nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒06‒15
eighteen papers chosen by

  1. Drivers of farm performance: Empirical country case studies By Johannes Sauer; Catherine Moreddu
  2. Accounting Total Factor Productivity of FDI Firm in Nepal By Bista, Raghu
  3. Determinants of Profitability of Banks: Evidence from Islamic Banks of Bangladesh By Nusrat Jahan
  4. Is there a link between firms? export activity and economic performance in a Small Open Economy? Evidence from Greece By Maria Kalogera; Antonios Georgopoulos; Panagiota Boura
  5. Global Value Chains and the Productivity of Firms in MENA countries: Does Connectivity Matter? By Rym AYADI; Giorgia GIOVANNETTI; Enrico MARVASI; Chahir ZAKI
  6. Productivity and Competitiveness of the Western Balkan countries: An Analysis Based on the wiiw Western Balkan Productivity Database By Oliver Reiter; Monika Schwarzhappel; Robert Stehrer
  7. An Investigation into the Equivalency of Three Performance Dimensions: Evidence from Commercial Banks in Bangladesh By Nusrat Jahan
  8. To what extent has climate change impacted the Total Factor Productivity of the Australian beef industry by state and as a country? By Harris, Patrick
  9. Agglomeration economies in Great Britain By Cem Özgüzel
  10. Financial Frictions, Borrowing Costs, and Firm Size Across Sectors By Bento, Pedro; Ranasinghe, Ashantha
  11. The Cobb-Douglas function as a flexible function: A new perspective on homogeneous functions through the lens of output elasticities By Frédéric Reynés
  12. An Empirical Investigation of Cash Conversion Cycle of Manufacturing Firms and its Association with Firm Size and Profitability By Nusrat Jahan
  13. Using COVD-19 Mortality to Select Among Hospital Plant Capacity Models: An Empirical Application to the Hubei Province By Kristiaan KERSTENS; Zhiyang SHEN
  14. Local governments’ efficiency and educational results: empirical evidence from Italian primary schools By Ferraro, Simona; Agasisti, Tommaso; Porcelli, Francesco; Soncin, Mara
  15. A Semiparametric Analysis of Green Inventions and Environmental Policies By Massimiliano Mazzanti; Antonio Musolesi
  16. An Analysis of the use of Chemical Pesticides and their Impact on Yields, Farmer Income and Agricultural Sustainability: The Case for Smallholder Farmers in Ethiopia By Aparna Rao; Risa Morimoto
  17. Parameters of Profitability: Evidence From Conventional and Islamic Banks of Bangladesh By K. M. Golam Muhiuddin; Nusrat Jahan
  18. The Energy Efficiency Gap and Energy Price Responsiveness in Food Processing By Gale Boyd; Matt Doolin

  1. By: Johannes Sauer (Technical University of Munich); Catherine Moreddu (OECD)
    Abstract: This report contains an empirical analysis of the productivity and sustainability performance of different types of farms in thirteen countries. Farm productivity performance is measured through estimates of average productivity levels and through annual rates of technical change. Evidence on the environmental sustainability of farm groups is based on an index that reflects environmental pressure per hectare and the local environmental sustainability of production practices. In addition to environmental sustainability, the analysis also considers fundamental differences across farms with respect to farm structure, innovation of operations, individual characteristics as well as farm location. Productivity performance by farm classes is related to the environmental sustainability performance and to other farm characteristics in order to shed light on the factors that drive or impede farm performance. Empirically identifying the main conditions for and obstacles to performance improvement supports the development of effective and efficient policies targeting the performance of farms. This analysis contributes in particular to a better understanding of the synergies and trade-offs between productivity and environmental sustainability performance.
    Keywords: agricultural policy, agriculture, drivers of performance, environmental sustainability, farm structure, innovation, productivity, technical change, technology
    JEL: D24 O31 O33 Q12 Q18
    Date: 2020–06–08
  2. By: Bista, Raghu
    Abstract: Economic Reforms towards economic liberalization and privatization is a good prescription to attract FDI in productive sectors. In 1990, Nepal liberalized her economy to create investment environment and destination of FDI by minimizing structural and institutional barriers and constraints for promoting TFP of productive sectors. This study investigates empirically what is TFP growth of FDI in Nepal in 1990 after economic liberalization process. We use econometric model based on Cobb Douglas production function and theoretical model of TFP growth accounting method. The econometric and non-parametric TFP estimation provides mostly positive TFP growth of FDI firms in Nepal. Few cases were influenced by political and security disturbances. Almost positive TFP growths have increasing productivity but there are still lower than expectation. There are still problems of massive inferior labor, no significant technological and financial transfer and poor business environment. Issues of continuity and stability between two periods indicate unpredictable situation of productivity.
    Keywords: FDI, TFP growth, economic reform, liberalization
    JEL: C54 C6 C61 E2 E23 E24 J5 O4 O47
    Date: 2019–02–05
  3. By: Nusrat Jahan
    Abstract: This empirical study is conducted on randomly selected six Islamic banks of Bangladesh. This study utilizes widely used Measures of banks profitability which are Return on Asset (ROA), Return on Equity (ROE) and Return on Deposit (ROD) and these are also commonly suggested tools by Bangladesh Bank to evaluate banks performance. In addition, this study examined the relationship of ROA with Asset Utilization (AU), Operational Efficiency (OE)and ROD. The result reveals that EXIM Bank Limited is performing very good in terms of all profitability measures ROA, ROE and ROD even though average asset size of Islami Bank Bangladesh Limited is found to be largest among all six Islamic Banks. The result of regression found the explanatory variable ROD is significantly associated with ROA but failed to establish any significant association with operational efficiency and asset utilization.
    Date: 2020–05
  4. By: Maria Kalogera (Department of Business Administration, University of Patras); Antonios Georgopoulos (Department of Business Administration, University of Patras); Panagiota Boura (Department of Business Administration, University of Patras)
    Abstract: Even though most of the export benefits inter alia refer to high productivity and profitability, the question is whether these performance indicators have been improved solely as a result of export activity or not. As such, in this study, we investigate whether and to what extent export activity could strengthen overall firm performance in terms of the aforementioned crucial measures, productivity and profitability. Moreover, we attempt to determine the impact of the crisis during the recession when firms seek new ways in order to increase and exploit their competitive advantage through exporting activity. As Greece is a very appealing case study due to the recession, we pooled micro-level data from Greek firms operating in all sectors of economy from 2005 to 2017. After extensive research of the literature, the most widely used financial and non-financial variables have been collected for each firm. By using the GMM model approach, the results indicate that high export intensity might strengthen the productivity and profitability of firms, especially if they are young, large in size and they operate in traditional industry sectors.* This research titled " Is there a link between firms? export activity and economic performance in a Small Open Economy? Evidence from Greece" as a part of the project "The Specification of Export Capacity of Enterprises and the Effects on the economic performance of firms" is implemented through the Operational Program "Human Resources Development, Education and Lifelong Learning" and is co-financed by the European Union (European Social Fund) and Greek national funds.
    Keywords: Export performance, Economic growth, Financial measures, Greek financial crisis, Panel data, Productivity, Profitability
    JEL: F23 L25 M21
    Date: 2020–02
  5. By: Rym AYADI; Giorgia GIOVANNETTI; Enrico MARVASI; Chahir ZAKI
    Abstract: We provide new evidence on the participation of firms within Global Value Chains (GVCs) for a large pool of MENA countries included in the World Bank Enterprise Surveys (WBES). Making use of several firm-level GVC participation indices, we find a positive association with firm productivity gains. Based on this result, we further investigate the complexity of GVC relationships and examine how sector/country connectivity affects firm productivity. Using a multi-level model, we augment our analysis by including centrality indicators calculated on the intermediate trade network, constructed from the EORA input-output tables. Positioning within the network structure of trade in intermediate products also plays a role. Our results indicate a positive effect of the connectivity of the sector on the Total Factor Productivity (TFP) of firms. Results remain robust after we control for the endogeneity between firm productivity and participation in GVCs.
    Keywords: global value chains, firm heterogeneity, MENA region, trade networks, productivity.
    JEL: F14 F15 L23 L25
    Date: 2020
  6. By: Oliver Reiter (The Vienna Institute for International Economic Studies, wiiw); Monika Schwarzhappel (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This policy brief provides results regarding productivity levels and dynamics in the Western Balkan countries in a comparative perspective, drawing on the newly established wiiw Western Balkan Productivity Database. We construct this database from data obtained from the national statistical institutes of the Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia). The database provides time series of value added, gross output and intermediate inputs as well as labour productivity and unit labour costs. We present the most important indicators comparing productivity performance of the Western Balkan countries with Bulgaria and Romania (which became EU Members in 2007) and Croatia (which became an EU Member in 2013).
    Keywords: Productivity, unit labour costs, Western Balkan countries, accession
    JEL: E01 O11 O40 O47
    Date: 2020–06
  7. By: Nusrat Jahan
    Abstract: This study evaluated the three dimensions of performance of commercial banks in Bangladesh by analyzing the trend of the Malmquist Productivity Index (MPI) of the Total Factor Productivity (TFP), Return on Asset (ROA) and Total Stock Return (TSR) over the period 2011 to 2015. The study developed an empirical framework with the intention to examine the equivalency of three dimensions of performance. Since, the measures of performance are different, they cannot be tested in their original form; hence, the growth rate of each category of performance measures were estimated and tested to examine the comparability among them. Evaluation of profitability revealed a decreasing trend and evaluation of stock performance suggests that investors are incurring losses on their investment over the selected period. Evaluation of productivity indicates that productivity regress was recorded initially but at the end of the studied period a modest productivity growth was recorded. Finally, this study was able to ascertain the anticipated equivalency of outcome of the three dimensions of performance.
    Date: 2020–05
  8. By: Harris, Patrick
    Abstract: The societal and climatic pressures towards agriculture and specifically the beef industry is increasingly prevalent in recent years. This paper has identified and evaluated the impact of climate on the TFP of the beef sector by state and as a country, which was found to be negative on balance. Additionally, it was found that Victoria was the most susceptible to changes in climate on average, complimenting previous literature that the southern regions of Australia (NSW, VIC, SA, TAS) are more susceptible to changes in climate compared to northern regions on average. Moreover, this paper addressed the current and prospective initiatives and management practices to mitigate the impact of adverse climate aberations, which found that feed additives, the breed of cattle, government subsidised insurance markets and education will assist the productivity of the beef sector in Australia and develop the resilience of farmers during extreme climate aberations.
    Keywords: Climate Change, Agriculture and climate change, agricultural econometrics, Australian beef production, beef production, total factor productivity, temperature and agriculture, Australian beef, econometrics, panel data.
    JEL: O4 O44 O5 O50 O56 Q0 Q1 Q12 Q14 Q15 Q18 Q2 Q20 Q28 Q5 Q52 Q53 Q54 Q58
    Date: 2020–05–31
  9. By: Cem Özgüzel
    Abstract: This paper estimates agglomeration economies in Great Britain. The analysis employs a definition of urban areas as functional economic units developed by the OECD in collaboration with the European Union to investigate the size and sources of productivity disparities across urban areas. It uses data from the UK Annual Survey of Hours and Earnings and the UK Labour Force Survey between 2000 and 2018 and a two-step estimation procedure that accounts for bias in the extent of agglomeration economies arising from individual sorting. The results suggest that a 10% increase in employment density of a city in Great Britain, would, on average, increase city productivity by 0.9-1 percent. The analysis also shows the estimated elasticity for employment density remains the same before and after the 2007–08 global financial crisis, not showing any clear structural break between city size and productivity relationship.
    Keywords: Great Britain, local labour markets, spatial wage disparities
    JEL: R12 R23 J31
    Date: 2020–06–08
  10. By: Bento, Pedro (Texas A&M University); Ranasinghe, Ashantha (University of Alberta, Department of Economics)
    Abstract: We document new evidence that financial under-development is associated with higher borrowing rates, lower investment in productivity, a smaller share of large firms, and smaller average firm size, both in manufacturing and services. To account for these patterns, we develop a two-sector economy with heterogeneous entrepreneurs that face financial frictions in the form of borrowing rates that rise with the cost of monitoring risky investments. The model is tractable and can be solved analytically, making clear predictions for the impact of high borrowing costs on investment, the share of large firms, and average firm size across sectors, consistent with the evidence we document. Varying monitoring costs to generate observed cross-country differences in borrowing rates, the model can account for one-third of the log-variance of observed average firm size across sectors, over 20 percent of the variation in investment, and a 30 percent drop in aggregate productivity, all substantial relative to the literature.
    Keywords: financial development; borrowing; firm size; investment; aggregate productivity
    JEL: O10 O14 O41 O43
    Date: 2020–05–28
  11. By: Frédéric Reynés (Observatoire français des conjonctures économiques)
    Abstract: By defining the Variable Output Elasticities Cobb–Douglas function, this article shows that a large class of production functions can be written as a Cobb–Douglas function with non-constant output elasticity. Compared to standard flexible functions such as the Translog function, this framework has several advantages. It does not require the use of a second order approximation. This greatly facilitates the deduction of linear input demands function without the need of involving the duality theorem. It allows for a tractable generalization of the CES function to the case where the elasticity of substitution between each pair of inputs is not necessarily the same. [4] This provides a more general and more flexible framework compared to the traditional nested CES approach while facilitating the analyze of the substitution properties of nested CES functions. The case of substitutions between energy, capital and labor is provided.
    Keywords: Cobb-Douglas function; Homogeneous functions
    Date: 2019–01
  12. By: Nusrat Jahan
    Abstract: The purpose of this empirical study is to investigate Cash Conversion Cycle of thirty manufacturing firms listed in Dhaka Stock Exchanges under six different categories, which are, Food and allied, Pharmaceuticals and chemical, Cement, Textile, Engineering and Miscellaneous. This paper sets industry average Cash Conversion Cycle for these six industries and examines the relationship of Cash Conversion Cycle with firm size and profitability. This study did not find statistically significant differences among the Cash Conversion Cycle of varying manufacturing industries. The result of this study indicates a statistically significant negative relationship between the Cash Conversion Cycle and profitability, especially in terms of Return on Equity. The result also shows that the Cash Conversion Cycle of manufacturing firm also has significant negative relationship with firm size, when measured in terms of net sales. The present study contributes to the literature on working capital management written in the context of Bangladesh.
    Date: 2020–05
  13. By: Kristiaan KERSTENS (IESEG School of Management and LEM-UMR 9221); Zhiyang SHEN (Beijing Institute of Technology, Beijing, China)
    Abstract: This contribution defines short-run as well as long-run output- and input-oriented plant capacity measures evaluated relative to convex and nonconvex technologies. All these plant capacity concepts are used to measure the use of existing capacities as well as the evolution and build-up of extra hospital capacity in the province of Hubei in China during the outbreak of the COVID- 19 epidemic in early 2020. The rather well-established fact from the medical literature that mortality rates increase with high capacity utilization rates is used to select the most plausible among these eight plant capacity concepts. It turns out that the relatively new input-oriented plant capacity concept correlates best with mortality.
    Keywords: : Data Envelopment Analysis; Free Disposal Hull; efficiency; plant capacity utilisation; mortality
    Date: 2020–05
  14. By: Ferraro, Simona; Agasisti, Tommaso; Porcelli, Francesco; Soncin, Mara
    Abstract: In Italy, the provision of educational ancillary services (like meals and school transportation) is in charge of the municipalities. We investigate whether municipalities differ in their efficiency when providing these services and whether such heterogeneity explains some portion of the variability observed in pupils’ test scores. The paper is the first application of a nonparametric order-m model and a two-stage multilevel regression to a unique administrative dataset, made of the entire population of Italian pupils tested in reading and mathematics at grade 5 (academic years 2012/2013 and 2014/2015). Results demonstrate that local governments have different efficiency levels in providing services to schools. The test scores’ variability among pupils, however, is not explained by different efficiency levels of local government in producing ancillary services.
    Keywords: ancillary services, order-m, multilevel modelling, efficiency
    JEL: H52 I21
    Date: 2020–02–26
  15. By: Massimiliano Mazzanti (University of Ferrara; SEEDS, Italy); Antonio Musolesi (University of Ferrara; SEEDS, Italy)
    Abstract: Innovation is a primary engine of sustainable growth. This paper provides new semiparametric econometric policy evaluation methods and estimates a green knowledge production function for a large, 30-year panel dataset of high-income countries. Because of the high degree of uncertainty surrounding the data-generating process and the likely presence of nonlinearities and latent common factors, the paper considers semiparametric panel specifications that extend the parametric multifactor error model and the random trend model. It also adopts a recently proposed information criterion for smooth model selection to compare these semiparametric models and their parametric counterparts. The results indicate that (1) the semiparametric additive specification with individual time trends is the preferred model, (2) threshold effects and nonlinearities are relevant features of the data that are obscured in parametric specifications, and (3) the effect of environmental policy is significant and clearly heterogeneous when modeled as a nonparametric function of certain knowledge inputs. The evidence shows a relevant nonlinear policy inducement effect occurring through R&D investments.
    Keywords: Innovation, knowledge, environmental policy, policy assessment, policy heterogeneity, large panels, cross-sectional dependence, factor models, random trend model, spline functions, model selection.
    Date: 2020–06
  16. By: Aparna Rao (Department of Economics, SOAS University of London); Risa Morimoto (Department of Economics, SOAS University of London)
    Abstract: In economic theory, the agricultural sector plays an undisputed role in growth, development and poverty reduction in a country. The sector is pivotal for a vast majority of Sub-Saharan Africa (SSA), given the large number of people dependent on agriculture for their livelihood. With the constraints on land expansion and the dual threat of climate change and an ever increasing population, agricultural productivity has become a key matter of concern in agricultural economics. Given this, a vast majority of literature focuses on improving productivity to meet food demand at any cost. A large percentage of it is focused on the use of pesticides, pre-harvest, to eradicate pests and diseases that lead to losses in the produce. As a result, there has been a significant increase in global pesticide usage over the last few years. Using the context of smallholder vegetable production in Ethiopia, this paper aims to highlight that although there is a requirement to increase yields to be able to meet the growing food demand, the focus has to shift towards looking at agricultural productivity through a sustainable lens. This is to say that increasing the use of pesticides to increase productivity, without considering human and environmental health, quality of produce and farmer income, is not enough to ensure sustainability. Rather, there is a requirement to go beyond the yield-based definition of productivity to incorporate agroecological farming practices.
    Keywords: pesticides; smallholders; Ethiopia; yield productivity; agricultural sustainability
    JEL: Q15 Q18
    Date: 2020–05
  17. By: K. M. Golam Muhiuddin; Nusrat Jahan
    Abstract: This paper evaluates the commercial banks of Bangladesh in terms of profitability dimension of performance and also examines the impact of selected determinants and banking system on this dimension of performance. Evaluation of trend in profitability of listed commercial banks of Bangladesh reveals that, on an average, profitability is exhibiting a decreasing trend over the selected period; however, the profitability performance of Islamic banks remained rather high compared to Conventional banks. Profitability measured by Return on Asset is found to be significantly affected by the bank-specific factors, industry-specific factor and the banking system. However, macro-economic factors evidently have no significant impact on profitability of commercial banks of Bangladesh.
    Date: 2020–05
  18. By: Gale Boyd; Matt Doolin
    Abstract: This paper estimates stochastic frontier energy demand functions with non-public, plant-level data from the U.S. Census Bureau to measure the energy efficiency gap and energy price elasticities in the food processing industry. The estimates are for electricity and fuel use in 4 food processing sectors, based on the disaggregation of this industry used by the National Energy Modeling System Industrial Demand Module. The estimated demand functions control for plant inputs and output, energy prices, and other observables including 6-digit NAICS industry designations. Own price elasticities range from 0.6 to -0.9 with little evidence of fuel/electricity substitution. The magnitude of the efficiency estimates is sensitive to the assumptions but consistently reveal that few plants achieve 100% efficiency. Defining a “practical level of energy efficiency” as the 95th percentile of the efficiency distributions and averaging across all the models result in a ~20% efficiency gap. However, most of the potential reductions in energy use from closing this efficiency gap are from plants that are “low hanging fruit”; 13% of the 20% potential reduction in the efficiency gap can be obtained by bringing the lower half of the efficiency distribution up to just the median level of observed performance. New plants do exhibit higher energy efficiency than existing plants which is statistically significant, but the difference is small for most of the industry; ranging from a low of 0.4% to a high of 5.7%.
    Date: 2020–06

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