nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒01‒25
ten papers chosen by

  1. Farm eco-efficiency: Can sustainable intensification make the difference? By Weltin, Meike; Hüttel, Silke
  2. Global Value Chains and Productivity: Micro Evidence from Estonia By Hang T. Banh; Philippe Wingender; Cheikh A. Gueye
  3. Can older workers stay productive? The role of ICT skills and training By Jong-Wha Lee; Do Won Kwak; Eunbi Song
  4. What to Make of the Kaldor-Verdoorn Law? By Deepankar Basu; Manya Budhiraja
  5. The Role of temperature, Precipitation and CO2 emissions on Countries’ Economic Growth and Productivity By Rigas, Nikos; Kounetas, Konstantinos
  6. Promoting the diffusion of technology to boost productivity and well-being in Korea By Mathilde Pak
  7. Digital Capital and Superstar Firms By Prasanna Tambe; Lorin Hitt; Daniel Rock; Erik Brynjolfsson
  8. Unit Labor Costs and Manufacturing Sector Performance in Africa By Karmen Naidoo; Léonce Ndikumana
  9. An unobserved components model of total factor productivity and the relative price of investment By Joshua C.C. Chan; Edouard Wemy
  10. Technology, demand, and productivity: what an industry model tells us about business cycles By Molnarova, Zuzana; Reiter, Michael

  1. By: Weltin, Meike; Hüttel, Silke
    Abstract: Sustainable intensification measures promise ecological improvements of farming while maintaining profitability. That is, farms should be able to produce at a higher ecological efficiency without losses in economic efficiency. Based on a theoretical framework, we investigate this promise empirically by analysing the environmental improvement potential of sustainable intensification. We thereby focus on quantifying biodiversity gains using a directional meta-frontier approach and farm survey data from the northern German Plain. We compare eco-efficiency scores in an ecological direction between adopters and matched non-adopters to identify the causal relationship between these gains and sustainable intensification. We find that adopters determine the system frontier. Despite higher mean eco-efficiency scores, most adopters do not yet fully exploit the potential of ecological improvements through sustainable intensification.
    Keywords: environmental sustainability,eco-efficiency,directional data envelopment analysis,matching
    JEL: Q12 Q15 Q57
    Date: 2019
  2. 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.
    Keywords: Global value chains;Productivity;Exports;Industrial productivity;Labor productivity;WP,GVC participation,production function,export firm
    Date: 2020–07–03
  3. By: Jong-Wha Lee; Do Won Kwak; Eunbi Song
    Abstract: This paper quantitatively examines the effects of aging on labor productivity using individual worker data in Korea. We find that attainment of information and communications technology (ICT) skills and participation in job-related training can help older workers stay productive. The estimation results present that ICT skills attainment has a positive effect on the wages of the older workers aged 50–64 with a high level of education or in a skill-intensive occupation. Job training also has a significant positive effect on the wages of older workers. Even compared to younger workers, older well-educated workers can be more productive through higher ICT skills attainment and job-training participation. The evidence suggests that a productivity decrease in line with the aging process can be mitigated by training aging workers to equip themselves with ICT skills.
    Keywords: aging, education, information and communications technology, productivity, skill, training
    JEL: J14 J24 J31 O47
    Date: 2021–01
  4. By: Deepankar Basu (Department of Economics, University of Massachusetts Amherst); Manya Budhiraja (Department of Economics, University of Massachusetts Amherst)
    Abstract: The Kaldor-Verdoorn law refers to a positive but less than one-for-one relationship between the growth rates of output and labor productivity, with causality running from the former to the latter. Empirical research has affirmed such a relationship and have found that the Kaldor-Verdoorn coefficient lies between 0 and 1. But the interpretation of this finding remains unclear. In this paper, we present a model to derive the Kaldor-Verdoorn law. Our results show that the Kaldor-Verdoorn coefficient is jointly determined by the elasticity of factor substitution, labor supply elasticity, the profit share and the increasing returns to scale (or demand-induced technical change) parameter. Hence, estimated Kaldor-Verdoorn coefficients cannot be used, on their own, to infer the presence of aggregate increasing returns to scale - other than in very special cases. We also show that, perhaps surprisingly, an economy without aggregate increasing returns to scale (or without any demand-induced technical progress) can generate a Kaldor-Verdoorn coefficient that lies between 0 and 1.
    Keywords: Aggregate productivity, Kaldor-Verdoorn coefficient, labor supply elasticity, CES production function.
    JEL: E12 O4
    Date: 2020
  5. By: Rigas, Nikos; Kounetas, Konstantinos
    Abstract: The world's climate has already changed measurably in response to accumulated greenhouse gases emissions. These changes, as well as projected future disruptions, such as increase of temperature, have prompted intense research. A significant body of literature on climate change and economic growth signifies a negative relationship between the two. However, considerable uncertainty surrounds the effect of increasing temperatures combined with releases of anthropogenic emissions to the atmosphere. By applying detailed country level data in the 1961-2013 period this paper documents the relationship between weather variables, CO2emissions, share of renewable energy sources, gross domestic product and total factor productivity in a standard Cobb-Douglas production function by using an instrumental variable approach. Our findings suggest that economic growth has been positively affected by temperature and CO2emissions, while climate vulnerability varies significantly between rich-poor countries. Furthermore, as soon as we take into account renewable sources as an instrument, the negative effect on CO2 emissions demonstrates its impact for optimal environmental policies design. Finally, our results also provide evidence for the existence of an inverted U-shaped relationship for temperature and emissions.
    Keywords: Climate Change, Countries' TFP, CO2 emissions, Renewable Energy Sources, Temperature.
    JEL: C26 Q40 Q54
    Date: 2021
  6. By: Mathilde Pak
    Abstract: Korea is a top player in emerging digital technologies, with an outstanding digital infrastructure and a dynamic ICT sector. The COVID-19 outbreak highlighted the importance of digitalisation to contain the spread of the virus, by allowing quick testing and tracing of infected people, and spurred the development of the "untact economy". Remote access both facilitated physical distancing and mitigated the economic impact of the crisis by enabling more people to continue working. Digital technologies offer opportunities to raise firms’ productivity and the population’s well-being. However, wide productivity gaps between large firms and SMEs and between manufacturing and services weigh on economy-wide productivity, which is far below the OECD average. A wide skills gap between youth and older generations prevents an increasing share of the population from taking part in and enjoying the benefits from a digitalised economy. This paper suggests ways to narrow the digital divide by enhancing the diffusion of digital technologies among firms and among individuals. Increased participation in quality ICT education and training for students, teachers, SME workers and older people is key to address the lack of adequate skills and awareness of digital benefits or dangers (online security, cyberbullying, addiction). Promoting innovation networks between SMEs, academia and large firms through vouchers or platforms can support SMEs’ R&D and commercialisation of innovative goods and services. Waiving stringent regulations through regulatory sandboxes can help identify and alter regulations that hinder the adoption and diffusion of digital technologies.
    Keywords: COVID-19, digital divide, Korea, productivity, regulatory sandboxes, SMEs, well-being
    JEL: I31 J24 L25 L51 O3
    Date: 2021–01–21
  7. By: Prasanna Tambe; Lorin Hitt; Daniel Rock; Erik Brynjolfsson
    Abstract: General purpose technologies like information technology typically require complementary firm-specific investments to create value. These complementary investments produce a form of capital, which is typically intangible and which we call digital capital. We create an extended firm-level panel on IT labor investments (1990-2016) using data from LinkedIn. We then apply Hall’s Quantity Revelation Theorem to compute both prices and quantities of digital capital over recent decades. We find that 1) digital capital prices vary significantly over time, peaking around the dot-com boom in 2000, 2) significant digital capital quantities have accumulated since the 1990s, with digital capital accounting for at least 25% of firms’ assets by the end of our panel, 3) that digital capital has disproportionately accumulated in a small subset of “superstar” firms and its concentration is much greater than the concentration of other assets, and 4) that digital capital accumulation predicts firm-level productivity about three years in the future.
    JEL: D24 D25 M21 O32 O33
    Date: 2020–12
  8. By: Karmen Naidoo (University of Massachusetts Amherst, USA); Léonce Ndikumana (University of Massachusetts Amherst, USA)
    Abstract: Several studies have highlighted that African manufacturing wages are higher than countries at similar levels of development, which contributes to the continent’s lower levels of manufacturing competitiveness. This paper derives unit labor costs – average wages relative to productivity – for two-digit manufacturing sectors across a wide range of developed and developing countries over the 1990-2015 period. We benchmark the unit labor costs to China and estimate the relationship between relative unit labor costs and manufacturing sector value added, employment, investment and exports. We find that relative unit labor costs have a smaller effect on manufacturing performance in Africa relative to other developing regions. Further, we find that for Africa, the level and growth of labor productivity have a quantitatively stronger and more robust effect on manufacturing performance than the level and growth of real wages. The results have important implications for industrial policy in African countries.
    Keywords: labor costs; productivity; manufacturing; exports; investment; Africa; China
    JEL: O14 L60 E24 J30
    Date: 2020
  9. By: Joshua C.C. Chan; Edouard Wemy
    Abstract: This paper applies the common stochastic trends representation approach to the time series of total factor productivity and the relative price of investment to investigate the relationship between neutral technology and investment-specific technology. The permanent and transitory movements in both series are estimated efficiently via MCMC methods using band matrix algorithms. The results indicate that total factor productivity and the relative price of investment are, each, well-represented by an integrated process of order one. In addition, their time series share a common trend component that we interpret as reflecting changes in General Purpose Technology. These results suggest that (1) the traditional view of assuming that neutral technology and investment-specific technology follow independent processes is not supported by the features of the time series and (2) advances in information and communication technologies are general purpose technological progress that drive the trend in aggregate TFP in the United States.
    Keywords: Business cycles, Investment-specific technological change, Total Factor Productivity, Unobserved Components Model
    JEL: E22 E32 C32
    Date: 2020–12
  10. By: Molnarova, Zuzana (Institute for Advanced Studies, Vienna, Austria); Reiter, Michael (Institute for Advanced Studies, Vienna, Austria)
    Abstract: In this paper, we study the relative importance of demand and technology shocks in generating business cycle fluctuations, both at the aggregate level and at the level of individual industries. We construct a New Keynesian DSGE model that is highly disaggregated at the industry level with an input-output network structure. Measured productivity in the model fluctuates in response to both technology and demand shocks due to endogenous factor utilization. We estimate the model by the simulated method of moments using U.S. industry data from 1960 to 2005. We find that the aggregate technology shock has zero variance. Exogenous shocks to technology are necessary for our model to fit the data, but these shocks are exclusively industry-specific, uncorrelated across industries. The bulk of the aggregate fluctuations, including those in aggregate measured productivity, are explained through shocks to aggregate demand. This shock structure is supported by a host of information from the disaggregate data. Our second finding is that about half of the decrease in the cyclicality of measured productivity in the U.S. after the mid-1980s can be explained by the reduction in the size of demand shocks, in line with the narrative of the great moderation.
    Keywords: Business cycles, productivity, industries, factor utilization, input-output linkages, networks
    JEL: E32 E24 E37
    Date: 2021–01

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