nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒01‒17
twelve papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. On the Estimation of Cross-Firm Productivity Spillovers with an Application to FDI By Malikov, Emir; Zhao, Shunan
  2. The gender productivity gap: Evidence from the Indian informal sector By Ira N. Gang; Rajesh Raj Natarajan; Kunal Sen; Myeong-Su Yun
  3. The Productivity Puzzle and the Decline of Unions By Mitra, Aruni
  4. Distance Functions and Generalized Means: Duality and Taxonomy By Walter Briec
  5. Persistent and transient inefficiency: Explaining the low efficiency of Chinese big banks By Zuzana Fungáčová; Paul-Olivier Klein; Laurent Weill
  6. Banking Reforms, Access to Credit, and Misallocation By Chakraborty, Pavel; Mitra, Nirvana
  7. Innovation under central planning: patenting and productivity in the GDR By Frieling, Titus
  8. Addressing Oil Spills and Agricultural Productivity. Evidence of Pollution in Nigeria. By Beatriz Manotas-Hidalgo
  9. Production Analysis with Asymmetric Noise By Badunenko, Oleg; Henderson, Daniel J.
  10. Efficient Innovation Policy Increases High-productivity R&D Work By Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
  11. The role of value added across economic sectors in modulating the effects of FDI on TFP and economic growth dynamics By Simplice A. Asongu; Christelle Meniago; Raufhon Salahodjaev
  12. A semiparametric panel data model with common factors and spatial dependence Abstract: This paper proposes alternative estimation procedures for semiparametric panel data models that allow handling complex and relevant empirical problems simultaneously, namely (i) functional misspecification, by modelling stochastic observed common factors with a nonparametric function instead of assuming the usual parametric form; (ii) cross-sectional dependence arising simultaneously from common factors and spatial dependence; and iii) heterogeneous relations among variables. We then consider a more general panel data model with several types of cross-sectional dependence and obtain consistent and asymptotically normal estimators for both slope parameters and unknown functions by extending Pesaran’s (2006) common correlated effect (CCE) approach to this semiparametric framework. Another methodological and empirical challenge is how to test for poolability and fully parametric functional form. For both cases, simple consistent test statistics are proposed and we show that they have limiting standard distributions under the null hypothesis. The theoretical findings are further supported for small samples via several Monte Carlo experiments, and an empirical application to the knowledge capital production function is conducted. By Alexandra Soberon; Antonio Musolesi; Juan Rodriguez-Poo

  1. By: Malikov, Emir; Zhao, Shunan
    Abstract: We develop a novel methodology for the proxy variable identification of firm productivity in the presence of productivity-modifying learning and spillovers which facilitates a unified "internally consistent" analysis of the spillover effects between firms. Contrary to the popular two-step empirical approach, ours does not postulate contradictory assumptions about firm productivity across the estimation steps. Instead, we explicitly accommodate crosssectional dependence in productivity induced by spillovers which facilitates identification of both the productivity and spillover effects therein simultaneously. We apply our model to study cross-firmspillovers in China’s electric machinery manufacturing, with a particular focus on productivity effects of inbound FDI.
    Keywords: Production Economics, Productivity Analysis
    Date: 2022–01
  2. By: Ira N. Gang; Rajesh Raj Natarajan; Kunal Sen; Myeong-Su Yun
    Abstract: We examine the patterns and correlates of the productivity gap between male-owned and female-owned firms for informal enterprises in India. Female-owned firms are on average 45 per cent less productive than male-owned firms, with the clearest productivity gaps observed at the lower end of the productivity distribution. Using decomposition methods, we find that about 73 per cent of the productivity gap can be explained by structural effect, with the remainder being due to differences in observable characteristics as captured by composition effect.
    Keywords: Gender, Productivity gap, India, Decomposition methods, Informal sector
    Date: 2021
  3. By: Mitra, Aruni
    Abstract: This paper argues that rapid de-unionization during the 1980s can explain the sudden vanishing of the procyclicality of productivity in the U.S. I use cross-sectional evidence from U.S. states and industries to argue that the lower cost of hiring and firing workers due to the decline in union power prompted firms to rely less on labour hoarding, making productivity less procyclical. Allowing the hiring cost to decrease by the same proportion as the decline in union density can match almost the entire drop in cyclical productivity correlations in a model with endogenous effort and costly employment adjustment.
    Keywords: productivity, unions, hiring cost, factor utilization, DSGE
    JEL: E22 E23 E24 E32 J50
    Date: 2021–10–03
  4. By: Walter Briec
    Abstract: This paper defines a new distance function in production theory that generalizes several existing efficiency measures. The new distance function is inspired from the Atkinson inequality index and maximizes the generalized sum of netput expansions until an efficient point is reached. Along this line, many measures of technical efficiency are derived from the maximization of a utility function built on the Stone-Geary model. In particular, the directional distance function is expressed from the maximization of a suitable Leontief utility function. A generalized mean duality theorem is proven and a dual correspondence is developed between the generalized directional distance function and the profit function. It is then shown that, for every feasible production vectors, all previous dual correspondences are special cases of this correspondence.
    Date: 2021–12
  5. By: Zuzana Fungáčová; Paul-Olivier Klein (LARGE - Laboratoire de recherche en gestion et économie - UNISTRA - Université de Strasbourg - L'europe en mutation : histoire, droit, économie et identités culturelles - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique); Laurent Weill (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)
    Abstract: A vast literature shows that China's five largest state-owned banks (the Big Five) suffer from low cost efficiency. We offer a new explanation of this situation, by decomposing overall efficiency of Chinese banks into two parts: persistent and transient efficiency. Using the model of Kumbhakar, Lien and Hardaker (2014) based on the stochastic frontier approach, we measure persistent and transient efficiency for a large sample of 166 Chinese banks over the period 2008–2015. We show that the lower efficiency of China's Big Five banks is almost entirely due to low persistent cost efficiency, indicating structural problems. On the contrary, the Big Five banks transient efficiency is similar to other Chinese banks, reflecting a good aptitude to minimize their costs in the short-term. Our findings support the view that major structural reforms are needed to enhance the efficiency of China's Big Five banks.
    Date: 2020–02
  6. By: Chakraborty, Pavel; Mitra, Nirvana
    Abstract: New liberalization policies are rapidly globalizing financial services in developing countries, but there is little or no microeconomic evidence on the impact of banking reforms on the real economy. We examine the impact of a banking sector reform characterized by the introduction of new domestic private and/or foreign banks on Indian manufacturing firms' access to credit, performance and the resulting misallocation in the Indian economy using a unique firm-bank matched data. We find that the introduction of new banks led to (i) increase in access to credit by 18–-23% for big firms (top 25 percentile of size distribution); (ii) reduction in access to loans for small firms (bottom 25th percentile) by around 45%; and (iii) increase in profit, total sales for big firms. Next, we follow Hsieh and Klenow (2009) and estimate the distortions arising out of the capital and output market and show that the banking reforms significantly relaxed the credit constraints only for the big and more productive firms, resulting in reduced capital market misallocation. Finally, our counterfactual experiment shows that the reallocation of credit led to an overall gain in manufacturing output by 0.15--1.1%.
    Keywords: Banking Reforms, Private and/or Foreign Banks, Big Firms, Cream Skimming, Misallocation
    JEL: G1 G21 L25 O47
    Date: 2021–02–15
  7. By: Frieling, Titus
    Abstract: This thesis employs novel datasets on patenting activity and TFP in the GDR to study the relationship between innovation and productivity. Patenting activity is chosen as a variable of interest due to its inherent link to the innovative process and high international and intertemporal comparability. No statistically significant relationship between patenting and future productivity growth is found in an analysis across 16 sectors of the GDR’s economy from 1950-1989. This result is unusual, and likely results out of the institutional framework of the GDR: firstly, it being a planned economy and the associated reduced productivity effects of innovations, and secondly, the GDR’s unique patent system which likely increased the number of patent applications while reducing their economic usefulness. By including the full breadth of the GDR’s patent stock, as well as robustly estimating the initial capital stock of the GDR, a more reliable account of both these variables can be made than was possible in previous studies. This thesis contributes to the literature through its use of new data and an adaptation of a proven empirical identification strategy to a new context. It also suggests avenues for further research on the relationship between patenting and innovation in the GDR and planned economies more widely.
    JEL: R14 J01 N0
    Date: 2021–12
  8. By: Beatriz Manotas-Hidalgo (Universidad Publica de Navarra)
    Abstract: This paper examines how the pollution generated by oil operations in Nigeria can affect agricultural total factor productivity. I analyze oil spills, which are the main ecological disaster in Nigeria and lead to major environmental, economic, and social problems. Following a consumer-producer household framework, and applying a difference-and-difference approach, I estimate an agricultural production function. I find that farmers located less than 10 kilometers from oil spills suffer a relative reduction in agricultural output of around 2.73%. I also examine alternative mechanisms and find that oil-spill pollution can explain my results. I detect less owner-occupied land and a drop in labor income in urban areas close to oil spills, which could also be explained by a decrease in the labor productivity component. This study highlights an externality through which the oil industry affects living conditions in rural areas and stresses the importance of clean-up in areas close to oil spills.
    Date: 2021
  9. By: Badunenko, Oleg; Henderson, Daniel J.
    Abstract: Symmetric noise is the prevailing assumption in production analysis, but it is often violated in practice. Not only does asymmetric noise cause least-squares models to be inefficient, it can hide important features of the data which may be useful to the firm/policymaker. Here we outline how to introduce asymmetric noise into a production or cost framework as well as develop a model to introduce inefficiency into said models. We derive closed-form solutions for the convolution of the noise and inefficiency distributions, the log-likelihood function, and inefficiency, as well as show how to introduce determinants of heteroskedasticity, efficiency and skewness to allow for heterogenous results. We perform a Monte Carlo study and profile analysis to examine the finite sample performance of the proposed estimators. We outline R and Stata packages that we have developed and apply to three empirical applications to show how our methods lead to improved fit, explain features of the data hidden by assuming symmetry, and how our approach is still able to estimate efficiency scores when the least-squares model exhibits the well-known "wrong skewness" problem in production analysis.
    Keywords: asymmetry, production, cost, efficiency, wrong skewness
    JEL: C13 C21 D24 I21
    Date: 2021–12–01
  10. By: Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
    Abstract: Abstract Our work applies the model developed by Acemoglu et al. (2018), henceforth, AAABK, for assessing the growth and welfare implications of different types of innovation policies. Central to the AAABK model is the ratio of high-productivity and low-productivity firms in total output and how different policy measures affect this relationship. We employ the AAABK framework to build a macroeconomic model of the innovative business sector in Finland and fit it to the company-level micro-data on Finnish companies from 2000 to 2016. We find that, generally, increasing R&D subsidies would be a recommendable policy in Finland. The welfare impacts of R&D subsidies are highest when they accelerate the re-allocation of R&D workers to companies with high R&D productivity. The most effective innovation policy targets R&D subsidies to companies with the highest innovation capacity (i.e., in these companies, R&D employees generate the highest increase in a firm’s productivity). If subsidies are allocated to companies with low innovation capacity or to low-productivity companies that are close to exiting the market, there will be less innovation and slower economic growth. An optimal subsidy policy would drive incumbents with low R&D productivity to exit.
    Keywords: Business subsidies, Innovation, Innovation policy, Growth, Growth models
    JEL: D21 D24 H25 L52 O31 O34
    Date: 2022–01–13
  11. By: Simplice A. Asongu (Yaounde, Cameroon); Christelle Meniago (Sol Plaatje University, South Africa); Raufhon Salahodjaev (Tashkent, Uzbekistan)
    Abstract: This study investigates: (i) the effect of foreign direct investment (FDI) on total factor productivity (TFP) and economic growth dynamics, and (ii) the relevance of value added from three economic sectors in modulating the established effect of FDI on TFP and economic growth dynamics. The geographical and temporal scopes are respectively 25 Sub-Saharan African countries and the period 1980–2014. The empirical evidence is based on non-interactive and interactive Generalised Method of Moments. The following main findings are established. First, FDI has a positive effect on GDP growth, GDP per capita and welfare real TFP. Second, the effect of FDI is negative on real GDP and TFP, while the impact is insignificant on real TFP growth and welfare TFP. Third, values added to the three economic sectors largely modulate FDI to produce negative net effects on TFP and growth dynamics. Policy implications are discussed with particular emphasis on the need to complement added value across various economic sectors in order to leverage on the benefits of FDI in TFP and economic growth. To the best of knowledge, this is the first study to assess how value added from various economic sectors affect the relevance of FDI on macroeconomic outcomes.
    Keywords: Economic output, total factor productivity, foreign investment, agricultural sector, manufacturing sector, service sector, sub-Saharan Africa
    JEL: E23 F21 F30 F43 O55
    Date: 2021–01
  12. By: Alexandra Soberon (Department of Economics, University of Cantabria); Antonio Musolesi (Università degli Studi di Ferrara); Juan Rodriguez-Poo (Department of Economics, University of Cantabria)
    Keywords: Cross-sectional dependence, Nonparametric estimation, Common correlated effects estimator, Nonparametric test, Knowledge capital production function.
    Date: 2022–01

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