nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒06‒22
sixteen papers chosen by

  1. A Novel MIMIC-Style Model of European Bank Technical Efficiency and Productivity Growth By Marwan Izzeldin; Emmanuel Mamatzakis; Anthony Murphy; Mike G. Tsionas
  2. The Effects of Access to Credit on Productivity Among Microenterprises: Separating Technological Changes from Changes in Technical Efficiency By Nusrat Abedin Jimi; Plamen Nikolov; Mohammad Abdul Malek; Subal Kumbhakar
  3. Is Technological Change Really Skills-Biased? Firm-level Evidence of the Complementarities between ICT and Workers’ Education By Filippo Pusterla; Thomas Bolli
  4. The similarities in efficiency of universities and universities of applied sciences in Lower Saxony By Stöver, Britta; Sibbertsen, Philipp
  5. On the productivity advantage of cities By Jacob, Nicholas; Mion, Giordano
  6. Determinants of firms’ efficiency: do innovations and finance constraints matter? The case of European SMEs By Ferrando, Annalisa; Rossi, Stefania P. S.; Bonanno, Graziella
  7. Robust frontier estimation from noisy data: a Tikhonov regularization approach By Abdelaati Daouia; Jean-Pierre Florens; Léopold Simar
  8. Does Easing Financing Matter for Firm Performance? By Bose, Udichibarna; Mallick, Sushanta; Tsoukas, Serafeim
  9. Slow Real Wage Growth during the Industrial Revolution: Productivity Paradox or Pro-Rich Growth? By Crafts, Nicholas
  10. Does Easing Access to Foreign Financing Matter for Firm Performance? By Udichibarna Bose; Sushanta Mallick; Serafeim Tsoukas
  11. Does board gender diversity influence firm profitability? A control function approach By Rey Đặng; L’hocine Houanti; Krishna Reddy; Michel Simioni
  12. An empirical note on the long-run effects of public and private R&D on TFP By Herzer, Dierk
  13. Local governments’ efficiency and educational results: empirical evidence from Italian primary schools By Simona Ferraro; Tommaso Agasisti; Francesco Porcelli; Mara Soncin
  14. Managerial Compensation and Firm Performance in Cameroon Microfinance Institutions By Nkiendem Felix; Douanla Jean; Innocent Essomme; Nchitu Asah; Roland Gahmuti
  15. The Life-cycle Growth of Plants: The Role of Productivity, Demand and Wedges By Marcela Eslava; John C. Haltiwanger
  16. The Price Effect of Trade: Evidence of the China Shock and Canadian Consumer Prices By Myeongwan Kim

  1. By: Marwan Izzeldin; Emmanuel Mamatzakis; Anthony Murphy; Mike G. Tsionas
    Abstract: Using Bayesian Monte Carlo methods, we augment a stochastic distance function measure of bank efficiency and productivity growth with indicators of capitalization, return and risk. Our novel Multiple Indicator-Multiple Cause (MIMIC) style model generates more precise estimates of policy relevant parameters such as returns to scale, technical inefficiency and productivity growth. We find considerable variation in the performance of EU-15 banks over the period 2008 to 2015. For the vast majority of banks, productivity growth – the sum of efficiency and technical changes – is negative, implying that the industry would benefit from innovation. We show that greater technical efficiency is associated with higher profitability, higher capital, a lower probability of default and lower return volatility.
    Keywords: Multiple Indicators-Multiple Causes (MIMIC); technical efficiency; productivity growth; EU banks
    JEL: C11 C51 D24 G21
    Date: 2020–05–19
  2. By: Nusrat Abedin Jimi; Plamen Nikolov; Mohammad Abdul Malek; Subal Kumbhakar
    Abstract: Improving productivity among farm microenterprises is important, especially in low-income countries where market imperfections are pervasive and resources are scarce. Relaxing credit constraints can increase the productivity of farmers. Using a field experiment involving microenterprises in Bangladesh, we estimate the impact of access to credit on the overall productivity of rice farmers, and disentangle the total effect into technological change (frontier shift) and technical efficiency changes. We find that relative to the baseline rice output per decimal, access to credit results in, on average, approximately a 14 percent increase in yield, holding all other inputs constant. After decomposing the total effect into the frontier shift and efficiency improvement, we find that, on average, around 11 percent of the increase in output comes from changes in technology, or frontier shift, while the remaining 3 percent is attributed to improvements in technical efficiency. The efficiency gain is higher for modern hybrid rice varieties, and almost zero for traditional rice varieties. Within the treatment group, the effect is greater among pure tenant and mixed-tenant farm households compared with farmers that only cultivate their own land.
    Date: 2020–06
  3. By: Filippo Pusterla (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Thomas Bolli (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper extends and refnes the concept of ICT-driven skills-biased technological change by disentangling the effects of information technologies (IT) and communication technologies (CT). Guided by the theory that IT and CT differently affect firms' production processes, we investigate the complementarities between these two distinct technologies and workers' levels of education in affecting firms' productivity. Exploiting within-firm variation between 2005-2017, we find that the use of IT-measured as use of business management tools - is particularly beneficial for workers with a tertiary vocational education. In contrast, CT - measured as workers' use of the intranet - is especially complementary to workers with a tertiary academic education. While consistent with the ICT-driven skills-biased technological change hypothesis, our results offer evidence on the necessity for differentiating between the effects of IT and CT on firm productivity when differently educated workers use these technologies.
    Keywords: skills-biased technological change, information technologies, communication technologies
    JEL: J24 O33
    Date: 2019–12
  4. By: Stöver, Britta; Sibbertsen, Philipp
    Abstract: Due to the advancing economisation and the associated discussion on the distribution of public budgets and tax revenues, the efficiency of higher education institutions is increasingly coming into focus. Since the 2000s, more and more studies on the efficiency of German universities have been published. While the research focus and the applied methods differ between these studies, the majority have in common that they exclude universities of applied sciences from the data set. The aim of this paper was to show differences and commonalities in efficiency between universities of applied sciences and universities in Lower Saxony. Based on an exclusive data set, the efficiency values were estimated using Data Envelopment Analysis and Stochastic Frontier Analysis including the analysis of efficiency changes, influencing factors and ranking differences between both methods. The central findings are that (1) there existed no significant differences in efficiency between universities and universities of applied sciences, (2) that an alignment process took place between 2010 and 2017 leading to a higher similarity in efficiency and (3) that the ranking and the level of efficiency depends very much on the choice of method stressing the necessity to settle on one method when using it for monitoring purposes.
    Keywords: Data Envelopment Analysis (DEA), Stochastic Frontier Analysis (SFA), efficiency, university (of applied sciences), Lower Saxony (Germany)
    JEL: C14 C23 C61 D61 I22 I23
    Date: 2020–06
  5. By: Jacob, Nicholas; Mion, Giordano
    Abstract: Ever since Marshall (1890) agglomeration externalities have been viewed as the key factor explaining the existence of cities and their size. However, while the various micro foundations of agglomeration externalities stress the importance of Total Factor Productivity (TFP), the empirical evidence on agglomeration externalities rests on measures obtained using firm revenue or value-added as a measure of firm output: revenue-based TFP (TFP-R). This paper uses data on French manufacturing firms' revenue, quantity and prices to estimate TFP and TFP-R and decompose the latter into various elements. Our analysis suggests that the revenue productivity advantage of denser areas is mainly driven by higher prices charged rather than differences in TFP. At the same time, firms in denser areas are able to sell higher quantities, and generate higher revenues, despite higher prices. These and other results we document suggest that firms in denser areas are able to charge higher prices because they sell higher demand/quality products. Finally, while the correlation between firm revenue TFP and firm size is positive in each location, it is also systematically related to density: firms with higher (lower) TFP-R account for a larger (smaller) share of total revenue in denser areas. These patterns thus amplify in aggregate regional-level figures any firm-level differences in productivity across space.
    Keywords: Agglomeration externalities; demand; density; prices; Quality; Revenue-based TFP; Total factor productivity (TFP)
    JEL: D24 L11 R12 R15
    Date: 2020–04
  6. By: Ferrando, Annalisa; Rossi, Stefania P. S.; Bonanno, Graziella
    Abstract: This paper aims at investigating the relationship between firms’ profit efficiency, access to finance and innovation activities. We enrich our understanding on firms’ performance by adopting the stochastic frontier approach (SFA), which allows us to estimate profit functions and to obtain efficiency scores for a large sample of European firms. We pioneer the use of a novel dataset that merges survey-based data derived from the ECB Survey on access to finance for enterprises (SAFE) with balance sheet information. Our evidence documents that credit constrained firms display an incentive to improve their efficiency in order to increase profitability. Among firms that have embarked in product innovation, those in the industry and high-tech sectors see their effort translated in higher profit efficiency. From a policy perspective, our results could help to better understand the link between innovation, financial constraints and efficiency, which goes beyond the idea that easier access to finance is the panacea to get higher profit efficiency. JEL Classification: D22, D24, L23, O31, C33
    Keywords: access to finance, innovation, stochastic frontier approach, survey data
    Date: 2020–06
  7. By: Abdelaati Daouia (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Pierre Florens (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Léopold Simar (Institut de Statistique, Biostatistique et Sciences Actuarielles (ISBA) - UCL - Université Catholique de Louvain)
    Abstract: In stochastic frontier models, the regression function defines the production frontier and the regression errors are assumed to be composite. The actually observed outputs are assumed to be contaminated by a stochastic noise. The additive regression errors are composed from this noise term and the one-sided inefficiency term. The aim is to construct a robust nonparametric estimator for the production function. The main tool is a robust concept of partial, expected maximum production frontier, defined as a special probability-weighted moment. In contrast to the deterministic one-sided error model where robust partial frontier modeling is fruitful, the composite error problem requires a substantial different treatment based on deconvolution techniques. To ensure the identifiability of the model, it is sufficient to assume an independent Gaussian noise. In doing so, the frontier estimation necessitates the computation of a survival function estimator from an illposed equation. A Tikhonov regularized solution is constructed and nonparametric frontier estimation is performed. The asymptotic properties of the obtained survival function and frontier estimators are established. Practical guidelines to effect the necessary computations are described via a simulated example. The usefulness of the approach is discussed through two concrete data sets from the sector of Delivery Services.
    Keywords: Deconvolution,Nonparametric estimation,Probability-weighted moment,Production function,Robustness,Stochastic frontie,Tikhonov regularization
    Date: 2020–04–27
  8. By: Bose, Udichibarna; Mallick, Sushanta; Tsoukas, Serafeim
    Abstract: Financial reforms have been found to be highly important in promoting aggregate productivity. Yet, the linkage between access to finance, firm-level productivity, and exporting performance has been overlooked in the literature. We fill this gap using a rich dataset of 11,612 Indian firms over the period 1988-2014 to study the impact of a unique financial policy intervention on firm performance. We document a significant effect of capital-account liberalization through the lens of an export-oriented policy initiative on firms’ productivity and consequently on their exporting activity. Finally, the beneficial effect of the policy change is more pronounced for financially vulnerable firms, as measured by high debt dependence and low levels of liquidity.
    Keywords: Productivity; Exporting; Financing; FX market liberalization
    Date: 2019–11–08
  9. By: Crafts, Nicholas
    Abstract: I examine the implications of technological change for productivity, real wages and factor shares during the industrial revolution using recently available data. This shows that real GDP per worker grew faster than real consumption earnings but labour's share of national income changed little as real product wages grew at a similar rate to labour productivity in the medium term. The period saw modest TFP growth which limited the growth both of real wages and of labour productivity. Economists looking for an historical example of rapid labour-saving technological progress having a seriously adverse impact on labour's share must look elsewhere.
    Keywords: Engels' pause; Factor shares; industrial revolution; labour productivity; real wages
    JEL: N13 O33 O47
    Date: 2020–05
  10. By: Udichibarna Bose; Sushanta Mallick; Serafeim Tsoukas
    Abstract: The literature shows that rigid capital control policies adversely influence international trade, leading to external financial reforms in terms of greater cross-border access to financing, which can stimulate aggregate productivity. However, the literature overlooks the relationships among access to external financing, firm-level productivity, and exporting performance. We fill this gap by using a rich dataset of 11,612 Indian firms over the period 1988–2014 and study how a unique financial policy intervention affects firm performance. We establish a significant effect of capital-account liberalization through an export-oriented policy initiative on firms’ productivity and, consequently, on their exporting activity. Finally, we find that the benefits of the policy reform are more pronounced for financially vulnerable firms characterized by either high debt or low liquidity.
    Keywords: Productivity; Exporting; Foreign Financing; FX market liberalization
    JEL: F4 F1 G1
    Date: 2020–05
  11. By: Rey Đặng (ISTEC - Institut supérieur des Sciences, Techniques et Economie Commerciales - ISTEC); L’hocine Houanti (Sup de Co La Rochelle - Ecole Supérieure de Commerce de la Rochelle - Groupe Sup de Co La Rochelle); Krishna Reddy (Toi Ohomai Institute of Technology); Michel Simioni (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004–2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015).
    Keywords: Women,Board of directors,Econometrics,Control function,Firm performance
    Date: 2020
  12. By: Herzer, Dierk
    Abstract: Several studies have examined the long-run effects of public and private R&D on TFP with mixed results. A common feature of these studies is the use of stocks of public and private R&D capital, constructed under the implicit assumption that the prices of GDP, public R&D, and private R&D move identically. Thus, the results of these studies may be biased to the extent that this assumption is violated. The main contribution of this note is to avoid this bias by using numbers of public and private sector researchers to measure R&D activity in the public and private sector. Contrary to previous studies, it is found—using numbers of researchers in the public and private sector—that there is strong evidence of a significant positive long-run effect of both public and private R&D on TFP and of a greater effect of public R&D than private R&D. Consistent with the mixed evidence reported in the literature, it is also found that the use of public and private R&D stocks produces mixed results regarding the long-run effects of public and private R&D on TFP.
    Keywords: public R&D, private R&D, total factor productivity, panel cointegration
    JEL: O11 O30 O47
    Date: 2020–05–29
  13. By: Simona Ferraro (Tallinn University of Technology); Tommaso Agasisti (Politecnico di Milano School of Management); Francesco Porcelli (Università di Bari); Mara Soncin (Politecnico di Milano School of Management)
    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: I21 H52
    Date: 2020–06
  14. By: Nkiendem Felix (Université de Dschang); Douanla Jean (Université de Dschang); Innocent Essomme; Nchitu Asah (Université de Yaoundé II); Roland Gahmuti (Université de Yaoundé II)
    Abstract: The rise in managerial pay over the past decades has sparked an intense debate about the nature of pay setting process. Many theoretical and empirical findings have portrayed direct and opposing relations between managerial compensation and firm performance within enterprises in general and financial institutions in particular.Here, managerial compensation retained as endogenous variable is captured using base salary and bonuses while firm performance as exogenous variable is measured using return on equity (ROE) and firm size while board size, is capturedthrough ownership and tenure served as control variables. We used questionnaires administered to managers of the respective institutions alongside with their pay slips and report of financial statement. STATA 12.0 was used to carry out our statistical test and regression analysis. Our sample survey consisted of 10 microfinance establishmentsin Cameroon for the period of 2007-2012. The results obtained depicted a negative significant relationship between pay and ROE regarding micro-finance establishments. Firm size on its part portrayed a positive influence on managers' compensation in micro-finance establishments. We recommend that decision-making in microfinance establishments should be driving incentives to cap managerial compensation with firm performance.
    Abstract: L'augmentation des rémunérations des cadres au cours des dernières décennies a suscité un débat intense sur la nature du processus de fixation des rémunérations. De nombreux résultats théoriques et empiriques ont mis en évidence des relations directes et opposées entre la rémunération des cadres et la politique de rémunération des entreprises. Dans ce cas, la rémunération des dirigeants conservée en tant que rémunération de base est la variable endogène qui est cerner à l'aide du salaire de base et des primes, tandis que la performance de l'entreprise en tant que variable exogène est mesurée à l'aide du rendement sur les capitaux propres (ROE) et la taille de l'entreprise, tandis que la taille du conseil d'administration est prise en compte par la propriété et la durée du mandat qui servent de variables de contrôle. Nous avons utilisé des questionnaires administrés aux gestionnaires des institutions respectives, en même temps que leurs fiches de paie et leur rapport d'état financier. STATA 12.0 a été utilisé pour effectuer notre test statistique et notre analyse de régression. Notre enquête par sondage comprenait 10 questionnaires sur la microfinance au Cameroun pour la période 2007-2012. Les résultats obtenus font apparaître une relation négative significative entre la rémunération et les Resultats concernant les établissements de micro-finance. La taille de l'entreprise, quant à elle, a eu une influence positive sur la rémunération des dirigeants en les établissements de micro-finance. Nous recommandons que la prise de décision dans les établissements de microfinance soit un facteur d'incitation au plafonnement de la rémunération des cadres avec des performances fermes.
    Keywords: Performance,ROE and Firm Size,Managerial Compensation
    Date: 2018–07–10
  15. By: Marcela Eslava; John C. Haltiwanger
    Abstract: We develop a framework that uses price and quantity information on both firms' outputs and inputs to assess the roles, on firm dynamics and welfare, of efficiency, input prices, demand/quality, idiosyncratic markups, and residual wedges. Our strategy nests previous approaches limited by data availability. In our application, demand/quality is found to dominate the cross sectional variability of sales growth, while quality-adjusted input prices and residual wedges play dampening roles, especially at birth. Markups play only a modest role for cross-sectional variability of sales growth but are important in explaining welfare losses from revenue productivity dispersion.
    JEL: E24 L24 O47
    Date: 2020–05
  16. By: Myeongwan Kim
    Abstract: The explosive growth in Chinese imports to Canada over the last two decades has had both negative and positive effects. In this paper, we look at the impact of Chinese imports on the prices Canadians pay for household consumption goods. We find Canadians have benefited from lower prices on some goods and lower inflation overall. To quantify the importance of Chinese imports for individual consumer products and map them to consumer price data, we construct concordance between products in the consumer price index (CPI) and commodities in the Harmonized Commodity Description and Coding System. We estimate that over the 2001-2011 period, cumulative inflation would have been 1.17-percentage-points higher for the total CPI had there been no change in the Chinese share of total imports in Canada. This assumes other factors are held constant. The average annual inflation for the total CPI was 2.1 per cent over the 2001-2011 period, implying that annual inflation would have been about 0.12-percentage-points higher if there had not been a surge in imports from China.
    Keywords: China Shock, Canada, Imports, Productivity, Innovation
    JEL: F62 O32 O51 O53 L60
    Date: 2020–06

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