds on and considerably extends Piva, Tani and Vivarelli (2018), confirming the key role of Business Visits as a productivity enhancing channel of technology transfer. Our analysis is based on a unique database on business visits sourced from the U.S. National Business Travel Association, merged with OECD and World Bank data and resulting in an unbalanced panel covering 33 sectors and 14 countries over the period 1998-2013 (3,574 longitudinal observations). We find evidence that BVs contribute to fostering labour productivity in a significant way. While this is consistent with what found by the previous (scant) empirical literature on the subject, we also find that short-term mobility exhibits decreasing returns, being more crucial in those sectors characterized by less mobility and by lower productivity performances.
    Keywords: business visits, labour mobility, knowledge diffusion, R&D, productivity
    JEL: J61 J61 O33
    Date: 2020–03
  10. By: Gee Hee HONG; ITO Arata; SAITO Yukiko; Thi-Ngoc Anh NGUYEN
    Abstract: Smooth business succession is vital not only to the survival of a firm, but also to aggregate growth, employment and productivity in Japan. In this paper, we use a rich dataset of Japanese firms to document the changing patterns of firm exits in the context of the aging population and assess the economic costs of business succession issues. We find that the overall health of Japanese firms improved in recent years, with bankruptcy rate and the ratio of zombie firms both decreasing. However, the voluntary exit rate of firms, including profitable ones, has increased in recent years as elderly CEOs cannot find business successors. This has resulted in a deterioration of resource allocation and productivity at the aggregate level. Furthermore, voluntary exits have spillover effects through inter-firm networks and increase the likelihood of exits of connected firms, even when these connected firms are healthy. These findings underscore the importance of addressing business transition issues in a rapidly aging society.
    Date: 2020–01
  11. By: Ramesh Jangili (Indira Gandhi Institute of Development Research)
    Abstract: The legal systems in emerging economies are weak and hence unsuccessful in completely eliminating market abuse, which could benefit some segment of firms to earn higher profits. This further leads to market imperfections and eventually to higher concentration. The problem persists even after strengthening market discipline and improving overall competition in emerging markets. Large and group firms in these markets could gain differential advantage and destroy value. We analyse the profitability of firms in an emerging economy, India; and find that large and group firms are more profitable than small and standalone firms. Further, we explicitly use cost efficiency of firms to understand the impact of market power on profitability and find that large firms in concentrated industries generate more profits. We also find that higher profitability of large firms is due to market power.
    Keywords: Profitability, Size, Group affiliation, Cost efficiency, Market power
    JEL: L22 L25 D22
    Date: 2020–01
  12. By: Sinem Kilic Celik (Prospects Group, World Bank); M. Ayhan Kose (Prospects Group, World Bank; Brookings Institution; CEPR; CAMA); Franziska Ohnsorge (Prospects Group, World Bank; CEPR; CAMA)
    Abstract: Global potential output growth has been flagging. At 2.5 percent in 2013-17, post-crisis potential growth is 0.5 percentage point below its longer-term average and 0.9 percentage point below its average a decade ago. Compared with a decade ago, potential growth has declined 0.8 percentage point in advanced economies and 1.1 percentage point in emerging market and developing economies. The slowdown mainly reflected weaker capital accumulation but is also evidence of decelerating productivity growth and demographic trends that dampen labor supply growth. Unless countered, these forces are expected to continue and to depress global potential growth further by 0.2 percentage point over the next decade. A menu of policy options is available to help reverse this trend, including comprehensive policy initiatives to lift physical and human capital and to encourage labor force participation by women and older workers.
    Keywords: Potential growth, potential output, advanced economies, emerging market and developing economies.
    JEL: O40 O47 E20
    Date: 2020–04
  13. By: Simplice A. 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
  14. By: Jan Hanousek (CERGE-EI, Charles University); Evzen Kocenda; Pavla Vozarova (Faculty of Information Technology, Czech Technical University)
    Abstract: We analyze the impact of multinational enterprises (MNEs), via their foreign direct investment, on domestic firms in 30 European host economies, from 2001 to 2013. We incorporate international industrial and trade linkages into a standard theoretical framework and test them empirically on a unique dataset compiled from the Amadeus, Eurostat, UNComtrade and BACI data sources and aggregated at industry level. While controlling for horizontal, vertical, and export channels at the upstream and downstream levels, we show that the presence of MNEs significantly affects domestic firms by changing the degree of competition and improving productivity. The impact is not always positive, as domestic firms are often crowded-out, but the negative effect for an average firm is mostly small.
    Keywords: multinational enterprise (MNE), foreign direct investment (FDI), European firms, spillovers, international trade
    JEL: C33 F15 F21 F23 O24
    Date: 2020–04
  15. By: Ni, Bin; Kato, Hayato
    Abstract: Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm-level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affects the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low-, middle-, and high-productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity-enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.
    Keywords: FDI spillovers; Heterogeneous productivity; Firm-level data; Endogenous structural break; Vertical Cournot model
    JEL: D22 F21
    Date: 2020–03–27

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