nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒08‒16
fourteen papers chosen by

  1. Climate variability and farm inefficiency: A spatial stochastic frontier analysis of Senegalese agriculture By Adjin, K. Christophe; Henning, Christian H. C. A.
  2. Intangibles, Markups, and the Measurement of Productivity Growth By Nicolas Crouzet; Janice C. Eberly
  3. Financial Frictions, Firm Dynamics and the Aggregate Economy: Insights from Richer Productivity Processes By Ruiz-García, J. C.
  4. A concerted effort to tackle the productivity puzzle during the post-COVID era By Bart van Ark; Venables
  5. Productivity in UK healthcare during and after the Covid-19 pandemic By Diane Coyle; Kaya Dreesbeimdieck; Annabel Manley
  6. Regional policies and sectoral outputs in the Italian regions. A multi-input multi-output counterfactual approach. By Gianluigi Coppola; Sergio Destefanis; Giorgia Marinuzzi; Walter Tortorella
  7. COVID-19, business support and SME productivity in the UK By Halima Jibril; Stephen Roper; Mark Hart
  8. Labor adjustment and productivity in the OECD By Dossche, Maarten; Gazzani, Andrea; Lewis, Vivien
  9. Trade and Management By Bloom, Nicholas; Manova, Kalina; Van Reenen, John; Sun, Stephen Teng; Yu, Zhihong
  10. What do Firms Gain from Patenting? The Case of the Global ICT Industry By Dimitrios Exadaktylos; Mahdi Ghodsi; Armando Rungi
  11. R&D Heterogeneity and Countercyclical Productivity Dispersion By Shuowen Chen; Yang Ming
  12. Choose the school, choose the performance. New evidence on the determinants of student performance in eight European countries By Bonacini, Luca; Brunetti, Irene; Gallo, Giovanni
  13. Technological Change and Domestic Outsourcing By Bergeaud, Antonin; Mazet-Sonilhac, Clément; Malgouyres, Clément; Signorelli, Sara
  14. Internet Access and its Implications for Productivity, Inequality, and Resilience By Jose Maria Barrero; Nicholas Bloom; Steven J. Davis

  1. By: Adjin, K. Christophe; Henning, Christian H. C. A.
    Abstract: This paper aimed to analyse Senegalese farmers' technical efficiency in the context of climate variability and spatial heterogeneity. To achieve this, firstly using simulated data, we evaluated the newly developed spatial stochastic frontier estimation technique based on skew-normal distributions. Secondly, using cross-sectional survey data we conducted an empirical analysis for 4423 Senegalese farm households. Simulation results show that the estimation approach used is appropriate and produces consistent results with large sample sizes, although it might suffer from a "starting values" problem. Empirical findings reveal that agricultural production in Senegal mostly depends on the allocated area and it is highly affected by climatic factors such as rainfall and temperature. Moreover, within a radius of 4 km, the technical efficiency of farms appears to be significantly affected by unobserved spatial features. Furthermore, this farm's technical efficiency can on average be increased by 20%, when accounting for spatial heterogeneity.
    Keywords: Climate variability,Farm efficiency,Spatial heterogeneity,Senegal
    JEL: Q54 C21 D24
    Date: 2020
  2. By: Nicolas Crouzet; Janice C. Eberly
    Abstract: In recent years, measured TFP growth in the US has declined. We argue that two forces contributed to this decline: the mismeasurement of intangible capital, and rising markups. Markups affect input shares, while intangibles omitted from measures of investment affect measured capital growth, each potentially generating downward bias in measured TFP growth. Most importantly, when both forces are simultaneously present, their effects reinforce each other and amplify the downward bias in measured TFP growth. Using input-output data, we estimate that this mechanism could account for one-third to two-thirds of the decline in measured TFP growth.
    JEL: D24 D4 E01 E22 G31
    Date: 2021–07
  3. By: Ruiz-García, J. C.
    Abstract: How do financial frictions affect firm dynamics, allocation of resources across firms, and aggregate productivity and output? Is the nature of productivity shocks that firms face primary for the effects of financial frictions? I first use a comprehensive dataset of Spanish firms from 1999 to 2014 to estimate non-parametrically the firm productivity dynamics. I find that the productivity process is non-linear, as persistence and shock variability depend on past productivity, and productivity shocks are non-Gaussian. These dynamics differ from the ones implied by a standard AR(1) process, commonly used in the firm dynamics literature. I then build a model of firm dynamics with financial frictions in which productivity shocks are non-linear and non-Gaussian. The model is consistent with a host of evidence on firm dynamics, financial frictions, and firms’ financial behaviour. In the model economy, financial frictions affect the firm life cycle. Without financial frictions, the size of an entrant firm will be three times larger. Furthermore, profit accumulation, which allows firms to overcome financial frictions, is slow, and it only speeds up when firms are mature. As a consequence, the average exiting firm is smaller than it would be without financial frictions. The aggregate consequences of financial frictions are significant. They result in misallocation of capital and reduce aggregate productivity by 16%. This figure is only 8% if productivity dynamics evolve according to a standard AR(1) process.
    Keywords: Firm Dynamics, Non-Linear Productivity Process, Financial Frictions, Misallocation
    JEL: E22 G32 O16
    Date: 2021–08–03
  4. By: Bart van Ark (The Productivity Institute, Alliance Manchester Business School, The University of Manchester); Venables (The Productivity Institute, Alliance Manchester Business School, The University of Manchester)
    Abstract: The United Kingdom has suffered an extreme version of the “productivity puzzle†– the strong and largely unexplained slowdown in productivity growth among OECD economies since the mid-2000s. In recognition of the challenges that weak productivity growth and low levels of productivity create for economic performance, living standards, and distribution of income across regions, a new research institute has been set up to advance the understanding of the problem. The Productivity Institute will create a comprehensive and interdisciplinary research agenda and contribute to the frontier of knowledge creation in productivity research in the UK and around the world. The Institute will focus on innovative ways to improve productivity performance, providing new insights to help policy and business leaders understand better how to raise productivity and thereby raise living standards in a sustainable manner. This short paper outlines the overall approach to research, engagement and capacity building by the Institute.
    Keywords: productivity, UK economy
    JEL: D2 E02 L1 O3 O4
    Date: 2021–01
  5. By: Diane Coyle (The Productivity Institute, Bennett Institute for Public Policy, University of Cambridge); Kaya Dreesbeimdieck (University of Cambridge); Annabel Manley (Bennett Institute for Public Policy, University of Cambridge)
    Abstract: Measured health output in the UK has declined sharply during the Covid-19 pandemic, despite the evident increase in some National Health Service (NHS) activities such as critical care, and the new test and trace and vaccination programmes. We identify the measurement methods applied to public services that explain the measured decline, and also explore the likely impact of changes in hospital practices during the pandemic, including increased use of technology, on healthcare productivity. We find that within NHS England the capacity constraints have contributed to substantial falls in non-Covid-19 health care activities, and argue that increased capacity in the social infrastructure of the health service is essential to enable higher productivity in an uncertain environment.
    Keywords: productivity, health care, NHS
    JEL: H51 I10 E01
    Date: 2021–02
  6. By: Gianluigi Coppola (University of Salerno); Sergio Destefanis (University of Salerno); Giorgia Marinuzzi (IFEL); Walter Tortorella (IFEL)
    Abstract: We assess the impact of various types of regional policies on the economies of the 20 Italian administrative regions for the 1994-2016 period. Differently from previous works, we assess the impact of various policy funds in four sectors (agriculture, industry, construction, services) through a multi-input multioutput transformation function, and we estimate the policies’ average partial effects through a control function approach incorporating the funds’ allocation rules. Our evidence implies that European Structural Funds had a significant impact on various sectoral components of regional GDP per capita, with the ERDF taking the strongest role. Furthermore, the effectiveness of European Structural Funds is weaker for services, and stronger for industry and (to a lesser extent) agriculture. Nationally funded regional policies do not have any aggregate impact but affect the sectoral composition of GDP.
    Keywords: European Structural Funds, control function approach, sectoral development, multi-output multiinput transformation functions
    JEL: C43 D24
    Date: 2021–05
  7. By: Halima Jibril (Enterprise Research Centre, Warwick Business School, University of Warwick); Stephen Roper (Enterprise Research Centre, Warwick Business School, University of Warwick); Mark Hart (Enterprise Research Centre, Aston Business School, Aston University)
    Keywords: Covid-19, small business, productivity
  8. 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.
    Keywords: effort,hours,labor adjustment,labor market deregulation,labor productivity,structural reform
    JEL: E30 E50 E60
    Date: 2021
  9. By: Bloom, Nicholas; Manova, Kalina; Van Reenen, John; Sun, Stephen Teng; Yu, Zhihong
    Abstract: We study how management practices shape export performance using matched production-trade-management data for Chinese and American firms and a randomized control trial in India. Better-managed firms are more likely to export, sell more products to more destinations, and earn higher export revenues and profits. They export higher-quality products at higher prices and lower quality-adjusted prices. They import a wider range of inputs and inputs of higher quality and price, from more advanced countries. We rationalize these patterns with a heterogeneous-firm model in which effective management improves performance by raising production efficiency and quality capacity.
    JEL: R14 J01 L81 N0
    Date: 2021–07–12
  10. By: Dimitrios Exadaktylos; Mahdi Ghodsi; Armando Rungi
    Abstract: This study investigates the relationship between patenting activity, productivity, and market competition at the firm level. We focus on the Information and Communication Technology (ICT) industry as a particular case of an innovative sector whose contribution to modern economies is pivotal. For our purpose, we exploit financial accounts and patenting activity in 2009-2017 by 179,660 companies operating in 39 countries. Our identification strategy relies on the most recent approaches for a difference-in-difference setup in the presence of multiple periods and with variation in treatment time. We find that companies being granted patents increase on average market shares by 11%, firm size by 12%, and capital intensity by 10%. Notably, we do not register a significant impact of patenting on firms' productivity after challenging results for reverse causality and robustness checks. Findings are robust after we consider ownership structures separating patents owned by parent companies and their subsidiaries. We complement our investigation with an analysis of market allocation dynamics. Eventually, we argue that policymakers should reconsider the trade-off between IPR protection and market competition, especially when the benefits to firms' competitiveness are not immediately evident.
    Date: 2021–08
  11. By: Shuowen Chen; Yang Ming
    Abstract: What causes countercyclicality of industry--level productivity dispersion in the U.S.? Empirically, we construct an index of negative profit shocks and show that both productivity dispersion and R&D intensity dispersion enlarge at the onset of the shock and gradually dissipate. Theoretically, we build a duopolistic technology--ladder model in which heterogeneous R&D costs determine firms' post--shock optimal behaviors and equilibrium technology gap. Quantitatively, we calibrate a parameterized model, simulate firms' post--shock responses and predict that productivity dispersion is due to the low--cost firm increasing R&D efforts and the high--cost firm doing the opposite. We provide two empirical tests for this mechanism.
    Date: 2021–08
  12. By: Bonacini, Luca; Brunetti, Irene; Gallo, Giovanni
    Abstract: This study aims to identify the main determinants of student performance in reading and maths across eight European Union countries (Austria, Croatia, Germany, Hungary, Italy, Portugal, Slovakia, and Slovenia). Based on student-level data from the OECD’s PISA 2018 survey and by means of the application of efficient algorithms, we highlight that the number of books at home and a variable combining the type and location of their school represent the most important predictors of student performance in all of the analysed countries, while other school characteristics are rarely relevant. Econometric results show that students attending vocational schools perform significantly worse than those in general schools, except in Portugal. Considering only general school students, the differences between big and small cities are not statistically significant, while among students in vocational schools, those in a small city tend to perform better than those in a big city. Through the Gelbach decomposition method, which allows measuring the relative importance of observable characteristics in explaining a gap, we show that the differences in test scores between big and small cities depend on school characteristics, while the differences between general and vocational schools are mainly explained by family social status.
    Keywords: Gelbach decomposition,Education inequalities,Machine learning,PISA,Schooling tracking,Student performance
    JEL: I21 I24 J24
    Date: 2021
  13. By: Bergeaud, Antonin (Bank of France); Mazet-Sonilhac, Clément (Sciences Po, Paris); Malgouyres, Clément (Paris School of Economics); Signorelli, Sara (University of Amsterdam)
    Abstract: Domestic outsourcing has grown substantially in developed countries over the past two decades. This paper addresses the question of the technological drivers of this phenomenon by studying the impact of the staggered diffusion of broadband internet in France during the 2000s. Our results confirm that broadband technology increases firm productivity and the relative demand for high-skill workers. Further, we show that broadband internet led firms to outsource some non-core occupations to service contractors, both in the low and high-skill segments. In both cases, we find that employment related to these occupations became increasingly concentrated in firms specializing in these activities, and was less likely to be performed in-house within firms specialized in other activities. As a result, after the arrival of broadband internet, establishments become increasingly homogeneous in their occupational composition. Finally, we provide suggestive evidence that high-skill workers experience salary gains from being outsourced, while low-skill workers lose out.
    Keywords: broadband, firm organization, labor market, outsourcing
    JEL: G14 G21 O33
    Date: 2021–07
  14. By: Jose Maria Barrero; Nicholas Bloom; Steven J. Davis
    Abstract: About one-fifth of paid workdays will be supplied from home in the post-pandemic economy, and more than one-fourth on an earnings-weighted basis. In view of this projection, we consider some implications of home internet access quality, exploiting data from the new Survey of Working Arrangements and Attitudes. Moving to high-quality, fully reliable home internet service for all Americans (“universal access”) would raise earnings-weighted labor productivity by an estimated 1.1% in the coming years. The implied output gains are $160 billion per year, or $4 trillion when capitalized at a 4% rate. Estimated flow output payoffs to universal access are nearly three times as large in economic disasters like the COVID-19 pandemic. Our survey data also say that subjective well-being was higher during the pandemic for people with better home internet service conditional on age, employment status, earnings, working arrangements, and other controls. In short, universal access would raise productivity, and it would promote greater economic and social resilience during future disasters that inhibit travel and in-person interactions.
    JEL: D24 D84 E24 E27 E71 H54 J22 J24 J31 J81
    Date: 2021–07

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