nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒05‒04
fifteen papers chosen by

  1. Robust efficiency analysis of public hospitals in Queensland, Australia By Bao Hoang Nguyen; Valentin Zelenyuk
  2. Aggregate Productivity Growth and Firm Dynamics in Korean Manufacturing 2007-2017 By Kyoo il Kim; Jin Ho Park
  3. Trade Induced Technological Change: Did Chinese Competition Increase Innovation in Europe? By Douglas L. Campbell; Karsten Mau
  4. Managerial knowledge and technology choice: evidence from U.S. mining schools By Michaël Rubens
  5. Endogenous Task-Based Technical Change - Factor Scarcity and Factor Prices - By Andreas Irmen
  6. Income Differences, Productivity and Input-Output Networks By Harald Fadinger; Christian Ghiglino; Mariya Teteryatnikova
  7. Economic Impacts to Be Brought by the DPRK's Return to International Society: CGE Analysis with the GTAP 9A Data Base By Enkhbayar Shagdar; Tomoyoshi Nakajima
  8. Chinese dialects, revolutionary war & economic performance By Zhu, Junbing; Grigoriadis, Theocharis
  9. Finance, Property Rights and Productivity in Italian Cooperatives By Donald A. R. George; Eddi Fontanari; Ermanno C. Tortia
  10. Workforce composition, productivity and pay: The role of firms in wage inequality By Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth; Balazs Stadler; Richard Upward; Wouter Zwysen
  11. Induced Innovation and Economic Environment By Tom\'a\v{s} Evan; Vladim\'ir Hol\'y
  12. Labour Productivity in State-Owned Enterprises By António Afonso; Maria João Guedes; Pankaj C. Patel
  13. Unpacking Skill Bias: Automation and New Tasks By Daron Acemoglu; Pascual Restrepo
  14. Mutual funds' performance: the role of distribution networks and bank affiliation By Giorgio Albareto; Andrea Cardillo; Andrea Hamaui; Giuseppe Marinelli
  15. Product diversification as a performance boosting strategy? Drivers and impact of diversification strategies in the property-liability insurance industry By Patty Duijm; Ilke van Beveren

  1. By: Bao Hoang Nguyen (CEPA - School of Economics, The University of Queensland); Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland)
    Abstract: In this study, we utilize various approaches for efficiency analysis to explore the state of efficiency of public hospitals in Queensland, Australia in the year 2016/17. Besides the traditional nonparametric approaches like DEA and FDH, we also use a more recent and very promising robust approach–order-α quantile frontier estimators (Aragon, Daouia, & Thomas-Agnan, 2005). Upon obtaining the individual estimates from various approaches, we also analyse performance on a more aggregate level – the level of Local Hospital Networks by using an aggregate efficiency measure constructed from the estimated individual efficiency scores. Our analysis suggests that the relatively low efficiency of some Local Hospital Networks in Queensland can be partially explained by the fact that the majority of their hospitals are small and located in remote areas.
    Keywords: Hospital eciency, Aggregate eciency, DEA, FDH, Alpha frontier
    JEL: C24 C61 I11 I18
    Date: 2020–04
  2. By: Kyoo il Kim (Department of Economics, Michigan State University); Jin Ho Park (Economic Research Institute, Bank of Korea)
    Abstract: We study aggregate productivity growth of the Korean manufacturing industry for the 2007-2017 period. We find that the nature of such growth was quite different for two measures of productivity. For labor productivity, most of growth comes from productivity changes among surviving firms. On the other hand, for TFP, most of the productivity growth comes from that of new entrants in recent years. Our work illustrates the different nature of two productivity measures in terms of their growth paths. We also show interesting industry dynamics for both productivity measures, as exiting firms contributed positively to aggregate productivity growth with increasing trends, which suggests that the market had gradually eliminated firms of lower productivity. Using the dynamic Olley and Pakes (1996) decomposition, we also find that for both productivity measures, a substantial productivity growth after the 2008 global financial crisis was due to market share reallocations between firms, but this between-firm contribution has somewhat slowed or been decreasing since then. Our industry sector level study also shows that there has been fundamentally different heterogeneous productivity growth patterns and components across manufacturing sectors. Finally, we find that the wage level also plays a role in moderating or as an accelerating factor for different productivity growth paths among surviving, entering, and exiting firms. We find that higher wage groups had disproportionately higher entry and exit rates, and that the contributions of these industry dynamics to aggregate productivity growth were largest for the highest wage group while the productivity growth from the between firm component was substantially higher for lower wage groups. Therefore, we find that not only a timely change in input and output, but also in the wage, is a necessary ingredient for the pace and magnitude of reallocation to be effective in aggregate productivity growth.
    Keywords: Aggregate Productivity Growth, Labor Productivity, Total Factor Productivity, Resource Reallocation, Entry and Exit, Wage
    JEL: C14 C18 D24
    Date: 2020–04–17
  3. By: Douglas L. Campbell (New Economic School); Karsten Mau (Maastricht University)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese competition induced a rise in patenting, IT adoption, and TFP by 30% of the total increase in Europe in the early 2000s. We find that the average patents per firm fell by 94% for the most Chinacompeting firms in their sample, but also by 94% for non-competing firms (starting from an initially higher level), and that various intuitive controls, such as controls for sectoral trends, renders the impact on patents-per-firm insignificant. We also find that while TFP appears to be positively correlated with the rise in Chinese competition, IV estimates are inconclusive, and other measures of productivity, such as value-added per worker and profits, are not correlated. Various instrumental and proxy variable approaches also do not support a positive impact of the rise of China on European patents.
    Keywords: Patents, China, Europe, Textiles, Trade Shocks, Manufacturing
    JEL: F14 F13 L25 L60
    Date: 2019–05
  4. By: Michaël Rubens
    Abstract: How do managers affect firm performance? A key difference between managers and other production inputs is that they choose the production function. I empirically distinguish between the direct effects of managers as inputs in the production process, which is the standard way to think about management, and their indirect effects as decision-makers of the production technology. I use this model to understand how the introduction of mining engineering degrees in the U.S.A. changed coal mining productivity. I find that conditional on all inputs and technology choices, mines managed by managers with mining degrees were not more productive than other mines. Mining college graduates did, however, tend to select better technologies, which in turn increased productivity by 29% on average. The main mechanism behind these better choices was that mining college graduates had superior ex-ante knowledge about the returns to various new technologies, while other managers had to acquire this information through trial-and-error.
    Keywords: Management, Productivity, Technology Adoption, Higher Education
    Date: 2020
  5. By: Andreas Irmen
    Abstract: This paper develops a static model of endogenous task-based technical progress to study how factor scarcity induces technological progress and changes in factor prices. The equilibrium technology is multi-dimensional and not strongly factor-saving in the sense of Acemoglu (2010). Nevertheless, labor scarcity induces labor productivity growth. There is a weak but no strong absolute equilibrium bias. This model provides a plausible interpretation of the famous contention of Hicks (1932) about the role of factor prices and factor endowments for induced innovations. It may serve as a micro-foundation for canonical macro-economic models. Moreover, it accommodates features like endogenous factor supplies and a binding minimum wage.
    Keywords: economic growth, endogenous technical change, direction of technical change, biased technology
    JEL: O31 D92 O33 O41
    Date: 2020
  6. By: Harald Fadinger; Christian Ghiglino; Mariya Teteryatnikova
    Abstract: We study the importance of input-output (IO) linkages and sectoral productivity (TFP) levels in determining cross-country income differences. Using data on IO tables and sectoral TFP levels for 38 countries, we uncover important differences in the interaction of IO structure with sectoral TFP levels across countries: while highly connected sectors are more productive than the typical sector in poor countries, the opposite is true in rich ones. To assess the quantitative role of linkages and sectoral TFP differences in cross-country income differences, we decompose cross-country variation in real GDP per worker using a multi-sector general equilibrium model. We find that these features explain between 8 and 10 percent of cross-country income variation.
    Keywords: input-output structure, productivity, cross-country income differences, development accounting
    JEL: O11 O14 O47 C67 D85
    Date: 2020–04
  7. By: Enkhbayar Shagdar (Economic Research Institute for Northeast Asia (ERINA)); Tomoyoshi Nakajima (Economic Research Institute for Northeast Asia (ERINA))
    Abstract: Recent developments on the Korean Peninsula and worldwide may bring an end to the DPRK's isolation from the world economy. Employing the Global Trade Analysis Project (GTAP) Data Base and the standard GTAP Model (the Model), this paper analyzed the expected economic impacts to be brought by the DPRK's return to international society. However, as the DPRK is not a separate GTAP region, but is represented in the database as part of a composite region of the Rest of East Asia (XEA) along with Macao, the DPRK's data was generated using the SplitReg program, and the resulting data was used as the base data in the Model. The generated data indicated that the DPRK's GDP value was higher by about one-third than those commonly reported in the existing publicly available data. Upon generating the DPRK data, three economic revitalization and integration scenarios: (i) total factor productivity (TFP) growth in the DPRK; (ii) Korean Unification; and (iii) Northeast Asia free trade agreement (FTA), were considered in the analyses. The simulation results of assuming that the DPRK's total factor productivity would grow by 30% (60% of labor productivity growth of the ROK between 1963 and 1973) as a result of the country's return to international markets indicated that the DPRK would have a welfare gain of $6.6 billion associated mostly with the gains in technical change along with allocative efficiency improvements and terms-of-trade gains in investment and savings. The government services sector would be the largest beneficiary of these gains, followed by agriculture, extraction, heavy and light manufacturing sectors. Most of the other regions in the model would benefit from welfare gains as well, with the European Union (EU28), China and the U.S. being the largest beneficiaries mainly due to their gains in terms-of-trade in goods and services. The other two scenarios also resulted in welfare gains for the DRPK, but on smaller scales. As a result of the Korean Unification scenario, the DPRK would have a welfare gain of $1.7 billion, while it would be equal to $107 billion in the case of a free trade agreement in Northeast Asia. Contrary to the first scenario, most of these welfare gains were associated with the country's gains in terms of trade in goods and services. In terms of impacts on industry, all sectors will benefit from the TFP growth, while there will be winners and losers in the Korean Unification and Northeast Asia FTA scenarios.
    Keywords: CGE analysis, the DRPK's economy, Total Factor Productivity
    JEL: D58 O53 D24
    Date: 2020–04
  8. By: Zhu, Junbing; Grigoriadis, Theocharis
    Abstract: In this paper, we explore the effects of dialectal diversity on economic performance by drawing evidence from Chinese prefecture-level cities. Our dataset is a panel of 5-year average data over the period from 2001 to 2015 including 274 cities. We compute five indices of Chinese dialectal diversity: 1. Dialectal fractionalization; 2. Adjusted dialectal fractionalization; 3. Dialectal polarization; 4. Adjusted dialectal polarization and 5. Periphery heterogeneity. We find that dialectal fractionalization and dialectal polarization as well as periphery heterogeneity have a positive effect on both income per capita and economic growth. Adjusted dialectal fractionalization exhibits a positive effect only on the change in economic growth over time. However, adjusted dialectal polarization does not show any robust effects. Furthermore, the experience of being governed by the Chinese Communist Party during the revolutionary war inhibits the negative effects of dialectal diversity in eastern China, while it has persistent negative effects in central and north-eastern regions of the country.
    Keywords: dialectal diversity,local economic performance,communist governance
    JEL: O10 O40 P51 Z19
    Date: 2020
  9. By: Donald A. R. George; Eddi Fontanari; Ermanno C. Tortia
    Abstract: Standard economic theory predicts that the accumulation of capital by means of indivisible reserves would lead to underinvestment and undercapitalization due to the truncated temporal horizon of worker-members in cooperatives (the so-called “Furubotn-Pejovich effect†). An inefficiently low stock of capital would imply, other conditions being equal, lower labour productivity. We test the real effects of collective capital on productivity using a large panel of Italian worker and social cooperatives. Firm-level balance sheet data from Bureau van Dijk Aida database are used to estimate the effects of collective and individual reserves of capital on total factor productivity using an augmented Cobb-Douglas production function. Social security data on employment contracts in all Italian enterprises are used to measure firm-level full-time worker equivalents employment. Collective ownership and total factor productivity are positively and significantly related after controlling for factor productivity, individual capital ownership and other standard firm-level and sectoral controls. This result is robust to different specifications of the model and suggests a positive role of collective capital in strengthening financial sustainability, patrimonial and employment stability in the long run, favouring also firm specific investments.
    Keywords: Cooperatives, Total factor productivity, Self-finance, Under capitalization, Collective capital, Individual capital
    JEL: J54 P13 P14
    Date: 2020
  10. By: Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth; Balazs Stadler; Richard Upward; Wouter Zwysen
    Abstract: In many OECD countries, low productivity growth has coincided with rising inequality. Widening wage and productivity gaps between firms may have contributed to both developments. This paper uses a new harmonised cross-country linked employer-employee dataset for 14 OECD countries to analyse the role of firms in wage inequality. The main finding is that, on average across countries, changes in the dispersion of average wages between firms explain about half of the changes in overall wage inequality. Two thirds of these changes in between-firm wage inequality are accounted for by changes in productivity-related premia that firms pay their workers above common market wages. The remaining third can be attributed to changes in workforce composition, including the sorting of high-skilled workers into high-paying firms.
    Keywords: firm wage premium, productivity, wage inequality
    JEL: D2 J31 J38
    Date: 2020–05–01
  11. By: Tom\'a\v{s} Evan; Vladim\'ir Hol\'y
    Abstract: The Hicks induced innovation hypothesis states that a price increase of a production factor is a spur to invention. We propose an alternative hypothesis restating that a spur to invention require not only an increase of one factor but also a decrease of at least one other factor to offset the companies' cost. We illustrate the need for our alternative hypthesis in a historical example of the industrial revolution in the United Kingdom. Furthermore, we econometrically evaluate both hypotheses in a case study of research and development (R&D) in 29 OECD countries from 2003 to 2017. Specifically, we investigate dependence of investments to R&D on economic environment represented by average wages and oil prices using panel regression. We find that our alternative hypothesis is supported for R&D funded and/or performed by business enterprises while the original Hicks hypothesis holds for R&D funded by the government and R&D performed by universities.
    Date: 2020–04
  12. By: António Afonso; Maria João Guedes; Pankaj C. Patel
    Abstract: In the aftermath of the Global and Financial Crisis (GFC), between 2013 and 2015, the Portuguese government revoked four holidays for both public sector and private employees. We test whether the revocation had an effect on labour productivity in State-Owned Enterprises (SOEs) in Portugal. Moreover, we also study whether such effects are different taking into account the SOEs managed by the Central Government or the Local and Regional Governments. Our results show that revocation of holidays did not impact labour productivity for either central or local and regional government managed SOEs. Though revocation of holidays espoused to improve productivity, the policy seems to have served a ceremonial purpose, but not an economic one.
    Keywords: labour productivity; state-owned enterprises; central government; panel data; Portugal
    JEL: C23 H79 J45 J58 J89 L32
    Date: 2020–04
  13. By: Daron Acemoglu (MIT and NBER); Pascual Restrepo (Boston University)
    Abstract: The standard approach to modeling inequality, building on Tinbergen’s seminal work, assumes factor-augmenting technologies and technological change biased in favor of skilled workers. Though this approach has been successful in conceptualizing and documenting the race between technology and education, it is restrictive in a number of crucial respects. First, it predicts that technological improvements should increase the real wages of all workers. Second, it requires sizable productivity growth to account for realistic changes in relative wages. Third, it is silent on changes in job and task composition. We extend this framework by modeling the allocation of tasks to factors and allowing richer forms of technological changes — in particular, automation that displaces workers from tasks they used to perform, and the creation of new tasks that reinstate workers into the production process. We show that factor prices depend on the set of tasks that factors perform, and that automation: (i) powerfully impacts inequality; (ii) can reduce real wages; and (iii) can generate realistic changes in inequality with small changes in productivity. New tasks, on the other hand, can increase or reduce inequality depending on whether it is skilled or unskilled workers that have a comparative advantage in these new activities. Using industry-level estimates of displacement driven by automation and reinstatement due to new tasks, we show that displacement is associated with significant increases in industry demand for skills both before 1987 and after 1987, while reinstatement reduced the demand for skills before 1987, but generated higher demand for skills after 1987. The combined effects of displacement and reinstatement after 1987 explain a significant part of the shift towards greater demand for skills in the US economy.
    Keywords: automation, demand for skills, displacement, inequality, labor share, new tasks, productivity, reinstatement, robots, skill-biased technological change, skill premium, tasks, task content of production, wage structure
    JEL: J23 J24 J31 O33
    Date: 2020–01
  14. By: Giorgio Albareto (Bank of Italy); Andrea Cardillo (Bank of Italy); Andrea Hamaui (Harvard University); Giuseppe Marinelli (Bank of Italy)
    Abstract: The paper investigates how the characteristics of the distribution network and the affiliation to a banking group affect mutual funds performance exploiting a unique dataset with extremely detailed information on funds’ portfolios and bank-issuer relationships for the period 2006-2017. We find that bank-affiliated mutual funds underperform independent ones. The structure of the distribution channels is a key-factor affecting mutual funds' performance: when bank platforms become by far the prevalent channel for the distribution of funds’ shares, asset management companies are captured by banks. As for bank affiliation, results show a positive bias of bank-controlled mutual funds towards securities issued by their own banking group clients (of the lending and investment banking divisions) and by institutions belonging to their own banking group; this last bias is exacerbated for mutual funds belonging to undercapitalized banking groups. The structure of the distribution channels explains two thirds of bank-affiliated mutual funds underperformance, whereas investment biases explain one fourth of the observed differential in returns with independent mutual funds.
    Keywords: mutual funds, mutual funds performance, distribution networks, conflict of interest
    JEL: G23 G21 G11 G32
    Date: 2020–04
  15. By: Patty Duijm; Ilke van Beveren
    Abstract: We investigate the relationship between product diversification and performance in the Dutch property-liability (P&L) insurance industry for the period 2007-2018. We employ a two-step approach: we first investigate the drivers of diversification and, as a second step, we investigate the impact of diversification on risk and return. Our results suggest that the impact of diversification can be beneficial, as it reduces an insurer's risk. Diversification is however also associated with lower returns, while it is not significantly related to risk-adjusted returns. Furthermore, the impact of diversification on performance is contingent upon an insurer's size and its extent of diversification.
    Keywords: insurance companies; diversification; risk; performance
    JEL: G22 G3 L25
    Date: 2020–03

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