nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒01‒10
seventeen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Structural Identification of Productivity under Biased Technological Change∗ By Laurens Cherchye; Thomas Demuynck; Bram De Rock; Cédric Duprez; Glenn Magerman; Marijn Verschelde
  2. The Real Side of Financial Exuberance: Bubbles, Output and Productivity at the Industry Level By Francisco Queirós
  3. Sources of Growth and Stagnation in the Japanese Economy: An Analysis Based on Data for Listed Firms Spanning More Than Five Decades By FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
  4. Convergence in Labor Productivity across Provinces and Production Sectors in China By Qin, Weiguang; Bhattarai, Keshab
  5. Public Investment, Convergence and Productivity Growth in European regions By Roberto Martino
  6. Does greater discretion improve the performance in the execution of public works? Evidence from the reform of discretionary thresholds in Italy By Massimo Finocchiaro Castro; Calogero Guccio
  7. Firm productivity and immigrant-native earnings disparity By Åslund, Olof; Bratu, Cristina; Lombardi, Stefano; Thoresson, Anna
  8. Productivity and Pay in the US and Canada By Jacob Greenspon; Anna M. Stansbury; Lawrence H. Summers
  9. Digitalisation and Beyond: The COVID-19 Pandemic and Productivity Growth in G20 Countries By Gaetano D’Adamo; Maria Bianchi; Lucia Granelli
  10. Transport infrastructure and technical efficiency in a panel of countries: Accounting for endogeneity in a stochastic frontier model By Ligia Alba Melo-Becerra; María Teresa Ramírez-Giraldo
  11. Tracing Productivity Growth Channels in the UK By Mr. Daniel Garcia-Macia; Julia Korosteleva
  13. How institutions moderate the effect of gender diversity on firm performance By Hoch, Felix; Seyberth, Lilo
  14. Goodness-of-fit in Optimizing Models of Production: A Generalization with a Bayesian Perspective By Mike Tsionas; Valentin Zelenyuk
  15. Worker Stress and Performance Pay: German Survey Evidence By Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe
  16. Transformation of Engineering Tools to Increase Material Efficiency of Concrete By Ichimaru Watanabe, Sonoko; Kamau-Devers, Kanotha; Cunningham, Patrick R.; Miller, Sabbie A.
  17. Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market By Rik L. Rozendaal; Herman R. J. Vollebergh

  1. By: Laurens Cherchye; Thomas Demuynck; Bram De Rock; Cédric Duprez; Glenn Magerman; Marijn Verschelde
    Abstract: We propose a novel method for structural production analysis in the presence of unobserved heterogeneity in productivity. Our approach is intrinsically nonparametric and does not require the stringent assumption of Hicks neutrality. We assume cost minimization as the firms’ behavioral objective, and we model productivity on which firms condition the input demand. Our model can equivalently be represented in terms of endogenously chosen latent input costs, which avoids an endogeneity bias in a natural way. Our empirical application to unique and detailed Belgian manufacturing data shows that our method allows for drawing strong and robust conclusions, despite its nonparametric orientation. For example, we confirm the well-documented productivity slowdown, and we highlight a potential bias when using a common-scale intermediate inputs price deflator in the estimation of productivity. In addition, we provide robust empirical evidence against the assumption of Hicks neutrality for the setting at hand.
    Keywords: productivity, unobserved heterogeneity, simultaneity bias, nonparametric production analysis, cost minimisation, manufacturing
    Date: 2021–12
  2. By: Francisco Queirós (Università di Napoli Federico II and CSEF)
    Abstract: There has been a growing interest in the theory of rational bubbles. Recent theories predict that bubbles are expansionary, but differ in the underlying mechanisms. This paper provides empirical evidence that help us assess different theories, and documents four main findings: stock market overvaluation is associated with (i) faster output and input growth, (ii) declining TFP growth, (iii) a greater contribution of labor for output growth, with no change in the contribution of capital, (iv) an increase in the number of firms. Overall, these findings suggest that bubbly expansions are driven by increased factor accumulation (in particular labor), and not from higher productivity growth.
    Keywords: Stock prices, fundamentals, bubbles, productivity growth.
    JEL: E44 G12 G31 G32
    Date: 2021–12–20
  3. By: FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
    Abstract: This study presents growth accounting and an analysis of productivity dynamics (as measured by labor productivity and total factor productivity, TFP) covering almost all listed firms in Japan spanning the 55-year period from 1960 to 2015 using the Development Bank of Japan's "Corporate Financial Databank" on listed firms. The results show that during much of the period, the productivity growth of listed firms diverged substantially from macroeconomic productivity trends: during the 1980s, when the Japanese economy received worldwide acclaim, listed firms' productivity growth declined substantially, while during the 1995–2010 period, when Japan's economy registered only tepid growth, listed firms enjoyed steady productivity improvements. Moreover, from 2010 to 2015, when the economy overall accelerated under "Abenomics," listed firms' productivity growth remained sluggish. This divergence in productivity trends between the economy overall and listed firms likely is due to differences in productivity growth between listed firms and other firms – primarily small and medium-sized firms – linked to their size, such as differences in terms of their speed of internationalization, investment in tangible and intangible assets, increases in part-time employment, and restructuring. This finding suggests that understanding differences in productivity linked to firm size is crucial for understanding productivity dynamics within Japan's economy, which has been characterized by a dual structure since the Meiji period. Meanwhile, our analysis of productivity dynamics shows that the contribution of the reallocation of resources from listed firms with low TFP to other listed firms to overall TFP growth among listed firms has been small, and that most of the overall TFP growth was due to TFP growth within firms (i.e., the within effect). The exception is the 2010–2015 period, when resource allocation in the nonmanufacturing sector made a substantial positive contribution to TFP growth.
    Date: 2021–11
  4. By: Qin, Weiguang; Bhattarai, Keshab
    Abstract: The panel data analysis for labour productivity convergence across provinces and sectors in China shows existence of unconditional and conditional convergence among them. While the human capital is found to have positive and significant effects on growth rates of sector-wise productivities, the FDI had positive and significant effects on growth rates of productivity across provinces. According to quantile regression, the convergence are asymmetric among provinces and sectors. The policy implications of this analysis is that low productivity sectors should improve human capital and reduce concentration for growing faster. Similarly provinces with low productivity could encourage more FDI to complement domestic investment for achieving higher rates of growth in labour productivity. This study also finds that greater inequality lowers the rate of labour productivity and hence causes more divergence across provinces. Effects income inequality on productivity are asymmetric and heterogeneous by quantiles and hence demand for an egalitarian redistribution system.
    Keywords: productivity convergence, labor, FDI, human capital, China
    JEL: O47
    Date: 2021–12–15
  5. By: Roberto Martino
    Abstract: This paper estimates an augmented growth model to analyse the contribution of public investment to productivity growth for European regions. The empirical model accounts for the accumulation of public capital, the stock of infrastructure and the creation of knowledge by the government sector, alongside other growth determinants, as institutions, education, and business R&D. Convergence dynamics are also explored. Data include 273 NUTS2 European regions from 27 countries from 1999 to 2018. The empirical evidence presented suggests that public investment is positively associated with productivity growth and complementarities with business investment are in place. Furthermore, returns on both types of investments are larger in the regions of the Southern periphery, flagging policy space for further public and private productive spending. No significant effect is found for the stock of infrastructure. Public R&D has an indirect impact on productivity growth through the mediating effect of business R&D, while institutional quality is a horizontal determinant of growth.
    Date: 2021
  6. By: Massimo Finocchiaro Castro (Mediterranean University of Reggio Calabria, Italy); Calogero Guccio (University of Catania, Italy)
    Abstract: In this work, adopting a semi-parametric approach and a quasi-experiment setting, we empirically assess the effects of a reform of public procurement regulation in Italy, approved in 2011, that increased the discretion of bureaucrats in selecting the procurer. To this end, employing a large dataset of public works managed by Italian municipalities in the period 2009-2013, we first estimate contract execution performance; then, we test the impact of the reform on the efficiency of public works execution in an institutional context characterized by large differences in social capital and trust in institutions. The results provide evidence that the reform exerted a positive, albeit small, effect on public works execution performance. However, the beneficial role exerted by increased discretion is positive and significant only in those areas where social capital and trust in institutions have reached higher levels. These results seem to suggest that more discretion leads to greater efficiency but also to greater corruption risks suggesting that increased discretion must be balanced by strengthened ex-post controls, particularly in high-risk areas.
    JEL: D24 D73 H57 P16
    Date: 2021–12
  7. By: Åslund, Olof (IFAU - Institute for Evaluation of Labour Market and Education Policy); Bratu, Cristina (Aalto University); Lombardi, Stefano (VATT Institute for Economic Research); Thoresson, Anna (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms.
    Keywords: Firm productivity; Immigrant-native earnings gaps; Wage inequality
    JEL: J15 J31 J62
    Date: 2021–12–08
  8. By: Jacob Greenspon; Anna M. Stansbury; Lawrence H. Summers
    Abstract: We study the productivity-pay relationship in the United States and Canada along two dimensions. The first is divergence: the degree to which the levels of productivity and pay have diverged. The second is delinkage: the degree to which incremental increases in the rate of productivity growth translate into incremental increases in the rate of growth of pay, holding all else equal. We show that in both countries the pay of typical workers has diverged substantially from average labor productivity over recent decades, driven by both rising labor income inequality and a declining labor share of income. Even as the levels of productivity and pay have grown further apart, we find evidence for some linkage between productivity and pay in both countries: a one percentage point increase in the rate of productivity growth is associated with a positive increase in the rate of pay growth, holding all else equal. This linkage appears stronger in the US than in Canada. Overall, our findings lead us to tentatively conclude that policies or trends which lead to incremental increases in productivity growth, particularly in large relatively closed economies like the USA, will tend to raise middle class incomes. At the same time, other factors orthogonal to productivity growth have been driving productivity and typical pay further apart, emphasizing that much of the evolution in middle class living standards will depend on measures bearing on relative incomes.
    JEL: E24 J24 J3
    Date: 2021–12
  9. By: Gaetano D’Adamo; Maria Bianchi; Lucia Granelli
    Abstract: The Italian G20 presidency has included reviving productivity growth as one of its priorities. Against this background, this Economic Brief discusses productivity growth in G20 economies in the context of the COVID-19 pandemic, paying attention to digitalisation, the emergence of digital platforms and intangible investment, and highlights related policy priorities. The COVID-19 pandemic is affecting productivity growth in many ways (e.g. through human capital, investment, resource reallocation, frictions to global value chains, etc.) and is likely to leave scars. Fostering digitalisation and intangible investment can help the recovery thanks to their overall positive impact on productivity. Key policies to unlock productivity growth discussed in the paper include: (i) high-quality investments in innovation, human capital and infrastructure, (ii) well-functioning labour and product markets to facilitate resource reallocation also across sectors, to absorb the shock of the crisis, (iii) facilitating access to finance and liquidity, and (iv) a supportive business environment. There is strong value added in international cooperation for productivity-enhancing policies: international cooperation can allow the sharing of information on lessons learnt and best practices. Moreover, common efforts and joint initiatives (for example, in investment) can maximise the impact of the measures and the positive spillovers. International coordination in the G20 can also contribute to fill existing data gaps to enable more evidence-based policy decisions.
    Keywords: productivity, digitalisation, COVID-19, investment, structural reforms, Gaetano D’Adamo, Maria Bianchi, Lucia Granelli.
    JEL: D24 E22 F42
    Date: 2021–07
  10. By: Ligia Alba Melo-Becerra; María Teresa Ramírez-Giraldo
    Abstract: En este artículo se estima una frontera de producción global utilizando modelos de frontera estocástica para evaluar la contribución de la infraestructura de transporte en el desempeño de los países. Encontramos que el papel de la infraestructura se subestima bajo el supuesto de exogeneidad, lo que indica que tener en cuenta la endogeneidad es crucial en la estimación. Los resultados sugieren que una mejor dotación de infraestructura contribuye al crecimiento económico, destacando su importancia para explicar las diferencias en el desempeño económico de los países. Las medidas de eficiencia indican que los países de ingresos altos son más eficientes que los países de ingresos bajos y medios, lo que sugiere que hay espacio para mejorar el desempeño económico en países con un nivel de ingresos más bajo. Mejores instituciones también son esenciales para fomentar el crecimiento económico de los países. **** ABSTRACT: In this paper, a global production frontier is estimated using stochastic frontier models to assess the contribution of transport infrastructure to countries’ performance. We find that the role of infrastructure is underestimated under the exogeneity assumption indicating that handling endogeneity is crucial in the estimation. Results suggest that a better endowment of infrastructure contributes to economic growth, highlighting its importance in explaining differences in the economic performance of countries. Efficiency measures indicate that high-income countries are more efficient than low- and middle-income countries, suggesting that there is room for improving economic performance in countries with a lower income level. Better institutions also are essential to foster countries’ economic output.
    Keywords: Transport infrastructure, stochastic frontier, efficiency, endogeneity, Infraestructura; Transporte; Frontera estocástica, eficiencia, endogeneidad
    JEL: H54 O18 O40 C19
    Date: 2021–12
  11. By: Mr. Daniel Garcia-Macia; Julia Korosteleva
    Abstract: What drove the UK productivity slowdown post-GFC, and how is the post-Covid recovery expected to differ? This paper traces the sources of TFP growth in the UK over the last two decades through the lens of a structural model of innovation, using registry data on the universe of firms. The dominant innovation source in the pre-GFC decade were improvements by incumbent firms on their own products, whereas creation of new varieties by entrants took a leading role post-GFC. In the Covid recovery, survey data suggests that creative destruction (i.e., innovation replacing other firms’ products) is expected to gain importance. This emphasizes the need for growth policies that facilitate labor and capital reallocation across firms, in addition to R&D support.
    Keywords: economic growth, innovation, creative destruction
    Date: 2021–11–12
  12. By: Gaygysyz Ashyrov; Helen Poltimäe
    Abstract: Energy efficiency is an important issue for developing countries like Vietnam, where the economy is thriving, but energy efficiency is still low. Firms should invest in energy efficiency measures, but the desired level is not reached. While the economic determinants of firms’ investments in energy efficiency have been researched, the role of the institutional setting has not gained so much attention. By employing data from Vietnamese small and medium-sized enterprises that has been administered in 2015, this article investigates how corruption, as a sign of institutional dysfunctionality, is associated with the energy efficiency in firms. Results of a bivariate binary probit estimation revealed that bribery increases the likelihood of energy efficiency environmentally friendly investments. However, findings from instrumental variable two stage least squares estimations demonstrate that bribery increases the cost of the investments. Hence, in the long run, corruption might have a deterring effect on energy efficiency investments by firms.
    Keywords: corruption, energy efficiency, institutional setting, Vietnam
    Date: 2022
  13. By: Hoch, Felix; Seyberth, Lilo
    Abstract: Research investigating the relationship between firm performance and gender diversity has so far reported conflicting evidence: Some studies find firm performance to benefit from gender diversity, others find negative results or no effect at all. Taking this inconclusive evidence as a sign for moderators influencing the effect of gender diversity on firm performance, we investigate the moderating influence of institutions on this relationship. Using data on 7,661 firms in 71 countries, we employ a multilevel linear regression with fixed effects to examine the moderating effect of formal as well as informal institutional characteristics. We find that institutions indeed moderate the relationship between gender diversity and firm performance. In particular, informal institutions seem to moderate the effect of diversity on market valuation (Tobin's Q), while formal institutions moderate the effect of gender diversity on firm financial performance (ROA). These results have important theoretical implications for the academic debate on gender diversity and firm performance as well as practical implications for both businesses and lawmakers.
    JEL: J16 J71 L25 M12 M14
    Date: 2021
  14. By: Mike Tsionas (Montpellier Business School & Lancaster University Management School); Valentin Zelenyuk (School of Economics, University of Queensland, Brisbane, Qld 4072, Australia)
    Abstract: We propose a very general approach for modeling production technologies that allows for modeling both inefficiency and noise that are specific for each input and each output. The approach is based on amalgamating ideas from nonparametric activity analysis models for production and consumption theory with stochastic frontier models. We do this by effectively re-interpreting the activity analysis models as simultaneous equations models in Bayesian compression and artificial neural networks frameworks. We make minimal assumption about noise in the data and we allow for flexible approximations to input- and output-specific slacks. We use compression to solve the problem of an exceeding number of parameters in general production technologies and we also incorporate environmental variables in the estimation. We present Monte Carlo simulation results and empirical illustration and comparison of this approach for US banking data.
    Date: 2021–12
  15. By: Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe
    Abstract: While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. It also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance moderates the relationship between performance pay and stress. The risk tolerant receiving performance pay suffer less stress than the risk averse.
    Keywords: Performance Pay,Worker Health,Stress,Risk Tolerance
    JEL: J33 I31 J32
    Date: 2021
  16. By: Ichimaru Watanabe, Sonoko; Kamau-Devers, Kanotha; Cunningham, Patrick R.; Miller, Sabbie A.
    Abstract: This report demonstrates how considerations across concrete material design and infrastructure design can be used together to change environmental impacts and costs by targeting appropriate constituents, materials, and system longevity. In this early-stage exploration, methods to compare concrete mixtures proportioning as they relate to environmental impacts, comparison indices based on common performance characteristics were used. This work was then built out to explore the role of steel reinforcement on reinforced concrete member environmental impacts to elucidate mechanisms to drive emissions reduction for these multi-material members. Finally, work was extended to understand how the longevity of concrete systems could influence environmental impacts associated with concrete production. Each stage of design considered was shown to have substantial effects on mitigating environmental impacts. In all cases, the primary environmental impact addressed was greenhouse gas emissions; however, this work can be extended to address other environmental impacts in future work. These methods from this work are demonstrated in this report through evaluation of mixtures in literature as well as a case study on an existing pavement overlay and potential alternative designs. View the NCST Project Webpage
    Keywords: Engineering, Concrete, material efficiency, environmental impact assessment, cost assessment, material selection, design decision making
    Date: 2021–12–01
  17. By: Rik L. Rozendaal; Herman R. J. Vollebergh
    Abstract: This article tests the effects of fuel economy and greenhouse gas emission standards on the direction of innovation, in particular on breakthrough technologies in the automotive industry. We develop an intuitive measure of standard stringency that captures the policy’s most important features for the decision as to whether or not to innovate. To test the role of these standards relative to prices and taxes, we construct a firm-level panel of patents in clean and dirty automotive technologies for the years 2000-2016. Our results indicate that standards are a very robust driver inducing clean innovation, whereas taxes also seem to play a role but prices (net of taxes) do not. This effect is driven by patenting for breakthrough technologies, in particular electric vehicle and hydrogen fuel cell technologies. We find no evidence that these policies negatively impact dirty innovation.
    Keywords: environmental policy instruments, regulatory stringency, innovation, directed technical change
    JEL: O30 Q55 Q58
    Date: 2021

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