nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2020‒08‒31
sixteen papers chosen by

  1. Measuring Energy Efficiency: An Application of Stochastic Frontier Production Function Analysis to Power Sector in Kerala By Pillai N., Vijayamohanan
  3. Technological novelty and productivity growth: a cliometric approach. By Marianna Epicoco; Magali Jaoul-Grammare; Anne Plunket
  4. Productive efficiency, technological change and catch up within Africa By Mensah, Emmanuel B.; Owusu, Solomon; Foster-McGregor, Neil
  5. The Historical Impact of Anthropogenic Climate Change on Global Agricultural Productivity By Ariel Ortiz-Bobea; Toby R. Ault; Carlos M. Carrillo; Robert G. Chambers; David B. Lobell
  6. The Agricultural Productivity Gap and Self-Employment Bias in the Labor Income Share By Paul, Saumik; Thomas, Liam
  7. Tasks, Technology, and Factor Prices in the Neoclassical Production Sector By Andreas Irmen
  8. The aggregate productivity effects of internal migration: evidence from Indonesia By Bryan, Gharad; Morten, Melanie
  9. Measuring Energy Efficiency: An Application of LMDI Analysis to Power Sector in Kerala By Pillai N., Vijayamohanan
  10. Global Value Chains and Productivity: Micro Evidence from Estonia By Hang T. Banh; Philippe Wingender; Cheikh A. Gueye
  11. Is Substitutability the New Efficiency? Endogenous Investment in the Elasticity of Substitution between Clean and Dirty Energy By Fabian Stöckl
  12. The effect of spatial concentration on the business performance in various types of Russian cities By Andrey Pushkarev; Oleg Mariev; Natalia Davidson
  13. The impact of swarm robotics on arable farm size and structure in the UK By Lowenberg-DeBoer, James; Behrendt, Karl; Godwin, Richard; Franklin, Kit
  14. Total Factor Productivity and Economic Growth in Pakistan: A Five Decade Overview By Omer Siddique
  15. Quality and its impact on efficiency By Daraio, Cinzia; Simar, Leopold; Wilson, Paul
  16. Hypothesis Testing in Nonparametric Models of Production using Multiple Sample Splits By Simar, Leopold; Wilson, Paul

  1. By: Pillai N., Vijayamohanan
    Abstract: Traditionally, there are two basically reciprocal energy efficiency Indicators: one, in terms of energy intensity, that is, energy use per unit of activity output, and the other, in terms of energy productivity, that is, activity output per unit of energy use. The enquiry that has proceeded from the problems associated with this method of a single energy input factor in terms of productivity has led to multi-factor productivity analysis. We have here two approaches: parametric and non-parametric. Parametric approach famously includes two methods: the erstwhile popular total factor energy productivity analysis and the currently fanciful stochastic frontier production function analysis; The non-parametric approach is popularly represented by data envelopment analysis. The present paper is an attempt to measure efficiency in electrical energy consumption in Kerala, India. We apply the parametric method of stochastic frontier production function analysis on a panel data of the Kerala power sector with three sectors (Primary, Secondary and Tertiary) for the period from 1970-71 to 2016-17. For a comparative purpose, we also have a regression with a pooled data stochastic frontier. The results indicate that the sector-wise technical efficiency estimates of the Kerala power sector are independent of time, which can significantly refer to a technically stagnant situation in energy efficiency. The implication of the time-varying decay model, even though statistically insignificant, of a falling trend in the technical efficiency of all the three sectors also is a hot matter of serious concerns.
    Keywords: Energy efficiency, Kerala, Power sector, Stochastic frontier, Technical efficiency.
    JEL: C13 C51 Q4
    Date: 2019–07
  2. By: Andrey Pushkarev (Ural Federal University); Anna Sennikova (Ural Federal University); Oleg Mariev (Ural Federal University)
    Abstract: This paper contributes to the analysis of several firm performance indicators for estimating market selection forces on the industrial level by using econometric estimation method. For the comparison we employ data on Russian manufacturing firms for the period from 2006 to 2017. The sample contains more than 79 thousand enterprises for a period of 2 to 12 years. This research is focused on such performance indicators as labor productivity, total factor productivity (TFP) and profit per employee. We compare results of the econometrical examination of the link between each of them and the firm growth. The main result implies that the bulk of the impact of productivity variables relates to efficiency changes more than to absolute differences of productivity levels across firms. Comparing three performance indicators we see that the median values of total explanatory ability are close for the labor productivity and total factor productivity. This holds true also on the level of individual industries. The results for profit per employee provide slightly higher median estimate. The research shows that such indicator as profit of the firm can well substitute labor productivity indicator in the market selection and competition research.
    Keywords: productivity, market selection, Russian firms
    JEL: L11 D40
  3. By: Marianna Epicoco; Magali Jaoul-Grammare; Anne Plunket
    Abstract: This paper aims at providing further empirical evidence on the long-run relationship between technology and productivity by using a cliometric approach based on Granger’s causality. We test, for the first time, the sign and direction of causality between technological novelty, which is an important driver of radical technological innovations, and productivity, for the whole 20th century. Technological novelty is here proxied by the degree of component recombination of inventions. We find that both the flow and stock of Technologically Novel Inventions (TNI) have an important, but temporary, positive impact on productivity, and that these inventions are originated by a handful of leading technological fields, mainly concentrated in the sectors of specialized suppliers of capital equipment and in science based sectors. Our results also show that, at the aggregate level, there is no causal relationship running from productivity to TNI, which suggests that radical technologies are exogenous, i.e., independent of productivity variations. However, we also find that, at technological field level, productivity has a positive or negative impact on TNI, depending on the field. This instead suggests that some radical technologies are endogenous. We conclude by discussing implications of these results on the productivity stagnation since the 1970s and the current productivity slowdown.
    Keywords: Technological novelty; Radical technologies; Productivity; Component recombination; Cliometrics; Granger’s causality.
    JEL: O33 O40 C32 N12
    Date: 2020
  4. By: Mensah, Emmanuel B. (Maastricht University, UNU-MERIT); Owusu, Solomon (Maastricht University, UNU-MERIT); Foster-McGregor, Neil (Maastricht University, UNU-MERIT)
    Abstract: The peculiar nature of African development presents unique technological challenges. This often requires African-induced innovation or a combination of frontier and local technologies to solve problems unique to Africa. However, most researchers study technological change in Africa in relation to some globally defined technology frontier. The diffusion of knowledge from this global frontier to other regions however decreases in intensity with geographic and relational distance. Given that African countries are geographically and relationally close to each other, this paper makes a departure from this existing literature and studies technological change and technological catch up within African by considering catch-up with respect to an African technology leader. We do this by using structural methods (Shift and Share catch-up decomposition) and nonparametric methods (Data Envelopment Analysis) to estimate an African production frontier. We further measure productivity change in sub-Saharan Africa and disentangle the change due to general technological progress and efficiency change using the Malmquist Productivity Index (MPI). Our results show that Botswana and Mauritius are the only two countries in Africa which have converged to the productivity level as well as the efficiency level of the frontier. This successful convergence is driven more by efficiency catch-up and less by technological change. We explore the special role of efficiency catch-up by decomposing it into within-sector convergence, between -sector convergence and initial specialization. The results highlight the special role of structural change in catch-up. This paper contributes to recent evidence suggesting that countries can climb up the income ladder at a faster rate through a two-pronged transformation – i.e. structural change and technological catch-up.
    Keywords: Africa, Technological change, Technological Catch-up, Economic Growth
    JEL: O30 O47 N17
    Date: 2020–08–04
  5. By: Ariel Ortiz-Bobea; Toby R. Ault; Carlos M. Carrillo; Robert G. Chambers; David B. Lobell
    Abstract: Agricultural research has fostered productivity growth, but the historical influence of anthropogenic climate change on that growth has not been quantified. We develop a robust econometric model of weather effects on global agricultural total factor productivity (TFP) and combine this model with counterfactual climate scenarios to evaluate impacts of past climate trends on TFP. Our baseline model indicates that anthropogenic climate change has reduced global agricultural TFP by about 21% since 1961, a slowdown that is equivalent to losing the last 9 years of productivity growth. The effect is substantially more severe (a reduction of ~30-33%) in warmer regions such as Africa and Latin America and the Caribbean. We also find that global agriculture has grown more vulnerable to ongoing climate change.
    Date: 2020–07
  6. By: Paul, Saumik (Newcastle University); Thomas, Liam (University of Tokyo)
    Abstract: We propose a theory-based adjustment to the labor income share to correct for the self-employment bias. Through a two-sector neoclassical framework with agriculture and non-agriculture, we derive the productivity-adjusted aggregate labor income share in terms of the agricultural productivity gap, and the labor income share in non-agriculture and value-added factor shares. We then construct a novel dataset on the labor income share at a sector level comprising of 53 countries. By applying the theory-based adjustment to our data, the average values for the aggregate and agricultural productivity-adjusted labor income share are 0.42 and 0.51, respectively. The gap between the productivity-adjusted and unadjusted figures are statistically significant only in agriculture, which can be attributed to the heavily underreported income from self-employed workers in agriculture. These findings appear robust at a more disaggregated level of non-agricultural sectors, as self-employment explains almost 98% of the variation in this gap.
    Keywords: labor income share, cross-country data, income distribution, self-employment
    JEL: E24 E25 J30
    Date: 2020–06
  7. By: Andreas Irmen
    Abstract: This paper introduces tasks into the neoclassical production sector. Competitive firms choose the profit-maximizing amounts of factor-specific tasks that determine their factor demands and output supplies. We show that the effect of factor-augmenting technical change on relative and absolute factor prices can be decomposed into a productivity effect and a task-demand effect of opposite sign. These effects appear since the novel task-based approach distinguishes between the demands for tasks and the demands for factors. This perspective provides a new intuition for the emergence of relative and absolute factor biases and the role of the elasticity of substitution.
    Keywords: technical change, factor prices, factor-specific tasks, neoclassical production
    JEL: O33 O41
    Date: 2020
  8. By: Bryan, Gharad; Morten, Melanie
    Abstract: We estimate the aggregate productivity gains from reducing barriers to internal labor migration in Indonesia, accounting for worker selection and spatial differences in human capital. We distinguish between movement costs, which mean workers will move only if they expect higher wages, and amenity differences, which mean some locations must pay more to attract workers. We find modest but important aggregate impacts. We estimate a 22 percent increase in labor productivity from removing all barriers. Reducing migration costs to the US level, a high-mobility benchmark, leads to a 7.1 percent productivity boost. These figures hide substantial heterogeneity. The origin population that benefits most sees a 104 percent increase in average earnings from a complete barrier removal, or a 25 percent gain from moving to the US benchmark.
    Keywords: Selection; Internal migration; Indonesia
    JEL: J1
    Date: 2019–10–01
  9. By: Pillai N., Vijayamohanan
    Abstract: The traditional interest in energy efficiency has centred on a single energy input factor in terms of productivity that has become famous through the index method in terms of activity output per unit of energy use. The enquiry that has proceeded from the problems associated with this method has led to identifying the effect source of variation, in terms of decomposition analysis. A variant of factor decomposition analysis, index decomposition analysis takes energy as a single factor of production, and explores various effects on energy intensity changes, by decomposing these changes into pure intensity changes effect, structure changes effect and activity changes effect. The present paper seeks to measure energy efficiency in Kerala in terms of index decomposition analysis, using the Logarithmic Mean Divisia Index (LMDI) method. For the empirical exercise of decomposition, we consider two energy sectors of Kerala: power sector and petroleum sector. Since the petroleum consumption data is available only for the period from 2007-08 to 2016-17, we take this as our study period for the analysis. As the measure of activity, we have the usual real gross State domestic product (GSDP at 2011-12 prices). First we analyse the two sectors separately, and then the combined sector is analysed for decomposition. The petroleum consumption data relating only to the secondary and tertiary sub-sectors, the less-efficient petroleum sector is found to overweigh the combined energy sector of Kerala to such an extent that the energy-efficiency potential of these two sub-sectors gets clouded. A sufficiently high degree of energy efficiency in the petroleum sector can indeed reverse this anomaly.
    Keywords: Energy efficiency, Kerala, Power sector, Index decomposition, Divisia index.
    JEL: C13 C51 Q4
    Date: 2019–06
  10. By: Hang T. Banh; Philippe Wingender; Cheikh A. Gueye
    Abstract: The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.
    Date: 2020–07–03
  11. By: Fabian Stöckl
    Abstract: When analyzing potential ways to counter climate change, standard models of green growth abstract from investment in substitutability between “clean” and “dirty” energy inputs. Instead, they rely on the assumption that efficiency with respect to fossil fuels can be increased perpetually. However, this is not in line with observed firm investment behavior and the limits to efficiency imposed by thermodynamic laws. In this paper, I develop a growth model that explicitly accounts for endogenous investment to increase input substitutability, in addition to investment in efficiency. The model predicts that, for a growing economy, there is always investment in both substitutability and efficiency, even without a carbon cap and with non-infinite fossil fuel prices. Most importantly, in the long-run, with sufficient investment in substitutability, fossil fuels become inessential for production. Moreover, the model predicts a declining income share of fossil fuels, an outcome not featured by standard models based on purely efficiency-enhancing technological progress. Overall, the model generates an endogenous path of transition from an economy characterized by a low elasticity of substitution to one characterized by a high elasticity. In doing so, it still nests the results derived from a purely efficiency-based directed technical change framework as a special case. In addition, this paper analyzes the scope for policy intervention, showing that even a temporary subsidy/tax can trigger a full transformation toward green growth.
    Keywords: Elasticity of substitution, endogenous (sigma-augmenting) technological change, growth, investment incentives, climate policy, decarbonization
    JEL: Q20 Q30 O30 O40
    Date: 2020
  12. By: Andrey Pushkarev (Ural Federal University); Oleg Mariev (Ural Federal University); Natalia Davidson (Ural Federal University)
    Abstract: This paper empirically analyzes the effect of spatial concentration of economic activities on enterprise productivity, using Russian firm-level data. Panel data allows us to control for endogeneity biases associated with estimation of agglomeration economies, using fixed effects method. Our results show that Russian firms benefit from the share of similar enterprises in the total city revenue and urbanization, also that these advantages differ by city type. We also find a lack of connection between the level of wages and the revenues of firms for cities within agglomerations (while for other types of cities this effect is significant and positive). We assume that this is primarily due to the role of the agglomeration center, which determines the level of wages in all cities of the agglomeration. The results show that for the optimal development of territories it is necessary to pursue a diversified regional policy.
    Keywords: spatial concentration, localization, urbanization, home market potential, Russian cities
    JEL: D24
  13. By: Lowenberg-DeBoer, James; Behrendt, Karl; Godwin, Richard; Franklin, Kit
    Abstract: Swarm robotics has the potential to radically change the economies of size in agriculture and this will impact farm size and structure in the UK. This study uses a systematic review of the economics of agricultural robotics literature, data from the Hands Free Hectare (HFH) demonstration project which showed the technical feasibility of robotic grain production, and farm-level linear programming (LP) to estimate changes in the average cost curve for wheat and oilseed rape from swarm robotics. The study shows that robotic grain production is technically and economically feasible. A preliminary analysis suggests that robotic production allows medium size farms to approach minimum per unit production cost levels and that the UK costs of production can compete with imported grain. The ability to achieve minimum production costs at relatively small farm size means that the pressure to “get big or get out” will diminish. Costs of production that are internationally competitive will mean reduced need for government subsidies and greater independence for farmers. The ability of swarm robotics to achieve minimum production costs even on small, irregularly shaped fields will reduce pressure to tear out hedges, cut infield trees and enlarge fields.
    Keywords: Agribusiness, Crop Production/Industries, Farm Management, Land Economics/Use, Research and Development/Tech Change/Emerging Technologies
    Date: 2019–05–16
  14. By: Omer Siddique (Senior Research Economist, Pakistan Institute of Development Economics, Islamabad.)
    Abstract: This paper traces Pakistan’s TFP and GDP growth from 1972 to 2019. The analysis shows that Pakistan’s TFP and economic growth have declined over time. The sectoral—agriculture, industry, and services—trends are also not different. The TFP and GDP growth rates of the total economy and the three sectors were the highest in the 1980s. In general, Pakistan's economic growth has been driven by factor accumulation, except for in the 1980s and the 2010s. The analysis further shows that whenever attempts were made to deregulate and liberalize the economy, it resulted in higher TFP growth and consequently in higher GDP growth. Similarly, macroeconomic and political stability also seems to be important factors in higher TFP and GDP growth. The comparison with other countries shows that Pakistan’s TFP growth performance has been reasonable, especially compared with India. However, the experience of other countries shows that to achieve GDP growth above 8 percent, Pakistan needs to enhance its productivity growth to 3 percent or above.
    Keywords: Total Factor Productivity, GDP Growth, Agriculture, Industry, Services
    Date: 2020
  15. By: Daraio, Cinzia; Simar, Leopold; Wilson, Paul
    Date: 2019–01–01
  16. By: Simar, Leopold; Wilson, Paul
    Date: 2019–01–01

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