nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2021‒10‒04
nine papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Are small farms really more productive than large farms? By Fernando Aragón; Diego Restuccia; Juan Pablo Rud
  2. Exploring Horizontal Mergers in Swedish District Courts Using Convex and Nonconvex Technologies: Usefulness of a Conservative Approach By Xiaoqing Chen; Kristiaan Kerstens; Qingyuan Zhu
  3. Minimum wage reform and firms’ performance – evidence from North Macedonia By Biljana Jovanovic; Nikola Naumovski
  4. Subsistence farming and factor misallocation:Evidence from Ugandan agriculture By Bruno Morando
  5. An assessment of pupil and school performance in public primary education in Uruguay By Paola Azar; Gabriela Sicilia
  6. Inward FDI, outward FDI, and firm-level performance in India By Koray Aktas; Valeria Gattai
  7. Academic Freedom, Institutions and Productivity By Berggren, Niclas; Bjørnskov, Christian
  8. The Spillover Effects of COVID-19 on Productivity throughout the Supply Chain By Victoria E. Agwam; Pablo Azar; Kyra Frye
  9. Robots For Economic Development By Calì, Massimiliano; Presidente, Giorgio

  1. By: Fernando Aragón (Simon Fraser University); Diego Restuccia (University of Toronto); Juan Pablo Rud (Royal Holloway, University of London)
    Abstract: This paper shows that using yields may not be informative of the relationship between farm size and productivity in the context of small-scale farming. This occurs because, in addition to productivity, yields pick up size-dependent market distortions and decreasing returns to scale. As a result, a positive relationship between farm productivity and land size may turn negative when using yields. We illustrate the empirical relevance of this issue with microdata from Uganda and show similar findings for Peru, Tanzania, and Bangladesh. In addition, we show that the dispersion in both measures of productivity across farms of similar size is so large that it renders farm size an ineffective indicator for policy targeting. Our findings stress the need to revisit the empirical evidence on the farm size-productivity relationship and its policy implications.
    Date: 2021–09
  2. By: Xiaoqing Chen (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China, and IESEG School of Management, 3 rue de la Digue, F-59000 Lille, France); Kristiaan Kerstens (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France); Qingyuan Zhu (Nanjing University of Aeronautics & Astronautics, College of Economics and Management, Nanjing, China)
    Abstract: Swedish district courts have undergone a major mergers and acquisitions program between 2000 and 2010 to centralize activity in larger and fewer courts. The purpose of this contribution is to conduct an efficiency analysis of these courts to identify the eventual efficiency gains. Distinguishing mainly between technical and scale efficiency and determining the returns to scale of individual observations, we try to find the potential rationales behind this merger wave. We are to the best of our knowledge the first to combine traditional convex with nonconvex nonparametric frontier methods to calculate efficiency before and after the mergers. It turns out that the nonconvex methods provide a more cogent ex post explanation of this merger wave.
    Keywords: Horizontal merger, Technical efficiency, Scale efficiency, Data Envelopment Analysis, Free Disposal Hull
    Date: 2021–08
  3. By: Biljana Jovanovic (National Bank of the Republic of North Macedonia); Nikola Naumovski (National Bank of the Republic of North Macedonia)
    Abstract: Minimum wage is an important redistributive tool and an important element of the employment strategies and social policies for overcoming poverty and reducing inequality. Even though the social dimension of the minimum wage concept is unquestionable, it also provokes frequent debates and discussions about the likely impact on firms’ financial conditions and consequently, firms’ profitability and performance. This research paper aims to investigate the economic impact of minimum wage increase on firms’ average wages, number of employees, profitability and productivity in the case of North Macedonia. The analysis is conducted by using firm level data set and difference-in-difference (DD) estimation method. Our results showed that the increase in minimum wages didn’t affect firms’ profitability significantly and this result is robust to the changes in the sample and method of estimation. In addition we found that most likely Macedonian firms did absorb higher labour costs by increase in productivity and, in some sectors, with decline in employment.
    Keywords: Inflation, minimum wage, adjustment channels, firms’ performance
    JEL: J31 J38 L25
    Date: 2021
  4. By: Bruno Morando (Department of Economics, Maynooth University.)
    Abstract: This paper presents a model where misallocation in the agricultural factors of production is the result of frictions in the food market which result in a disproportionately large subsistence sector. The empirical analysis, based on microdata on Ugandan farms, corroborates the theoretical predictions of the qualitative model. Specifically: subsistence farmers operate inefficiently high shares of land and capital and the efficiency losses are more severe in areas where subsistence farming is more widespread, possi-bly due to higher transportation costs. Conversely, I find no relationship between the level of misallocation and credit access and/or land market activity. These findings suggest that market connectivity also plays a key role in determining the efficiency of agricultural input distribution and that land market liberalization is a necessary but not sufficient condition to tackle misallocation.
    Keywords: Misallocation, Productivity, Agriculture, Uganda
    JEL: Q14 O40 O13
    Date: 2021
  5. By: Paola Azar (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Gabriela Sicilia (Universidad de la Laguna (España). Departamento de Economía, Contabilidad y Finanzas.)
    Abstract: This paper discusses the potential improvements in pupil’s academic results at public primary schools in Uruguay. Using student level data from the first national assessment of educational achievements, we decompose education attainments into pupil’s own effort and school value added following a multilevel metafrontier approach originally introduced by Silva-Portela and Thannassoulis (2002). We find that on average, pupils miss 19.2% of their potential achievement, mainly driven by their own under-performance. The extent of output students cannot obtain because of school effects is mainly explained by suboptimal resource availability at the school level rather than schools’ own managerial ability. The shortfall in the school’s contribution to efficiency affects those students in the least advantaged socioeconomic contexts and those with lower test scores.
    Keywords: educational performance, multilevel metafrontier approach, primary education
    JEL: C61 H52 I21
    Date: 2021–09
  6. By: Koray Aktas; Valeria Gattai
    Abstract: In recent years, India has emerged as a leading foreign direct investment (FDI) player, featuring prominently as both an origin and a destination of FDI. This study takes a firm-level perspective to empirically address the relationship between inward FDI, outward FDI, and firm-level performance in India. Using the Orbis database, our estimates reveal that Indian firms that have at least one foreign shareholder and/or one foreign subsidiary outperform those that do not. Controlling for endogeneity through propensity score matching and difference-in-difference techniques, we show that the deeper the FDI involvement, the larger the performance differentials. Moreover, compared with investing abroad, receiving foreign capital can contribute more toward enhancing the performance of Indian firms.
    Keywords: India, Foreign Direct Investment (FDI), inward, outward, firm-level performance
    JEL: F23 L25 O53
    Date: 2021–09
  7. By: Berggren, Niclas (Research Institute of Industrial Economics (IFN)); Bjørnskov, Christian (Aarhus University, Denmark)
    Abstract: The issue of what explains differences in the wealth of nations is one of the most classic in economics. We propose de facto academic freedom as an explanatory variable. The main idea is that such freedom allows for the development of new useful knowledge through research unconstrained by powerholders in business and politics. Using a new global panel-data set, encompassing up to 127 countries over the period 1960–2015, we show that there is indeed a positive relationship between de facto academic freedom and both labor and total-factor productivity growth. However, this effect only appears as long as the quality of the legal system is sufficiently high. We suggest that this is because such institutional quality offers protection that stimulates entrepreneurs to make use of the new knowledge produced in academia in innovative activities, which in turn benefits productivity growth.
    Keywords: Institutions; Academic freedom; Freedom of speech; Productivity; Growth
    JEL: F13 H25 O31 O38 O43
    Date: 2021–09–21
  8. By: Victoria E. Agwam; Pablo Azar; Kyra Frye
    Abstract: While the shocks from COVID-19 were concentrated in a handful of contact-intensive industries, they had rippling effects throughout the economy, which culminated in a considerable decline in U.S. GDP. In this post, we estimate how much of the fall in U.S. GDP during the pandemic was driven by spillover effects from the productivity losses of contact-intensive industries.
    Keywords: pandemic; COVID-19; productivity; supply chains
    JEL: E2
    Date: 2021–09–27
  9. By: Calì, Massimiliano; Presidente, Giorgio
    Abstract: Recent evidence suggests that automation technologies entail a trade-off between productivity gains and employment losses for the economies that adopt them. This paper casts doubts on this trade-off in the context of a developing country. It shows significant productivity and employment gains from automation in Indonesian manufacturing during the years 2008-2015, a period of rapid increase in robot imports. Analysis based on manufacturing plant data provides evidence of two plausible reasons for the absence of this trade-off. First, it documents the presence of diminishing productivity returns to robot adoption. As a result, the benefits from automation could be particularly large for countries at early stages of adoption, such as Indonesia. Second, the analysis finds significant positive employment spillovers from automation in downstream plants. Such effects are likely larger in countries such as Indonesia, where the foreign content of manufacturing production is low. Suggestive evidence indicates such results could apply to developing countries more generally.
    Keywords: Robots,Automation,Development,Employment,Productivity,Spillovers
    JEL: O14 J23 J24 L11 F63
    Date: 2021

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