nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒07‒12
twenty-two papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Environmental efficiency measurement when producers control pollutants under heterogeneous conditions: a generalization of the materials balance approach By Eder, Andreas
  2. Africa’s manufacturing puzzle: Evidence from Tanzanian and Ethiopian firms By Diao, Xinshen; Ellis, Mia; McMillan, Margaret S.; Rodrik, Dani
  3. Productivity and human capital: The Italian case By Camilla Andretta; Irene Brunetti; Anna Rosso
  4. Dispersion in Dispersion: Measuring Establishment-Level Differences In Productivity By Cunningham, Cindy; Foster, Lucia; Grim, Cheryl; Haltiwanger, John C.; Pabilonia, Sabrina Wulff; Stewart, Jay; Wolf, Zoltan
  5. New evidence on intangibles, diffusion and productivity By Carol Corrado; Chiara Criscuolo; Jonathan Haskel; Alexander Himbert; Cecilia Jona-Lasinio
  6. Large Firms and the Cyclicality of US Labour Productivity By Joshua Brault; Hashmat Khan
  7. Labor-saving technological change? Sectoral evidence for Germany By Ferschli, Benjamin; Rehm, Miriam; Schnetzer, Matthias; Zilian, Stella
  8. Does pesticide use have short term spillover effects? The case of Swiss winter wheat producers By Dakpo, Hervé; Mohring, Niklas; Finger, Robert
  9. Exploring the heterogeneous effects of weather on productivity using generalized random forests By Stetter, Christian; Sauer, Johannes
  10. The return on human (STEM) capital in Belgium By Gert Bijnens; Emmanuel Dhyne
  11. Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants By Marc Baudry; Anouk Faure
  12. Performance Evaluation of the Fruit and Vegetable Subsectors in the Azerbaijani Economy: A Combinatorial Analysis Using Regression and Principal Component Analysis By Niftiyev, Ibrahim
  13. A longitudinal overview of the European national innovation systems through the lenses of the Community Innovation Survey By Makrevska Disoska, Elena; Toshevska-Trpchevska, Katerina; Tevdovski, Dragan; Jolakoski, Petar; Stojkoski, Viktor
  14. China's Long-Term Growth Potential: Can Productivity Convergence Be Sustained? By Takatoshi Sasaki; Tomoya Sakata; Yui Mukoyama; Koichi Yoshino
  15. Enhancing digital diffusion for higher productivity in Spain By Yosuke Jin
  16. Innovation policy and performance of Eastern European Countries By Foreman-Peck, James; Zhou, Peng
  17. Impacts of the Clean Air Act on the Power Sector from 1938-1994: Anticipation and Adaptation By Clay, Karen; Jha, Akshaya; Lewis, Joshua; Severnini, Edson R.
  18. Profitability, Productivity and Growth By Marek Ignaszak; Petr Sedlácek
  19. Maximum Likelihood Estimation of Stochastic Frontier Models with Endogeneity By Centorrino, Samuele; Perez Urdiales, Maria
  20. Improving coffee productivity in Ethiopia: The impact of a coffee tree rejuvenation training program on stumping By Abate, Gashaw Tadesse; Bernard, Tanguy; Regassa, Mekdim D.; Minten, Bart
  21. Labor adjustment and productivity in the OECD By Dossche, Maarten; Gazzani, Andrea; Lewis, Vivien
  22. Binary Endogenous Treatment in Stochastic Frontier Models with an Application to Soil Conservation in El Salvador By Centorrino, Samuele; Perez Urdiales, Mari­a; Bravo-Ureta, Boris; Wall, Alan

  1. By: Eder, Andreas
    Abstract: This article provides a generalization of the materials balance-based production model introduced by Coelli et al. (2007). Based on this, some new environmental efficiency (EE) measures are presented. The Coelli et al. (2007) EE measure and its extension by Rødseth (2016) produce biased efficiency estimates if the material flow coefficients (MFCs) are heterogeneous across decision-making units and non-discretionary. Furthermore, the Coelli et al. (2007) measure fails to reward emission reductions by emission control. To overcome these shortcomings, this paper proposes production models which allow for heterogeneous MFCs reflecting differences of external environmental factors or non-controllable heterogeneities in inputs and outputs, and which properly take into account emission abatement activities. Based on this, we provide new EE measures and decompose them into i) a part reflecting emission control efficiency (ECE), ii) a part measuring material input efficiency (MIE), and iii) a part reflecting the efficient allocation between material and non-material inputs (environmental allocative efficiency, EAE). The approach is illustrated by an empirical application to arable farming in Austria utilizing data from 90 farms for the year 2011. Soil erosion is considered an undesirable output and land a material input. The average EE, ECE, MIE, and EAE are 0.53, 0.96, 0.69, and 0.79, respectively. The results indicate that actual output can be potentially achieved with 47% less soil loss. Most of the potential to improve EE is due to differences in MIE and EAE. Removing inefficiencies in the implementation of existing, subsidized erosion controls allows soil loss to be reduced by 4%.
    Keywords: Emission-generating technologies,Materials balance condition,Weak-G disposability,Data envelopment analysis,Non-discretionary factors,Soil erosion,Crop farms
    JEL: C61 D24 Q12 Q15
    Date: 2021
  2. By: Diao, Xinshen; Ellis, Mia; McMillan, Margaret S.; Rodrik, Dani
    Abstract: Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.
    Keywords: TANZANIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; ETHIOPIA; manufacturing; growth; productivity; enterprises; firms; labour productivity; labour; technology; innovation; structural transformation
    Date: 2021
  3. By: Camilla Andretta; Irene Brunetti; Anna Rosso
    Abstract: This paper investigates whether and how worker composition, ownership and management affect the productivity of firms. To this aim, we use a dataset obtained by integrating the micro-data drawn from Rilevazione su Imprese e Lavoro (RIL), a survey conducted by Inapp in 2010 and 2015 on a representative sample of Italian limited liability and partnership firms, with the AIDA archive containing comprehensive information on the balance sheets of almost all the Italian corporations. We apply different regression models and the findings reveal that a higher share of skilled workers within firms and more experienced managers are associated with higher productivity levels. In addition, firms run by managers with higher education are more likely to introduce innovation. Finally, family ownership and the coincidence of management with ownership are negatively related with firm productivity.
    Keywords: firm, Human capital, productivity
    JEL: J24 D24
    Date: 2021–07–08
  4. By: Cunningham, Cindy (U.S. Bureau of Labor Statistics); Foster, Lucia (U.S. Census Bureau); Grim, Cheryl (U.S. Census Bureau); Haltiwanger, John C. (University of Maryland); Pabilonia, Sabrina Wulff (U.S. Bureau of Labor Statistics); Stewart, Jay (U.S. Bureau of Labor Statistics); Wolf, Zoltan (U.S. Census Bureau)
    Abstract: We describe new experimental productivity statistics, Dispersion Statistics on Productivity (DiSP), jointly developed and published by the Bureau of Labor Statistics (BLS) and the Census Bureau. Official BLS productivity statistics provide information on aggregate productivity growth. Yet, a large body of research shows that within-industry variation in productivity provides important insights into productivity dynamics. This research reveals large and persistent productivity differences across businesses, even within narrowly defined industries. These differences vary by industry and time and are related to productivityenhancing reallocation. Dispersion in productivity across businesses can provide information about the nature of competition and frictions within sectors, and about the sources of rising wage inequality across businesses. Because there were no official statistics providing this level of detail, BLS and the Census Bureau partnered to create measures of within-industry productivity dispersion. These measures complement official BLS aggregate industry-level productivity growth statistics and thereby improve our understanding of the rich productivity dynamics in the U.S. economy. The microdata underlying DiSP are available for use by qualified researchers on approved projects in the Federal Statistical Research Data Center network. DiSP confirms the presence of large productivity differences, and we hope that it will encourage further research into understanding these differences.
    Keywords: manufacturing, reallocation, within-industry variation, establishments, business cycles
    JEL: D24 E24 E32
    Date: 2021–06
  5. By: Carol Corrado (The Conference Board); Chiara Criscuolo (OECD); Jonathan Haskel (Imperial College); Alexander Himbert (OECD); Cecilia Jona-Lasinio (LUISS Guido Carli)
    Abstract: This paper presents new evidence on the impact of intangible capital on productivity dispersion within industries. It first shows that rise in productivity dispersion after 2000 is more pronounced in intangible-intensive industries; then analyses the link between intangible capital intensity and productivity dispersion both at the top and at the bottom of the productivity distribution, and in different industries. The findings suggest that industries that have experienced a stronger increase in intangible investment have also seen a steeper rise in productivity dispersion both at the top and at the bottom of the productivity distribution. While the results at the top seem to be associated with the scalability of intangible capital – which is likely to disproportionally benefit high-productivity firms and incumbents – dispersion at the bottom appears to be linked to complementarities between intangible investment and factors like digital intensity, trade openness and venture capital.
    Keywords: Innovation, Investment, Science and Technology
    Date: 2021–07–08
  6. By: Joshua Brault (Department of Economics, Carleton University); Hashmat Khan (Department of Economics, Carleton University)
    Abstract: We present novel stylized facts on the declining cyclicality of labour productivity for large firms. Changes in their output-labour productivity correlations are close to those observed in the aggregate data, unlike small firms. We find support for the hypothesis that this change is driven by increased labour market flexibility. In response to a 1% increase in real sales large firms’ hire an additional 75 workers in the pre-1985 period, compared to an additional 90 workers in the post-1985 period. Our findings are of direct relevance to the growing literature on the role of large firms in driving US business cycles.
    Keywords: Large Firms, Labour Productivity, Business Cycles
    JEL: D22 E24 E32
    Date: 2021–03–13
  7. By: Ferschli, Benjamin; Rehm, Miriam; Schnetzer, Matthias; Zilian, Stella
    Abstract: This paper investigates the links between digitalization, market concentration, and labor productivity at the sectoral level in Germany. Combining data for digitalization and labor productivity from the EU KLEMS database with firm-level data from the CompNet and Orbis Bureau Van Dijk databases to construct market concentration measures between 2000 to 2015, we show that (1) the German economy appears to have digitized since 2000, and (2) there is no clear-cut relationship between digitalization and market concentration at the sectoral and descriptive level. Using a time and sector fixed effects model, however, we find evidence for (3) a positive relationship of productivity to both market concentration and digitalization at the sectoral level in Germany. This finding is robust to alternative measures of digitalization and market concentration, but sensitive to the sector sample. We therefore cautiously conclude that recent technological change appears to have been labor-saving, and that productivity-enhancing "superstar firm" effects seem to exist in Germany.
    Date: 2021
  8. By: Dakpo, Hervé; Mohring, Niklas; Finger, Robert
    Abstract: In this study, we empirically estimate the extent of pesticide spillovers on agricultural productivity on a farm-level. As a basis for our empirical analysis, we develop a dynamic damage control specification model of pesticides, where spillovers are associated with the previous period's consumption. We then analytically derive potential spillovers of pesticides on agricultural productivity through effects on the production area, nitrogen fertilizer, and work-machinery productivities and estimate the extent of these effects empirically. To this end, we use a rich farm panel data set on Swiss wheat producers over the period 2009-2015. To account for both pesticide volume and toxicity, a load index is used. Our preliminary results indicate positive short-term spillover effects of the fate toxicity index while the ecotoxicity has a negative spillovers.
    Keywords: Crop Production/Industries, Productivity Analysis
    Date: 2021–03
  9. By: Stetter, Christian; Sauer, Johannes
    Keywords: Productivity Analysis, Environmental Economics and Policy
    Date: 2021–03
  10. By: Gert Bijnens; Emmanuel Dhyne
    Abstract: Whilst overall productivity growth is stalling, firms at the frontier are still able to capture the benefits of the newest technologies and business practices. This paper uses linked employer-employee data covering all Belgian firms over a period of almost 20 years and investigates the differences in human capital between highly productive firms and less productive firms. We find a clear positive correlation between the share of high-skilled and STEM workers in a firm's workforce and its productivity. We obtain elasticities of 0.20 to 0.70 for a firm's productivity as a function of the share of high-skilled workers. For STEM (science, technology, engineering, mathematics) workers, of all skill levels, we find elasticities of 0.20 to 0.45. More importantly, the elasticity of STEM workers is increasing over time, whereas the elasticity of high-skilled workers is decreasing. This is possibly linked with the increasing number of tertiary education graduates and at the same time increased difficulties in filling STEM-related vacancies. Specifically, for high-skilled STEM workers in the manufacturing sector, the productivity gain can be as much as 4 times higher than the gain from hiring additional high-skilled non-STEM workers. To ensure that government efforts to increase the adoption of the latest technologies and business practices within firms lead to sustainable productivity gains, such actions should be accompanied by measures to increase the supply and mobility of human (STEM) capital. Without a proper supply of skills, firms will not be able to reap the full benefits of the digital revolution.
    Keywords: education, human capital, linked employer-employee data, productivity, Skills
    JEL: E24 I26 J24
    Date: 2021–07–08
  11. By: Marc Baudry (EconomiX (Université Paris Nanterre)); Anouk Faure (EconomiX (Université Paris Nanterre) & Chaire Economie du Climat (PSL))
    Abstract: This study investigates the nature of technological progress in six manufacturing industries covered under the EU-ETS, plus the power sector, and its effect on carbon price formation using marginal abatement cost curves. We adopt a technological frontier framework that we calibrate to input and output data at the plant level from 2013 to 2017, with a directional distance function approach. Our results reveal that most of the time, technological progress resulted in inflating baseline emissions, despite decreasing the carbon intensity of production. In our sample industries, technological progress therefore leads to increase abatement efforts, raising the equilibrium price of carbon.
    Keywords: SEQE, Changement Technologique, Production, Analyse Empirique,
    JEL: D24 L6 O33 Q58 Q54
    Date: 2021–06
  12. By: Niftiyev, Ibrahim
    Abstract: Azerbaijan has an oil-led economy, which according to the well-known resource curse and Dutch disease hypotheses decreases the role of non-oil tradable sectors. Nevertheless, the government has actively fostered the growth of non-oil tradable sectors as the export orientation of Azerbaijan is being leveraged by the recently adopted economic policies. However, performance evaluations at the subsectoral level remain rare. The present paper evaluates the performance of the fruit and vegetable subsectors in Azerbaijan from 1995 to 2020 based on multiple key indicators, such as production, profitability, and productivity via principle component analysis (PCA). The purpose of the study was to provide a comparison of two key subsectors in Azerbaijan that are strong candidates for non-oil tradable exports. The results revealed that the vegetable subsector outperformed the fruit subsector in terms of production and profitability from 1999 to 2014; however, it experienced a sharp decline from 2014 to 2015 (the period of the rapid commodity price downturns), which gives rise to the question of whether the extractive industry negatively affected the subsector. Compared to the vegetable subsector, production and profitability in the fruit subsector demonstrated a more stable upward trend. In addition, labor input in both subsectors decreased over time, indicating efficiency gains via new technology transfers and productivity enhancements. Ordinary Least Squares (OLS) results demonstrated a strong and statistically significant negative relationship between the performance of the vegetable subsector with the oil revenue boom period (2008-2015).
    Keywords: Azerbaijan economy,agriculture,subsectoral performance,egetable production,fruit production
    JEL: E01 C38 O13 Q11 Q18
    Date: 2021
  13. By: Makrevska Disoska, Elena; Toshevska-Trpchevska, Katerina; Tevdovski, Dragan; Jolakoski, Petar; Stojkoski, Viktor
    Abstract: In this paper, we perform a detailed longitudinal analysis on the innovation performance in nine European countries by using data stemming from the Community Innovation Survey. The temporal dimension of our dataset includes the period during the financial crisis of 2008 as well as the period after the crisis. As such, it allows us to fully evaluate the changes in the innovation processes within the countries during and after the crisis. Our findings suggest that there are no significant differences between the countries in the determinants for firms which decide to enter the innovation process. However, the effect of innovation output over labor productivity varies between economies: there is a positive relationship in the more developed economies compared to a negative or neutral relationship in the less developed. We use these results to speculate that the national innovation system in developing economies becomes more vulnerable in periods of financial crises.
    Keywords: CIS, European countries, national innovation systems, longitudinal studies, labor productivity
    JEL: C33 C36 O31 O33
    Date: 2021–06–21
  14. By: Takatoshi Sasaki (Bank of Japan); Tomoya Sakata (Bank of Japan); Yui Mukoyama (Bank of Japan); Koichi Yoshino (Bank of Japan)
    Abstract: This study estimates the growth rate of China's economy until 2035 based on the assumption that productivity will continue converging to that of frontier economies and assesses the feasibility of such an outcome. Our estimates imply that the size of China's economy can potentially double by 2035 as long as the country follows the "catch-up" process achieved by other East Asian economies. However, given the circumstances that China faces, such as the need to maintain agricultural output levels, limits to the growth of its export-dependent manufacturing industry, and the aging of the population, the obstacles to following the other East Asian economies' catch-up process are substantial. To overcome these obstacles and proceed with catch-up, China will need to boost TFP growth by promoting innovation and making steady progress in addressing institutional and resource allocation issues.
    Keywords: China; Catch-up Process (Convergence); Aging of the Population; Savings Rate; Total Factor Productivity (TFP) Growth
    JEL: E21 E22 J11 O11 O47
    Date: 2021–06–30
  15. By: Yosuke Jin
    Abstract: The increased adoption of digital technologies has been transforming the Spanish economy. The COVID-19 crisis is expected to speed up this process. The new digital strategy, ‘Digital Spain 2025’, features a number of ambitious objectives in a timely manner. There is a need to promote digital diffusion across the country by developing communication infrastructure further, while addressing the digital divide across regions and ensuring digital security. Addressing key bottlenecks, such as people’s skills, through education policies at every level, would enable the use of digital technologies and boost productivity growth. This would help in particular laggard firms and low-skilled people, making the benefits of digitalisation shared by all. In parallel, R&D should be enhanced to lift the capacity of firms to adopt and use digital technologies effectively, resulting in improving their business models and products. Finally, business dynamism should be revitalised to encourage risk taking among firms, thus facilitating digital diffusion, while ensuring an efficient allocation of capital.
    Keywords: business environment, digitalisation, intangible assets, productivity, risk capital, skills
    JEL: L1 L2 O1
    Date: 2021–07–06
  16. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: This paper shows that EU and national innovation subsidy policies stimulated Central and East-ern Europe Countries (CEEC) productivity in the years after their entry to the EU. However, the average effectiveness of national funding was higher for the Western control group coun-tries than for the CEEC sample. EU innovation subsidies partly compensated the CEEC for the greater innovation effectiveness and impact of western economies. Although they crowded out innovation projects or funding of local governments at the country level, the subsidies crowded in national and local projects at the firm level. Local/regional state innovation aid to enterprises encouraged no increase in labour productivity in all but one of sample CEEC countries. These impacts are assessed in a sequential structural econometric model estimated using Eurostat’s collection of Community Innovation Surveys covering the years 2006-2014.
    Keywords: innovation policy; European Union; R&D; subsidies
    JEL: L53 L21 H71 H25
    Date: 2021–07
  17. By: Clay, Karen (Carnegie Mellon University); Jha, Akshaya (Carnegie Mellon University); Lewis, Joshua (University of Montreal); Severnini, Edson R. (Carnegie Mellon University)
    Abstract: The passage of landmark government regulation is often the culmination of evolving social pressure and incremental policy change. During this process, firms may preemptively adjust behavior in anticipation of impending regulation, making it difficult to quantify the overall economic impact of the legislation. This study leverages newly digitized data on the operation of virtually every fossil-fuel power plant in the United States from 1938-1994 to examine the economic impacts of the 1970 Clean Air Act (CAA) on the power sector. This unique long panel provides us an extended pre-regulation benchmark, allowing us to account for both anticipatory behavior by electric utilities in the years leading up to the Act's passage and reallocative effects of the CAA across plant vintages. We find that the CAA led to large and persistent decreases in output and productivity, but only for plants that opened before 1963. The timing aligns with the passage of the original 1963 CAA, which provided the federal government with the authority to "control" air pollution, sending a strong signal to firms of impending federal regulation. We provide historical evidence of anticipatory responses by utilities in the design and siting of plants that opened after 1963. We also find that the aggregate productivity losses of the CAA borne by the power sector were substantially mitigated by the reallocation of output from older less efficient power plants to newer plants.
    Keywords: power plants, electricity generation, total factor productivity, clean air act, air quality regulations, NAAQS
    JEL: K32 N52 Q52
    Date: 2021–06
  18. By: Marek Ignaszak; Petr Sedlácek
    Abstract: Recent empirical evidence suggests that firm selection and growth are largely demand-driven. We incorporate this feature into a model of endogenous growth in which heterogeneous firms innovate and survive based on profitability, rather than productivity alone. We show analytically that firm-level demand variation impacts aggregate growth by changing firms’ incentives to innovate. Estimating our model on U.S. Census firm data, we quantify that 20% of aggregate growth is demand-driven and that the macroeconomic impact of growth policies is fundamentally different compared to a model driven by productivity variation alone. We find empirical support for our model mechanism in firm-level data.
    Date: 2021–05–28
  19. By: Centorrino, Samuele; Perez Urdiales, Maria
    Keywords: Research Methods/ Statistical Methods, Production Economics
    Date: 2021–03
  20. By: Abate, Gashaw Tadesse; Bernard, Tanguy; Regassa, Mekdim D.; Minten, Bart
    Abstract: Coffee is Ethiopia’s most important export commodity, cultivated by over 6 million smallholder farmers in the country, and accounting for about one-third of the country’s commodity exports. While coffee production has increased over the last decade, coffee yields are low and several constraints to improved productivity remain. With two-three decades old and low-yielding coffee trees in particular, the sector cannot attain its full potential. In this paper, we assess the short-term impact of a coffee tree rejuvenation training program in Sidama on adoption rate and intensity of stumping – currently the best practice to revitalize ageing coffee trees and substantially improve their productivity. Using baseline and follow-up data and a difference-in-difference approach, we find that the adoption rate and intensity of stumping has increased by about threefold during the first year of the rejuvenation training intervention.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; coffee; agricultural productivity; coffee industry; commodities; plant rejuvenation; stumping; coffee farm college
    Date: 2021
  21. By: Dossche, Maarten; Gazzani, Andrea; Lewis, Vivien
    Abstract: Labor productivity is more procyclical in OECD countries with lower employment volatility. To capture this new stylized fact, we propose a business cycle model with employment adjustment costs, variable hours and labor effort. We show that, in our model with variable effort, greater labor market frictions are associated with procyclical labor productivity as well as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the data. By implication, labor market deregulation has a greater effect on the cyclicality of labor productivity and on the relative volatility of employment when effort can vary. JEL Classification: E30, E50, E60
    Keywords: effort, hours, labor adjustment, labor market deregulation, labor productivity.
    Date: 2021–06
  22. By: Centorrino, Samuele; Perez Urdiales, Mari­a; Bravo-Ureta, Boris; Wall, Alan
    Keywords: Production Economics, Research Methods/ Statistical Methods
    Date: 2021–03

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