nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒05‒31
seventeen papers chosen by

  1. The potential cost of methane and nitrous oxide emissions regulation in U.S. agriculture By Kabata, T., L. E. Fulginiti, and R.K. Perrin
  2. Heterogeneity, Measurement Error, and Misallocation in African Agriculture: A Comment By Fernando Aragon; Diego Restuccia; Juan Pablo Rud
  3. Transatlantic Technologies: The Role of ICT in the Evolution of U.S. and European Productivity Growth By Gordon, Robert J; Sayed, Hassan
  4. Economic performance and drivers of efficiency in the Irish crops sector (2011 – 2019) By Thorne, F.
  5. Cost Efficiency Analysis using Operating Profit Margin for the New Zealand Dairy Industry By Robbie Maris; Zack Dorner; Ryan Mills
  6. Growing Like China: Firm Performance and Global Production Line Position By Chor, Davin; Manova, Kalina; Yu, Zhihong
  7. Layoffs and Productivity at a Bangladeshi Sweater Factory By Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco; Rabbani, Atonu
  8. Combinatorial Growth with Physical Constraints: Evidence from Electronic Miniaturization By Pablo Azar
  9. Empirical Productivity Distributions and International Trade By Egger, Peter; Erhardt, Katharina; Nigai, Sergey
  10. Efficiency of small and medium-sized real estate industry -An analysis on the period after the burst of the bubble economy using micro-data By Yasuo Goto
  11. Does energy efficiency affect ambient PM2.5? The moderating role of energy investment By Cunyi Yang; Tinghui Li; Khaldoon Albitar
  12. Productivity dispersion and sectoral labour shares in Europe By Martina Lawless; Luke Rehill
  13. Judicial Efficiency and Economic Growth: Evidence based on EU data By Rizos, Anastasios; Kapopoulos, Panayotis
  14. Some Do Energy Efficiency Improvements Reduce Energy Use? Empirical Evidence on the Economy-Wide Rebound Effect in Europe and the United States By Anne Berner; Stephan Bruns; Alessio Moneta; David I. Stern
  15. Covid-19 and Firms: Productivity and Government Policies By Kozeniauskas, Nicholas; Moreira, Pedro; Santos, Cezar
  16. Does institutional quality foster economic complexity? The fundamental drivers of productive capabilities By Vu, Trung V.
  17. What do we know from the vast literature on efficiency and productivity in healthcare? A Systematic Review and Bibliometric Analysis By Kok Fong See; Shawna Grosskopf; Vivian Valdmanis; Valentin Zelenyuk

  1. By: Kabata, T., L. E. Fulginiti, and R.K. Perrin
    Abstract: Most studies on the impacts of agriculture on the environment have devoted efforts to measure the environmental impacts of the sector rather than to assess its ability to reduce or mitigate such impacts. Some have addressed the environmental efficiency of the sector (Reinhard, et al., 1999, Ball et al., 1994 and 2004; Rezek and Perrin, 2004 and Serra et al., 2011) but only few have examined greenhouse gas emissions (Njuki and Bravo-Ureta, 2015; Dakpo, Jeanneaux and Latruffe, 2016) from the sector. This paper analyzes the agricultural performance of states in the U.S. in terms of their ability to reduce emissions of methane and nitrous oxide, two major greenhouse gases (GHGs) with important global warming potential. The analysis evaluates Färe’s PAC (pollution abatement cost) for each state and year, a measure of the opportunity costs of subjecting the sector to GHG emissions regulation. Using both hyperbolic and directional distance functions to specify the technology with good and bad outputs, we find that such regulations might reduce output by an average of about 2%, though the results for individual states vary quite widely.
    Keywords: Environmental Economics and Policy, Production Economics, Productivity Analysis
    Date: 2020–12–24
  2. By: Fernando Aragon; Diego Restuccia; Juan Pablo Rud
    Abstract: Gollin and Udry (2021) estimate the contribution of mismeasurement to productivity dispersion among production units and conclude that previous studies have overestimated the potential efficiency gains from factor reallocation. We show that this conclusion is incorrect based on their own empirical evidence, which instead corroborates the importance of misallocation emphasized in the macro-development literature. We also point out important limitations in the implementation of the plot-level analysis that overstates the importance of mismeasurement in understanding productivity differences.
    Keywords: Plot, farm, misallocation, measurement error, agriculture, land institutions, distortions.
    JEL: O4
    Date: 2021–05–27
  3. By: Gordon, Robert J; Sayed, Hassan
    Abstract: We examine the role of the ICT revolution in driving productivity growth behavior for the United States and an aggregate of ten Western European nations (the EU-10) from 1977 to 2015. We find that the standard growth accounting approach is deficient when it separates sources of growth between ICT capital deepening and TFP growth, because much of the effect of the ICT revolution was channeled through spillovers to TFP growth rather than being limited to the capital deepening pathway. Using industry-level data from EU KLEMS, we find that most of the 1995-2005 U.S. productivity growth revival was driven by ICT-intensive industries producing market services and computer hardware. In contrast the EU-10 experienced a 1995-2005 growth slowdown due to a paucity of ICT investment, a failure to capture the efficiency benefits of ICT, and performance shortfalls in specific industries including ICT production, finance-insurance, retail-wholesale, and agriculture. After 2005 both the U.S. and the EU-10 suffered a growth slowdown, indicating that the benefits of the ICT revolution were temporary rather than providing a new permanent era of faster productivity growth. This joint transatlantic post-2005 slowdown is consistent with the broader view that ongoing innovation has been less potent in boosting productivity growth compared to earlier decades of the postwar era.
    Keywords: Computers; Industry Structure; Information Technology; productivity slowdown
    JEL: E01 E24 O33 O47 O51 O52
    Date: 2020–07
  4. By: Thorne, F.
    Keywords: Livestock Production/Industries, Productivity Analysis
    Date: 2021–03
  5. By: Robbie Maris (University of Waikato); Zack Dorner (University of Waikato); Ryan Mills (Dairy NZ)
    Abstract: Cost efficiency analysis has not been widely applied in the dairy industry, despite its role in driving profitability, resilience and debt serviceability in low subsidy export-oriented farming systems. We analyse cost efficiency using operating profit margin (a reliable, well-supported and easily interpretable parameter from the DuPont framework) for the first time on New Zealand dairy farms. We utilise a 10-year panel dataset, developed using sample and population data, to get a representative picture of the industry. We begin by grouping farms into quartiles of their long-run cost efficiency (10-year average) and perform non-parametric Games-Howell hypothesis testing to investigate differences in the groups. We then estimate a fixed effects panel regression model for each quartile to examine the factors correlated with cost efficiency over time within low to high performing groups. We find cost-efficient farms use less supplement and nitrogen fertiliser over the long run, milk price fluctuations disproportionately impact lower quartile groups, and farms may be able to reduce GHG emissions whilst maintaining strong cost efficiency. Our exercise demonstrates that analysing cost efficiency using operating profit margin can produce valuable insights for low subsidy export-oriented agricultural industries.
    Keywords: cost efficiency;dairy industry;New Zealand;operating profit margin;panel data
    JEL: C12 C23 Q12
    Date: 2021–05–20
  6. By: Chor, Davin; Manova, Kalina; Yu, Zhihong
    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: China; Firm Heterogeneity; firm lifecycle; global value chains; Production line position; Upstreamness
    JEL: F10 F14 F23 L23 L24 L25
    Date: 2020–08
  7. By: Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco; Rabbani, Atonu
    Abstract: Conflicts between management and workers are common and can have significant impacts on productivity. We study how workers in a large Bangladeshi sweater factory responded to management's decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers had social connections â?? \textit{friends} â?? that matters. We also provide suggestive evidence of deliberate shading of performance by workers in order to punish the factory's management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory's internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the firm emerges as a web of interconnected relational agreements supported by social connections.
    Keywords: layoffs; Morale; productivity; Relational Contracts
    JEL: J50 M50 O12
    Date: 2020–07
  8. By: Pablo Azar
    Abstract: In the past sixty years, transistor sizes and weights have decreased by 50 percent every eighteen months, following Moore’s Law. Smaller and lighter electronics have increased productivity in virtually every industry and spurred the creation of entirely new sectors of the economy. However, while the effect of the increasing quality of computers and electronics on GDP has been widely studied, the question of how electronic miniaturization affects economic growth has been unexplored. To quantify the effect of electronic miniaturization on GDP, this paper builds an economic growth model that incorporates physical constraints on firms’ production sets. This model allows for new types of productivity spillovers that are driven by products’ physical characteristics. Not only are there spillovers from changes in industry productivity, but also, there can be “size spillovers,” where the miniaturization of one industry’s product leads to miniaturization of products that are downstream in the supply chain, reflecting how transistor miniaturization has led to the decrease in size of a large variety of electronic products. Using a new data set of product weights and sizes, we test the predictions of the model and show that Moore’s Law accounts for approximately 3.5 percent of all productivity growth in the 1982-2007 period, and for 37.5 percent of the productivity growth in heavy manufacturing industries. The results are robust under multiple specifications, and increase in strength during the 1997-2007 subperiod.
    Keywords: economic growth; productivity; electronic miniaturization
    JEL: O30 O40 E00
    Date: 2021–05–01
  9. By: Egger, Peter; Erhardt, Katharina; Nigai, Sergey
    Abstract: We use firm-level data for 15 countries and 13 manufacturing sectors to estimate firm-level productivity parameters and to establish representative country-sector-specific empirical productivity distributions. We use these distributions against the backdrop of multi-sector versions of the models of Eaton and Kortum (2002) and Melitz (2003) to quantify the role of technology in shaping international trade flows. We find that, on average, absolute advantage measured as productivity differences across countries within sectors explains 15% and 21% of the total variation in bilateral trade shares in the models of Eaton and Kortum (2002) and Melitz (2003), respectively. In contrast, on average, comparative advantage measured as productivity differences across sectors within countries explains 39% and 47% of the variation in trade flows in these two models. We also demonstrate that empirical productivity distributions entail quantitatively important micro-to-macro implications for marginal responses of trade flows to changes in trade costs, for gravity-type estimation of trade models, and for comparative statics isomorphism between the customarily parameterized models of international trade. We confirm the predictions of the two aforementioned models under empirical productivity distributions in the data.
    Keywords: Empirical trade analysis; Productivity distributions; Quantitative trade analysis; technology
    JEL: F1 F10 F12
    Date: 2020–08
  10. By: Yasuo Goto (Faculty of Social Innovation, Seijo University)
    Abstract: The real estate industry is a typical industry that suffered the most damage from the bursting of the bubble economy in Japan and seems to have not yet completely recovered from the severe situation overall. In this article we analyse the industry using comprehensive database which incorporate huge number of small and medium-sized enterprises. We confirmed that the real estate industry as a whole is not in a bad situation, but that the smallest tiers are performing poorly. It can be interpreted as not because of the large number of inefficient firms, but because of the high degree of inefficiency, in terms of inefficiency of firms which is evaluated with the criteria for “zombie” firm in this article. The average profit margin of SMEs in the real estate industry is relatively low, however, the proportion of zombie firms is not necessarily high. The problem is not the ratio of the number of zombies but the performance of zombies in the smallest class. In the real estate industry, relatively large-scale class generally has become out of the post-bubble situation. Improving the profitability of the smallest tier seems to be an unavoidable challenge for improving the performance of the industry as a whole.
    Keywords: firm dynamics, zombie firm, profit margin, bubble economy, small and medium-sized enterprises (SMEs), size-dependent policy
    JEL: P43 L25 M13 G32
    Date: 2021–05
  11. By: Cunyi Yang; Tinghui Li; Khaldoon Albitar
    Abstract: The difficulty of balance between environment and energy consumption makes countries and enterprises face a dilemma, and improving energy efficiency has become one of the ways to solve this dilemma. Based on data of 158 countries from 1980 to 2018, the dynamic TFP of different countries is calculated by means of the Super-SBM-GML model. The TFP is decomposed into indexes of EC (Technical Efficiency Change), TC (Technological Change) and EC has been extended to PEC (Pure Efficiency Change) and SEC (Scale Efficiency Change). Then the fixed effect model and fixed effect panel quantile model are used to analyze the moderating effect and exogenous effect of energy efficiency on PM2.5 concentration on the basis of verifying that energy efficiency can reduce PM2.5 concentration. We conclude, first, the global energy efficiency has been continuously improved during the sample period, and both of technological progress and technical efficiency have been improved. Second, the impact of energy efficiency on PM2.5 is heterogeneous which is reflected in the various elements of energy efficiency decomposition. The increase of energy efficiency can inhibit PM2.5 concentration and the inhibition effect mainly comes from TC and PEC but SEC promotes PM2.5 emission. Third, energy investment plays a moderating role in the environmental protection effect of energy efficiency. Fourth, the impact of energy efficiency on PM2.5 concentration is heterogeneous in terms of national attribute, which is embodied in the differences of national development, science & technology development level, new energy utilization ratio and the role of international energy trade.
    Date: 2021–05
  12. By: Martina Lawless; Luke Rehill
    Abstract: The stability of the labour share of income is a fundamental feature of macroeconomic models, with broad implications for the shape of the production function, inequality, and macroeconomic dynamics. However, empirically, this share has been slowly declining in many countries for several decades, though its causes are subject of much debate. This paper analyses the drivers of labour share developments in Europe at a sectoral level. We begin with a simple shift-share analysis which demonstrates that the decline across countries has been primarily driven by changes within industries. We then use aggregated microdata from CompNet to analyse drivers of sector-level labour shares and to decompose their effects into shifts in the sector average or reallocation of resources between firms. Our main findings are that the advance of globalisation and the widening productivity gap between “the best and the rest” have negative implications for the labour share. We also find that most of the changes are due to reallocation within sectors providing support for the “superstar firms” hypothesis. The finding that globalisation has had a negative impact on the labour share is of relevance for policy in the context of the current backlash against globalisation and reinforces the need to ensure benefits of globalisation and productivity are passed on to workers.
    Keywords: globalisation, labour shares, productivity
    JEL: E25 O40 F62
    Date: 2021–05–26
  13. By: Rizos, Anastasios; Kapopoulos, Panayotis
    Abstract: The growth-enhancing property of a well-functioned judicial system is documented on the back of the safeguarding of property rights and legal investor protection, the well-functioning of financial markets, the support to entrepreneurship and the upholding of the firm growth. We investigate the effects of judicial efficiency on economic growth, using a new dataset over the period 2010-2018 drawn by the EU Justice Scoreboard study. More specifically, we estimate a static growth equation controlling for alternative judicial efficiency measures. Our findings corroborate that the inefficiencies in the operation of judicial systems pose obstacles to economic growth, and consequently, positive developments in judicial efficiency can be growth enhancing. Specifically, inefficiencies in the operation of judicial systems, measured alternatively as (a) lengthier court proceedings, (b) lower rates of clearance of accumulated unresolved cases, (c) increasing burden of pending cases and (d) a high inflow of new cases, all undermine economic growth. Our results justify the further adoption of judicial reforms in European Union members, that strengthen the enforcement of private contracts, incentivizing the domestic and external investment decisions and supporting the European economies to achieve and sustain robust growth rates. Finally, we find that civil origin legal systems, which are characterized by a higher degree of formalism in judicial procedures relative to common law origin systems, hinder economic growth.
    Keywords: judicial efficiency, economic growth, disposition time, clearance rate, caseload
    JEL: C23 C26 K40 O43
    Date: 2021–05
  14. By: Anne Berner; Stephan Bruns; Alessio Moneta; David I. Stern
    Abstract: Improving energy efficiency is often considered to be one of the keys to reducing greenhouse gas emissions. However, efficiency gains also reduce the cost of energy services and may even reduce the price of energy, resulting in energy use rebounding and potential energy use savings being eaten up. There is only limited empirical research quantifying the economy-wide rebound effect that takes the dynamic economic responses to energy efficiency improvements into account. We use a Structural Factor-Augmented Vector Autoregressive model (S-FAVAR) that allows us to track how energy use changes in response to an energy efficiency improvement while accounting for a vast range of potential confounders. Our findings point to economy-wide rebound effects of 78% to 101% after two years in France, Germany, Italy, the U.K., and the U.S. These findings imply that energy efficiency innovations alone may be of limited help in reducing future energy use and emphasize the importance of tackling carbon emissions directly.
    Keywords: Energy efficiency; economy-wide rebound effect; climate change; climate policy; Structural FAVAR; Independent Component Analysis.
    Date: 2021–05–27
  15. By: Kozeniauskas, Nicholas; Moreira, Pedro; Santos, Cezar
    Abstract: This paper investigates how the Covid-19 pandemic has affected firms and which firms have benefited from government support. Using a panel survey of Portuguese firms conducted during the pandemic matched with pre-Covid administrative data, the results show that the shock was large, but heterogeneous across firms. Though most firms experienced declines in sales, high productivity firms were more likely to remain open, less likely to cut employment and made less use of government support.
    Date: 2020–08
  16. By: Vu, Trung V.
    Abstract: It is well established in the long-term development literature that deeply rooted institutions are the fundamental drivers of comparative prosperity across the world. This study contributes to this line of inquiry by investigating the extent to which the quality of institutions helps shape international differences in economic complexity – a novel measure of productive capabilities. More specifically, economic complexity corresponds to an enhanced capacity to produce and export a diverse range of sophisticated (high-productivity) products, which is highly predictive of future patterns of growth and development. The central hypothesis is that institutions are linked to higher degrees of economic complexity via strengthening incentives for innovative entrepreneurship, fostering human capital accumulation, and directing human resources towards productive activities. Employing data for up to 115 countries, I consistently obtain precise estimates of the positive effects of institutional quality, measured by the Economic Freedom of the World Index, on economic complexity. The findings highlight the important role of establishing well-functioning institutions in driving structural transformation towards productive activities, which contributes to alleviating the persistence of underdevelopment.
    Keywords: Institutions,Economic freedom,Economic complexity,Productive capabilities
    JEL: O43 O11 H11
    Date: 2021
  17. By: Kok Fong See (Universiti Sains Malaysia, Malaysia); Shawna Grosskopf (Oregon State University, United States); Vivian Valdmanis (Western Michigan University, United States); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: Not only does healthcare play a key role in a country’s economy, but it is also one of the fastest-growing sectors for most countries, resulting in rising expenditures. In turn, efficiency and productivity analyses of the healthcare industry have attracted attention from a wide variety of interested parties, including academics, hospital administrators, and policy makers. As a result, a very large number of studies of efficiency and productivity in the healthcare industry have appeared over the past three decades in a variety of outlets. In this paper, we conduct a comprehensive and systematic review of these studies with the aid of modern machine technology learning methods for bibliometric analysis. This approach facilitated our identification and analysis and allowed us to reveal patterns and clusters in the data from 477 efficiency and productivity articles associated with the healthcare industry from 1983 to 2019, produced by nearly 1000 authors and published in a multitude of academic journals. Leveraging on such ‘biblioanalytics’, combined with our own understanding of the field, we then highlight the trends and possible future of efficiency and productivity studies in healthcare.
    Date: 2021–05

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.