nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒06‒28
fourteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Can You Teach an Old Dog New Tricks? New Evidence on the Impact of Tenure on Productivity By Gagliardi, Nicola; Grinza, Elena; Rycx, Francois
  2. Cap-and-trade and produce at least cost? Investigating firm behaviour in the EU ETS By Zarkovic, Maja
  3. roductivity Slowdown and MNEs' Intangibles: where is productivity measured? By Jean-Charles Bricongne; Samuel Delpeuch; Margarita Lopez Forero
  4. Productivity and Employment in APAC Economies: A Comparison with the EU Using Firm-Level Information By Mauro, Filippo di; Hoang, Minh Duy; Morgan, Peter
  5. Employee training and firm performance: Evidence from ESF grant applications By Pedro S. Martins
  6. Unobserved technological heterogeneity among German electricity distribution network operators - a latent class analysis By Just, Lisa
  7. Can European businesses achieve productivity gains from investments in energy efficiency? By Kalantzis, Fotios; Niczyporuk, Hanna
  9. The effects of cross-border acquisitions on firms’ productivity in the EU By Gregori, Wildmer Daniel; Martinez Cillero, Maria; Nardo, Michela
  10. Misallocation in Open Economy By Maria D. Tito; Ruoying Wang
  11. Capital-Reallocation Frictions and Trade Shocks By Lanteri, Andrea; Medina, Pamela; Tan, Eugene
  12. Technological Change and Obsolete Skills: Evidence from Men’s Professional Tennis By Ian Fillmore; Jonathan Hall
  13. Is government debt good or bad for labor productivity? A dynamic panel analysis over 1972-2019 By Carvelli, Gianni; Trecroci, Carmine
  14. Agricultural productivity and land inequality. Evidence from the Philippines By Bequet, Ludovic

  1. By: Gagliardi, Nicola (Free University of Brussels); Grinza, Elena (University of Milan); Rycx, Francois (Free University of Brussels)
    Abstract: In this paper, we explore the impact of workers' tenure on firm productivity, using rich longitudinal matched employer-employee data on private Belgian firms. We estimate a production function augmented with a firm-level measure of tenure. We deal with endogeneity, which arises from unobserved firm heterogeneity and reverse causality, by applying a modified version of Ackerberg et al.'s (2015) control function method, which explicitly removes firm fixed effects. Consistently with recent theoretical predictions, we find that tenure exhibits an inverted-U-shaped relationship with respect to productivity. The existence of decreasing marginal returns to tenure is corroborated in our analysis on the tenure composition of the workforce. We also find that the impact of tenure differs widely across workforce and firm dimensions. Tenure is particularly beneficial for productivity in contexts characterized by a certain degree of routineness and lower job complexity. Along the same lines, our findings indicate that tenure exerts stronger (positive) impacts in industrial and high capital-intensive firms, as well as in firms less reliant on knowledge- and ICT-intensive processes.
    Keywords: tenure, firm productivity, semiparametric methods to estimate production functions, longitudinal matched employer-employee data
    JEL: D24 M59
    Date: 2021–05
  2. By: Zarkovic, Maja (University of Basel)
    Abstract: A persistent concern in the literature on climate policy is that the emissions abatement, which is achieved via environmental regulation, has potentially adverse affects on firms' economic performance. I investigate this issue in the context of the European Union Emissions Trading Scheme (EU ETS) and the German manufacturing sector. My investigation uses confidential data from an administrative firm-level production census. As a measure of the economic performance, I estimate cost efficiencies and their determinants for narrowly defined industries with a stochastic cost frontier (SCF) analysis. In order to directly compare cost efficiencies across treatment groups, I use a stochastic meta frontier (SMF) analysis. I provide additional evidence of the causal impact of the EU ETS on various types of firms` costs with a difference-in-differences (DD) framework. My results indicate that the EU ETS regulation has resulted in a small but significant increase in costs across the German manufacturing sector. This increase is driven mostly by an increase in energy and capital costs. I demonstrate that the potential to increase cost efficiency exists for most industries in the German manufacturing sector. The analysis of the drivers of cost efficiency confirms that in most industries, exporting firms are more cost efficient than their counterparts. In contrast, the results show that innovating firms and firms that are regulated by the EU ETS are less cost efficient than unregulated firms.
    Keywords: Stochastic Frontier Analysis, Meta Frontier Analysis, EU ETS, Manufacturing Sector
    JEL: D22 D24 N64 Q52
    Date: 2020–09–30
  3. By: Jean-Charles Bricongne (Banque de France); Samuel Delpeuch (SciencesPo); Margarita Lopez Forero (Evry University/Paris-Saclay)
    Abstract: Based on French firm-level data over 15 years we evaluate the contribution of the microlevel profit shifting -through tax haven foreign direct investments (FDI), may it be in or outward- to the aggregate productivity slowdown in France and the role that intangible investments play in this relation. We show that firm productivity in France experiences a decline over the immediate years following the establishment in a tax haven, with an average estimated drop by 3.5% in labor productivity. We argue that this productivity decline, following a presence in a tax haven, is most likely explained by MNEs' fiscal optimization, where domestic productivity is underestimated as profits are not recorded anymore in the home country. The fall in productivity is especially strong for firms that are intensive in intangible capital and is equivalent to 4.1% (versus 2.7% for low intangible intensive firms), reflecting the fact that these types of assets are more easily transferred across countries and facilitate fiscal optimization. Our results additionally suggest that the mismeasurement has strong dynamic effects, as the decline becomes more important the longer the firm remains in a tax haven. Due to possible attenuation biases, we argue that our estimates provide a lower bound of the productivity mismeasurement. Finally, given these firms' weight in the economy, our results imply an 8% loss at the aggregate in terms of the level of the labor productivity throughout the whole sample period, which is equivalent to an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.
    Keywords: Tax Havens, Profit shifting FDI, Productivity slowdown, Productivity mismeasurement, Intangible capital
    JEL: D33 F23 H26 H87 O47
    Date: 2021
  4. By: Mauro, Filippo di (Asian Development Bank Institute); Hoang, Minh Duy (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute)
    Abstract: We provide an overview of productivity development and other related indicators in Asia and Pacific (APAC) countries, with comparisons with the Europe region. We use the seventh vintage firm-level data from the Productivity Research Network in the APAC region and CompNet in Europe for our study. The overall results show that the productivity growth in developed APAC countries (Australia, New Zealand, and the Republic of Korea) is significantly ahead of the growth in developing APAC countries (India and the People’s Republic of China) and on par with the EU’s growth. There is an ongoing process of bottom firms catching up with top firms in the Republic of Korea and the richest EU countries. Regarding employment and labor skills, employment growth has generally been quite stagnant in all regions. Labor skills, for which we use the wage premium as a proxy, are quite similar across most regions, with the richest EU countries showing a higher premium than the rest. Our test of the productivity–employment link indicates that the size of employment tends to have a greater impact on productivity in APAC countries, while labor skills have greater emphasis in the EU.
    Keywords: productivity; firm-level; employment; labor costs; labor skills; wage premium; TFP dispersion; firm concentration; financial constraint; Filippo di Mauro; Minh Duy Hoang; Peter Morgan
    JEL: D24 E24 J21 J24 P52
    Date: 2021–05–21
  5. By: Pedro S. Martins
    Abstract: As work changes, firm-provided training may become more relevant. However, there is little causal evidence about the effects of training on firms. This paper studies a large training grants programme in Portugal, supported by the European Social Fund, contrasting firms that received the grants and firms that also applied but were unsuccessful. Combining several rich data sets, we compare many potential outcomes of these firms, while following them over several years both before and after the grant decision. Our difference-in-differences models estimate significant positive effects on take up (training hours and expenditure), with limited deadweight; and that such additional training led to increased sales, value added, employment, productivity, and exports (although not profits). These effects tend to be of at least 5% and, in some cases, 10% or more, and are robust in multiple dimensions.
    Keywords: productivity, Programme evaluation, Training subsidies
    JEL: J24 H43 M53
    Date: 2021–07–08
  6. By: Just, Lisa (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Accounting for network operators’ heterogeneity is of crucial importance for regulators. In contrast to observed heterogeneity, the consideration of unobserved differences is far more challenging. Most estimation models try to account for unobserved factors that impact the network operators’ costs and performance but neglect the possibility of heterogeneous technologies. Assuming a common technology represented by a joint cost function across network operators implies, e.g., identical marginal costs and economies of scale for all network operators. As it is questionable that this assumption holds in practice, efficiency estimates may be biased as technological heterogeneity is misunderstood as inefficiency. To overcome this misspecification, a latent class model is applied to a comprehensive database of German electricity distribution network operators between the years 2011 and 2017, explicitly accounting for technological differences across network operators. The results indicate that German distribution network operators can be unambiguously classified into three statistically different classes that share a common cost function. The findings show significant differences in the size, capacity of distributed generation from renewable energy sources and identify distributed generation capacity as an important driver of the network operators’ technology.
    Keywords: Electricity distribution; latent class models; regulation; stochastic frontier analysis; unobserved heterogeneity
    JEL: D24 L51 L94
    Date: 2021–06–21
  7. By: Kalantzis, Fotios; Niczyporuk, Hanna
    Abstract: Energy efficiency investments are essential for transitioning to a carbon-neutral economy. Nevertheless, despite being financially viable, many energy efficiency investment opportunities do not materialise. The existing literature attributes this situation to financial and non-financial factors. Research suggests that many firms focus only on direct energy savings and neglect non-energy benefits that include increased labour productivity. Up to date, due to lack of high-quality data, few studies attempted to quantify the effects of the energy efficiency investments on firm-level outcomes other than the reductions in energy consumption. This paper overcomes this barrier by using novel data from a firm-level survey conducted by the European Investment Bank that covers more than 15,000 firms in 27 European Union member states and the UK during 2018-2019. It studies the relationship between the energy efficiency investment and the labour productivity of the European firms, utilising instrumental variables methodology to account for potential endogeneity. The results show a positive and causal relationship between energy efficiency investment and labour productivity. The findings of the paper suggest that firms can benefit much more from the energy efficiency investment than what is often assumed, and highlight a need for government policies that would increase firms' awareness of the non-energy benefits.
    Keywords: Energy Efficiency,Climate Investment,Productivity
    Date: 2021
  8. By: Arnita Rishanty; Asep Suryahadi
    Abstract: Circular economy aims to improve the used-resources efficiency and effectiveness holistically, thereby self-sustained and sustainable. Such concept promotes an all-inclusive productivity worldview. Yet, a question remains to what extent does the circular economy practices have impact on firms’ productivity, particularly in developing economies where there are conditions that are not necessarily in line with textbook rules that are mostly based on the developed economies paradigm. As the concept of the circular economy is a relatively new focus of research, it makes this paper to be the first empirically investigating the impact of circular economy practices on firms productivity in Indonesia. The open paradigm of circular economy that is non-restrictive and adaptable to the social and ecological environment depending on the availability of resources (low-tech to high-tech) and markets (small to large), makes circular economy approach, theoretically, is effective to improve productivity sustainably with limited resources available as in developing economies such as Indonesia. The study also contributes by highlighting the challenge on limited data availability related to measuring the circular economy measurements. We find the evidence in support of circular economy practices positively affecting firms productivity. However, the effects differ across sectors. What also important is that the dynamics of other deteminant variables of productivity shows that there is unique treats of firms that implement circular economy practices which makes them different and more resilient compared to other general firms.
    Keywords: circular economy, productivity, Indonesia
    JEL: C5 D2 Q5
    Date: 2020
  9. By: Gregori, Wildmer Daniel (European Commission); Martinez Cillero, Maria (European Commission); Nardo, Michela (European Commission)
    Abstract: This study empirically investigates the extent to which firms in the European Union, once acquired through a cross-border acquisition, show different productivity levels as compared to those firms that have not been acquired. Our identification strategy relies on the combination of Propensity Score Matching and the Staggered Difference-in-Difference estimator, using firms’ balance sheet for the years 2008-2018. We find that cross-border acquisitions decrease the productivity of the acquired firms, especially in the manufacturing and services sectors, as well as in less knowledge intensive activities. Firms targeted by acquirers originating in emerging market economies also experience a negative effect on productivity.
    Keywords: Cross-border M&As, FDI, TFP, European Union, Propensity Score Matching, DiD
    JEL: D24 F23 F60 G34
    Date: 2021–05
  10. By: Maria D. Tito; Ruoying Wang
    Abstract: This paper estimates the impact of reducing export and import tariffs on firm input choices. In presence of borrowing constraints, lower export tariffs facilitate the reallocation of capital and labor inputs across firms, while a decline in import tariffs either tightens import competition or increases the availability of imported inputs; all three mechanisms suggest that a higher degree of openness should be associated with lower misallocation. To analyze the empirical relationship between openness and input misallocation, we draw on the annual surveys conducted by the Chinese National Bureau of Statistics (NBS) between 1998 and 2007. From the surveys, we con- struct firm-level measures of input misallocation that control for firm heterogeneity; we identify shocks to openness using industry tariff levels and firm trade shares. We find that firm facing higher tariffs in either import or export markets make less optimal input choices. We further decompose our analysis between input and output tariffs: our results suggest that the labor reallocation mainly occurs because of lower input tariffs, while the selection effect induced by changes in output tariffs does not necessarily cause more distorted firms to exit and, therefore, tends to have an insignificant effect on input allocation. Finally, we calculate the contribution of tariff changes towards aggregate misallocation and productivity: our results indicate that the impact of firm-level tariff reductions on aggregate misallocation and productivity was marginal in our sample period, but the presence of sizeable interactions between trade shocks and mis- allocation at the sector level suggests that our result should be interpreted as a lower bound of the overall effect.
    Keywords: Openness; Misallocation; Export Tariffs; Input and Output Tariffs
    JEL: F14
    Date: 2021–01–29
  11. By: Lanteri, Andrea; Medina, Pamela; Tan, Eugene
    Abstract: What are the short- and medium-term effects of an import-competition shock on firm dynamics and aggregate productivity? We address this question by combining detailed data on investment dynamics of Peruvian manufacturing firms, data on trade flows from China, and a quantitative general-equilibrium model with heterogeneous firms subject to idiosyncratic shocks. In the data, we find evidence of substantial frictions that slow capital reallocation, by rendering disinvestment and firm exit costly. In our model, these frictions shape the transitional dynamics after a trade shock. On impact, a drop in output prices due to import competition induces a spike in inaction, and exit of some productive firms, consistent with our empirical evidence. These effects expand the aggregate productivity wedge relative to a frictionless benchmark. Overall, productivity gains materialize slowly over time, whereas welfare gains emerge early in the transition.
    Keywords: capital reallocation; Firm Dynamics; Investment Irreversibility; Trade Shocks
    Date: 2020–05
  12. By: Ian Fillmore (Washington University in St. Louis); Jonathan Hall (University of Toronto)
    Abstract: Technological innovation can raise the returns to some skills while making others less valuable or even obsolete. We study the effects of such skill-altering technological change in the context of men’s professional tennis, which was unexpectedly transformed by the invention of composite racquets during the late 1970s. We explore the consequences of this innovation on player productivity, entry, and exit. We find that young players benefited at the expense of older players and that the disruptive effects of the new racquets persisted over two to four generations.
    Keywords: technological change, human capital, tennis
    JEL: J24 O33 Z22
    Date: 2021–06
  13. By: Carvelli, Gianni; Trecroci, Carmine
    Abstract: In this paper we provide new insights on the nexus between public debt and economic growth, focusing on the growth of debt rather than its level. By exploiting updated macroeconomic time series for 75 countries (37 OECD and 38 non-OECD) over the period 1972-2019 and using the system-GMM technique, we estimate the impact of the growth of public debt per worker on labor productivity growth. We find evidence of a significant adverse effect of the growth of public debt per worker on labor productivity growth, as proxied by the growth of output per worker. Similar results arise when we consider the growth of public debt per capita and the growth of real GDP per hours worked.
    Keywords: Public debt, Labor productivity, Growth.
    JEL: C33 E6 E62 H6 H63 O4 O47
    Date: 2021–06–16
  14. By: Bequet, Ludovic
    Abstract: This paper presents the first detailed empirical evaluation of the effect of genetically engineered(GE) crops on land inequality, using three waves of census data covering 21 years and 17 million plots in the Philippines. Exploiting exogenous variations in soil and weather characteristics leading to differences in potential gain from GE corn cultivation, I show that the introduction of this labor- saving technology in 2003 led to an increased in municipality-level landholding and land ownership inequality. This effect is partly driven by a relative increase in agricultural land, is stronger in municipalities that adopted modern agricultural practices later and where credit penetration is higher. While increased land inequality is associated with a higher level of terrorist activity, it does not seem to have any adverse effect on agricultural productivity or economic activity.
    Keywords: Land inequality, Agricultural technology, Land reform
    JEL: O13 Q12 Q15
    Date: 2021–06–10

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