nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒02‒08
thirteen papers chosen by

  1. Dynamic and Non-Neutral Productivity Effects of Foreign Ownership: A Nonparametric Approach By Yoonseok Lee; Mary E. Lovely; Hoang Pham
  2. The UK's great demand and supply recession By Jacob, Nick; Mion, Giordano
  3. Labour-augmenting technical change data for alternative elasticities of substitution, growth, slowdown, and distribution dynamics By Ziesemer, Thomas
  4. Value efficiency and its decomposition into direct price and quantity effects By Jean-Philippe Boussemart; Hervé Leleu; Raluca Parvulescu
  5. Trade, productivity and (mis)allocation By Berthou, Antoine; Jong-Hyun Chung, John; Manova, Kalina; Sandoz Dit Bragard, Charlotte
  6. Crop Selection and International Differences in Aggregate Agricultural Productivity By Jorge Alvarez; Claudia Berg
  7. Estimating Production Functions in Differentiated-Product Industries with Quantity Information and External Instruments By de Roux, Nicolás; Eslava, Marcela; Franco, Santiago; Verhoogen, Eric
  8. Import competition, heterogeneous preferences of managers and productivity By Chen, Cheng; Steinwender, Claudia
  9. Changing Relationship between Farm Size and Productivity and Its Implications for Philippine Agriculture By Keijiro Otsuka
  10. Growing like China: firm performance and global production line position By Davin Chor; Kalina Manova; Zhihong Yu
  11. The Impact of Covid-19 on Productivity By Nicholas Bloom; Philip Bunn; Paul Mizen; Pawel Smietanka; Gregory Thwaites
  12. Are bigger banks better? Firm-level evidence from Germany By Kilian Huber
  13. The productivity paradox- policy lessons from MICROPROD By Grégory Claeys; Maria Demertzis

  1. By: Yoonseok Lee (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Mary E. Lovely (Department of Economics, Maxwell School, Syracuse University, 110 Eggers Hall, Syracuse, NY 13244); Hoang Pham (Oregon State University)
    Abstract: This paper studies two novel productivity characteristics of foreign acquisition on high-tech manufacturing firms: the dynamic and the non-Hicks-neutral effects. A dynamic productivity effect of foreign ownership arises when adoption of foreign technology and management practices takes time to fully realize. Furthermore, these dynamic adjustments may be capital or labor augmenting as adoption of advanced production technologies tends to have non-neutral productivity implications in developed countries. We propose and implement an econometric framework to estimate both effects using firm-level data from China's manufacturing sector. Our framework extends the nonparametric productivity framework developed by Gandhi, Navarro and Rivers (2020), in which identification is achieved using a firm's first-order conditions and timing assumptions. We find strong evidence of dynamic and non-neutral effects from foreign ownership, with significant differences across investment sources. Investment from OECD sources is found to provide a long-term productivity boost for all but the largest recipients, while that from Hong Kong, Macau and Taiwan does not raise performance. These findings have implications for China's declining labor share and for the rising domestic value-added content of its high-tech exports
    Keywords: Foreign Direct Investment, Productivity Dynamics, Non-Hicks-Neutral Effect, China's Manufacturing Sector, Nonparametric Model
    JEL: F23 D24 L25 C51 F61 P33 L60
    Date: 2021–01
  2. By: Jacob, Nick; Mion, Giordano
    Abstract: We revisit UK’s poor productivity performance since the Great Recession by means of both a suitable theoretical framework and firm-level prices and quantities data for detailed products allowing us to both measure demand, and its changes over time, and distinguish between quantity total factor productivity (TFP-Q), i.e., the capacity to turn inputs into more physical output (number of shirts, liters of beer), and what we call revenue total factor productivity (TFP-R), i.e., productivity calculated using revenue (or value-added) as a measure of output and so the capacity to turn inputs into more revenue. This in turn allows us to measure how changes in TFP-Q, demand and markups ultimately affected revenue TFP, as well as labour productivity, over the Great Recession. Our findings suggest that the poor UK firms’ productivity performance post-recession is due to both a weakening of demand and a decreasing TFPQ pushing down sales, markups, revenue TFP and labour productivity.
    Keywords: total factor productivity (TFP); revenue TFP; prices; demand; great recession; United Kingdom
    JEL: D24 L11 E01 O47 O52
    Date: 2020–12
  3. By: Ziesemer, Thomas (UNU-MERIT, Maastricht University)
    Abstract: We solve the standard production function with constant elasticity of substitution (CES) for its labour augmenting technology term. We make capital stock data and insert them together with data from Penn World Tables (PWT9.1). This provides labour augmenting technology levels and growth rates for alternative elasticities of substitution for 70 countries, 1950-2017. The percentage growth rates of labour-augmenting technical change (LATC) are shown to fall over time (productivity slowdown) for all elasticity values in a panel data analysis. They converge to a panel average of 2.67% and 1% depending on the inclusion of human capital and the elasticity of substitution assumed. The standard growth result of a GDP growth rate equal to that of LATC and labour input holds only for LATC based on low elasticities of substitution indicating that the economies are not in steady-states. The correlation of LATC growth rates with total factor productivity growth from PWT9.1 is strongest (0.893) for LATC data based on an elasticity of substitution of 0.8. Matching the labour/capital share ratios from CES functions with those of PWT9.1 reveals a range of elasticities of substitution for each country, mostly between 0.8 and 1.2 or somewhat lower for developing countries. If the MPL-to-wage ratio is 1.6, the elasticities of substitution vary around 0.8. Using the human-capital corrected LATC growth with CES = 0.8, 13 of 69 countries have a productivity slowdown defined as growth rate below mean in the long run; the USA is not among them indicating that the US productivity slowdown is mainly one of human capital. Dynamics of coefficient of variation and kernel density distributions for LATC growth rates shows that there is neither technological convergence nor divergence.
    Keywords: technical change, growth, productivity slowdown, convergence
    JEL: O33 O47
    Date: 2021–01–21
  4. By: Jean-Philippe Boussemart (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France); Hervé Leleu (IESEG School of Management, CNRS, Univ. Lille, UMR 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France); Raluca Parvulescu (IESEG School of Management, UMR CNRS 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France)
    Abstract: Based on the idea that in real markets firms have some freedomto set their output prices and negotiate input unit costs, this paper introduces a new approach for value efficiency decomposition as the product of direct price and quantity effects. Our framework relies on the axiomatization of a value transformation set on which quantity, price and value distance functions can be defined. The methodology developed allows for variousdegrees of dependency between quantity and price as well as for different degrees of freedom in price setting. The value efficiency decomposition can encompass all traditional measures such as cost, revenue, profit and profitability efficiencies. An application on French cattle farms illustrates the appeal of our approach for practitioners.
    Keywords: Data envelopment analysis, value transformation set, value efficiency, direct price efficiency.
    JEL: D24 C43
    Date: 2021–01
  5. By: Berthou, Antoine; Jong-Hyun Chung, John; Manova, Kalina; Sandoz Dit Bragard, Charlotte
    Abstract: We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.
    Keywords: international trade; export demand; import competition; productivity; allocative efficiency; misallocation
    JEL: F10 F14 F43 O24 O40 O47
    Date: 2020–01
  6. By: Jorge Alvarez; Claudia Berg
    Abstract: A large share of cross-country differences in productivity is explained by differences in agricultural productivity. Using a combination of sub-national agricultural statistics and geospatial datasets on crop-specific potential yields, we study the main drivers of this variation from a macroeconomic perspective. We find that differences in geographically-induced crop-specific comparative advantages can explain a substantial share of the variation in yields across the world. Data reveal substantial gaps between potential and observed yields in most countries. When decomposing these within country gaps, we find that crop selection gaps are on average larger than those induced by input usage alone. The results highlight the importance of understanding the interaction of geography and crop selection drivers in assessing aggregate agricultural productivity differences.
    Keywords: Agricultural sector;Agroindustries;Personal income;Agricultural commodities;Labor;WP,potential yield,crop selection
    Date: 2019–08–16
  7. By: de Roux, Nicolás (Universidad de los Andes); Eslava, Marcela (Universidad de los Andes); Franco, Santiago (University of Chicago); Verhoogen, Eric (Columbia University)
    Abstract: This paper develops a new method for estimating production-function parameters that can be applied in differentiated-product industries with endogenous quality and variety choice. We take advantage of data on physical quantities of outputs and inputs from the Colombian manufacturing survey, focusing on producers of rubber and plastic products. Assuming constant elasticities of substitution of outputs and inputs within firms, we aggregate from the firm-product to the firm level and show how quality and variety choices may bias standard estimators. Using real exchange rates and variation in the "bite" of the national minimum wage, we construct external instruments for materials and labor choices. We implement a simple two-step instrumental-variables method, first estimating a difference equation to recover the materials and labor coefficients and then estimating a levels equation to recover the capital coefficient. Under the assumption that the instruments are uncorrelated with firms' quality and variety choices, this method yields consistent estimates, free of the quality and variety biases we have identified. Our point estimates differ from those of existing methods and changes in our preferred productivity estimator perform relatively well in predicting future export growth.
    Keywords: production-function estimation, quality, variety, external instruments
    JEL: L1 D24 O14 L65
    Date: 2020–12
  8. By: Chen, Cheng; Steinwender, Claudia
    Abstract: When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.
    Keywords: import competition; productivity; family firms; managers
    JEL: D23 F14 L21 L22
    Date: 2020–01
  9. By: Keijiro Otsuka (Graduate School of Economics, Kobe University; Graduate School of Economics, Kobe University)
    Abstract: No controversy in the history of agricultural economics is more perennial than the relationship between farm size and productivity. While the dominant view has been the inverse relationship (IR), particularly when the productivity is measured by gross value of output or physical yield per hectare, several studies found the positive and U-shaped relationships between farm size and productivity. Furthermore, there is evidence that IR has been weakened, particularly in rapidly-growing countries in Asia. This study's primary purpose is to identify causes for the different and changing relationships between farm size and productivity based on a literature review. The second purpose of this study is to review farm size changes over time among selected Asian countries to examine how farm size changes are related to the changing farm size-productivity relationship or the changing advantage of small vs. large farms. The third purpose is to draw policy implications of the changing farm size-productivity relationships for the future of Philippine agriculture.
    Date: 2021–02
  10. By: Davin Chor; Kalina Manova; Zhihong Yu
    Abstract: Global value chains have fundamentally transformed international trade and development in recent decades. We use matched firm-level customs and manufacturing survey data, together with Input-Output tables for China, to examine how Chinese firms position themselves in global production lines and how this evolves with productivity and performance over the firm lifecycle. We document a sharp rise in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 1992-2014 period, both in the aggregate and within firms over time. Firms span more stages as they grow more productive, bigger and more experienced. This is accompanied by a rise in input purchases, value added in production, and fixed cost levels and shares. It is also associated with higher profits though not with changing profit margins. We rationalize these patterns with a stylized model of the firm lifecycle with complementarity between the scale of production and the scope of stages performed.
    Keywords: Global value chains, production line position, upstreamness, firm heterogeneity, firm lifecycle, China
    JEL: F10 F14 F23 L23 L24 L25
    Date: 2020–09
  11. By: Nicholas Bloom; Philip Bunn; Paul Mizen; Pawel Smietanka; Gregory Thwaites
    Abstract: We analyze the impact of Covid-19 on productivity in the United Kingdom using data derived from a large monthly firm panel survey. Our estimates suggest that Covid-19 will reduce TFP in the private sector by up to 5% in 2020 Q4, falling back to a 1% reduction in the medium term. Firms anticipate a large reduction in ‘within-firm’ productivity, primarily because measures to contain Covid-19 are expected to increase intermediate costs. The negative ‘within-firm’ effect is partially offset by a positive ‘between-firm’ effect as low productivity sectors, and the least productive firms among them, are disproportionately affected by Covid-19 and consequently make a smaller contribution to the economy. In the longer run, productivity growth is likely to be reduced by diminished R&D expenditure and diverted senior management time spent on dealing with the pandemic.
    JEL: E0 L2
    Date: 2020–12
  12. By: Kilian Huber
    Abstract: The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in post-war Germany. I show that firms did not grow faster after their relationship banks became bigger. In fact, opaque borrowers grew more slowly. The enlarged banks did not increase profits or efficiency, but worked with riskier borrowers. Bank managers benefited through higher salaries and media attention. The paper presents newly digitized microdata on German firms and their banks. Overall, the findings reveal that bigger banks do not always raise real growth and can actually harm some borrowers.
    Keywords: bank regulation, big banks, bank size, economic growth, Brexit, economic geography, employment, globalisation, productivity,technological change
    JEL: E24 E44 G21 G28
    Date: 2020–12
  13. By: Grégory Claeys; Maria Demertzis
    Abstract: This Policy Contribution is an output from the MICROPROD project, which received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement no. 822390. Productivity growth in Europe has been on a downward trend for several decades. Given that productivity growth is a crucial source of output growth, particularly in an aging society like the European Union, it is crucial to understand what is driving this...
    Date: 2021–01

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