nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒02‒14
fifteen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. Broadband and Productivity: Structural Estimates for Germany By Tomaso Duso; Mattia Nardotto; Alexander Schiersch
  2. Are small farms really more productive than large farms? By Fernando M. Aragón; Diego Restuccia; Juan Pablo Rud
  3. The UK Productivity Puzzle: Does Firm Cohort matter for their Performance following the Financial Crisis? By Mustapha Douch; Huw Edwards; Sushanta Mallick
  4. Assessing misallocation in agriculture: plots versus farms By Fernando Aragon; Diego Restuccia; Juan Pablo Rud
  5. How did China's GVCs participation influence its manufacturing productivity? By Ping Hua
  6. Testing for Optimization Behavior in Production when Data is with Measurement Errors: A Bayesian Approach By Mike G. Tsionas; Valentin Zelenyuk
  8. Sustainable land management, gender, and agricultural productivity: Evidence from Ethiopia's fragile watershed observatory By Kato, Edward; Mekonnen, Dawit Kelemework; Tiruneh, Solomon; Ringler, Claudia
  9. Streams of digital data and competitive advantage: The mediation effects of process efficiency and product effectiveness By E. Raguseo; Pigni, F.; Claudio Vitari
  10. The Impact of ESG performance on the Financial Performance of European Area Companies: An empirical examination By Phoebe Koundouri; Nikitas Pittis; Angelos Plataniotis
  11. Profit Margins in U.S. Domestic Airline Routes By Hakan Yilmazkuday
  12. European bank profitability: the Great Convergence? By Martien Lamers; Thomas Present; Rudi Vander Vennet
  13. The effect of revenue diversification on bank profitability and stability during the COVID-19 Pandemic: Evidence from Kenya By Ochenge, Rogers
  14. Effect of public investments on maize and cereal productivity By Smart, Jenny; Benin, Samuel; Marenya, Paswel; Takeshima, Hiroyuki; Smart, Francis
  15. The relationship between Corporate Social Responsibility and performance: the moderating effect of financial leverage By Wafa Sahraoui; Rimvie Enoc Kabore

  1. By: Tomaso Duso; Mattia Nardotto; Alexander Schiersch
    Abstract: We study the impact of broadband availability on firms’ total factor productivity (TFP) using German firm-level data between 2010 and 2015. We adopt a control function approach to causally identify and separately estimate productivity for 46 two-digit manufacturing and service sectors. Over the sample period, broadband availability, measured by 16 Mbps transmission rates, more than doubled in German municipalities. While this increased broadband availability has almost no effect on firms’ productivity in manufacturing, it significantly increases TFP in most service sectors. Yet, the size of the effect is heterogenous across industries.
    Keywords: broadband internet, productivity, firm-level data
    JEL: D24 D22 J24 O14 O22 O33
    Date: 2021
  2. By: Fernando M. Aragón (Institute for Fiscal Studies); Diego Restuccia (Institute for Fiscal Studies); Juan Pablo Rud (Institute for Fiscal Studies and 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 ine?ective 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: 2021–10–14
  3. By: Mustapha Douch (Bank of Lithuania, The University of Edinburgh); Huw Edwards (Loughborough University); Sushanta Mallick (Queen Mary University)
    Abstract: This paper provides empirical evidence on how the aftermath of the 2008 crisis affected firm productivity in the UK, taking account of the cohort effect of firms established after 2008. We test this using firmspecific and time-varying credit scores to capture firms’ ability to access credit. To overcome the identification problem, a matched sample based on firm’s credit score, firm age, size and ownership status is used by undertaking the propensity score matching approach. While we find evidence that smaller firm size and changes in credit conditions affect productivity, about half of the difference in productivity remains unexplained. We extend the matching analysis to examine sectors and cohorts, and find that, during 2011-2016, the low productivity is driven primarily by newer firms operating in the services sector, rather than in manufacturing. Within services, the underlying productivity puzzle is driven by a cessation of growth in high-productivity financial services, while abundant labour supply has led to a ‘levelling down’ of performance of newer firms in the rest of services, in line with relatively lowproductivity manufacturing.
    Keywords: : Total Factor Productivity, Cohort, Crisis, Firm Survival, Credit Score.
    JEL: E00 D24 E30 G21
    Date: 2022–01–31
  4. By: Fernando Aragon; Diego Restuccia; Juan Pablo Rud
    Abstract: We assess the extent and cost of misallocation in agriculture in less-developed countries comparing the analysis at the plot and farm levels. Using detailed data from Uganda, we show that the plot-level analysis leads to extremely large estimates of reallocation gains, even after adjusting for measurement error and unobserved heterogeneity. These results reflect two empirical limitations of the plot as unit of analysis: excess measurement error and near constant returns to scale production estimates. We find limited evidence of substantial measurement error at the farm level.
    Keywords: plot, farm, misallocation, measurement error, agriculture, distortions.
    JEL: O4
    Date: 2022–02–04
  5. By: Ping Hua (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)
    Abstract: By using panel data of 15 Chinese manufacturing industries over the 2005-2014 period from OECD TiVA and WIOD databases, the impact of China's GVCs participation on labor productivity is estimated. We find that while the productivity elasticity of the share of sector's foreign value added relative to sector's exports known as sector backward linkages is negative, that relative to China's gross exports named structure backward linkage is positive. As the annual average growth rates of both backward linkages are negative, China's backward linkages have contributed to productivity growth of 6.41% per year on average. We find that the positive productivity elasticity of the share of domestic intermediate goods embodied in exports of third countries relative to sector's exports, named sector forward linages together with a positive annual average growth rate, and that relative to China's exports named structure forward linkages together with a negative annual average growth rate, have increased productivity of 1.97% per year on average. We find finally that GVCs position is improved from 0.3 in 2005 to 0.7 in 2014. China's GVCs participation exerted positive productivity effects via optimizing resource allocation inside sectors towards more efficiency ones, via moving up from low productivity backward linkages to higher productivity forward linkages and via improving its position. This diminished the risk to be entrenched in low-profitability low productivity growth GVCs activities in China. However, the productivity contribution of backward linkages 3 times higher than that of forward linkage suggests that the future positive productivity impact of GVCs moving up may be much more difficult in a less favorable context (trade war between China and USA, reindustrialization and trade protection related to Covid-19 for example).
    Keywords: JEL Classification Numbers: F62,F63,O5,O47 global value chains,manufacturing productivity,China
    Date: 2021–12–31
  6. By: Mike G. Tsionas (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: The purpose of this paper is to develop formal tests for cost / profitt rationalization of observed data sets under measurement errors in both prices and quantities. The new techniques are based on new statistical formulations for inequalities that describe cost and pro t rationalizability, developed in a Bayesian framework. The new likelihood-based methods of inference are introduced and then illustrated using a data set of large U.S. banks. We also develop various robustness checks, including a normal and lognormal speci cation of the data generating process, as well as a multivariate mixture-of-normal-distributions.
    Keywords: Cost Minimization; Profit Maximization; Likelihood-based methods; Markov Chain Monte Carlo; Banking.
    Date: 2021–01
  7. By: Priit Vahter; Maaja Vadi
    Abstract: This paper explores the dynamic nature of complementarities between technological and organizational innovation at firms. Using Spanish firm level panel data (PITEC) over period 2008-2016, it investigates how the formation, keeping and ending of the joint adoption of these two core types of innovation is associated with firm performance. In the case of the general static test of complementarities we find no evidence of complementarities. However, once we focus on the analysis of within-firm changes in the complementarity bundle of innovation types, we observe clear evidence that some sequential as well as simultaneous strategy switches towards combining technological and organizational novelties are associated with significant performance premia at firms. Our findings point out the key role of technological innovation in these complementarities. We find evidence of sequential complementarity only when organizational innovation is added to the already existing technological innovation at the firm, not when organizational innovation is added as first component before technological innovation. In the case of dissolving the complementarity bundle of innovation types, the key disadvantage for the firm is related to dropping the technological innovation. Giving up only organizational innovation while keeping the technological innovation appears to have no negative effect, on average, on firm performance.
    Keywords: technological innovation, organizational innovation, complementarities, sequential complementarity
    Date: 2022
  8. By: Kato, Edward; Mekonnen, Dawit Kelemework; Tiruneh, Solomon; Ringler, Claudia
    Abstract: Land degradation is a pressing global challenge, with three billion people residing in degraded landscapes. The global cost of land degradation is estimated to be about $300 billion per year, with Africa south of the Sahara accounting for 26 percent of the total global costs due to land-use and land-cover changes. In Ethiopia, it is estimated that more than 85 percent of land is moderately to severely degraded due to changes in land use and cover, costing the country an estimated US$4.3 billion annually. In order to halt further degradation and support essential restoration through sustainable land management (SLM) and related investments, the Water and Land Resource Center (WLRC) and its consortium of development partners established six learning watersheds in Central and North-Western Ethiopia with the ultimate goal of improving water security and crop and livestock productivity.
    Keywords: ETHIOPIA, EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, sustainability, sustainable land management, land management, gender, agricultural productivity, watersheds,
    Date: 2021
  9. By: E. Raguseo (DIGEP - Department of Management and Production Engineering [Politecnico di Torino] - Polito - Politecnico di Torino = Polytechnic of Turin); Pigni, F. (Grenoble Ecole de Management); Claudio Vitari (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU ECO - Aix-Marseille Université - Faculté d'économie et de gestion - AMU - Aix Marseille Université)
    Abstract: Firms can achieve a competitive advantage by leveraging real-time Digital Data Streams (DDSs). The ability to profit from DDSs is emerging as a critical competency for firms and a novel area for Information Technology (IT) investments. We examine the relationship between DDS readiness and competitive advantage by studying the mediation effect of product effectiveness and process efficiency. The research model is tested with data obtained from 302 companies, and the results confirm the existence of the mediation effects. Interestingly, we confirm that competitive advantage is more significantly impacted by IT investments affecting product effectiveness than those affecting process efficiency
    Keywords: Streams of big data,process efficiency,product effectiveness,competitive advantage
    Date: 2021
  10. By: Phoebe Koundouri; Nikitas Pittis (University of Piraeus, Greece); Angelos Plataniotis
    Abstract: Achieving climate neutrality dictated by international agreements such as the Paris Agreement, the United Nations Agenda 2030 and the European Green Deal, requires the conscription of all parts of society. The business world and especially large enterprises have a leading role in this effort. Businesses can contribute to this effort, by establishing a reporting and operating framework according to specific Environmental, Societal, Goovernance (ESG) criteria. The interest of companies in the ESG framework has become more intense in the recent years, as they recognize that appart from an improved reputation, ESG criteria can add value to them and help to become more effective in their functioning. However, especially large European companies, are legally obligated by the Non-Financial Reporting Directive (NFRD - Directive 2014/95/EU), to disclose non-financial information on how they deal with social and environmental issues. In the literature, there are discussions on what extent a good ESG-performance affects a company's profitability, valuation, capital efficiency and risk. The purpose of this paper is to examine empirically whether a relationship between good ESG performance and the good financial condition of companies can be documented. For a sample of the top-50 European companies in terms of ESG performance (STOXX 28 Europe ESG Leaders 50 Index), covering a wide range of sectors, namely Automobile, Consumer Products, Energy, Financial Services, Manufacturing etc., first, we reviewed their reportings to see which ESG framework they use to monitor their performance. Next, we examined whether there is a pattern of better financial performance if compared to other large European corporations. Our results show that such a connection seem to exist at least for some specific parameters, while for others such a claim cannot be supported.
    Keywords: ESG, STOXX Europe, Financial Performance, Capital Structure, Profitability, Valuation
    Date: 2022–01–30
  11. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: This paper estimates profit margins in the U.S. airline industry at the domestic route level. The dynamic estimation methodology used not only is robust to any simultaneity/endogeneity bias by construction but also results in profit margin estimates that are highly consistent with actual profit data from the U.S. airline industry. Estimated annual profit margins have an average of about 13.3%, with a range between 2.7% and 42.9% across routes. A cross-route analysis further suggests that annual profit margins increase with the market share of the largest airline serving the route, whereas they decrease with airfare. Important policy suggestions follow.
    Keywords: Profit Margin, Price Elasticity, U.S. Domestic Routes
    JEL: C32 L93
    Date: 2021–11
  12. By: Martien Lamers; Thomas Present; Rudi Vander Vennet (-)
    Abstract: Have Euro Area banks restored viability in the post-crisis era? We investigate profitability convergence for Euro Area banks over the period 2009-2020 using the concepts of ß and s convergence and a club clustering algorithm. Our evidence is consistent with a slow catch up of the weaker banks, but we also document that better performing banks converge towards a lower profit level, suggesting a ‘great convergence’ towards the middle. Moreover, we identify a cluster of banks exhibiting dismal profit dynamics, indicating the need for a restructuring of part of the Euro Area banking sector.
    Keywords: Euro Area banks, bank profitability, ß convergence, s convergence, club clustering analysis
    JEL: C38 G20 G21
    Date: 2022–02
  13. By: Ochenge, Rogers
    Abstract: This paper uses annual data from Kenyan banks over the 2010-2020 period to empirically analyze the link between diversification (non-interest income) and bank performance. Using dynamic panel regressions, the study finds that banks which diversify (functionally) their sources of revenues tend to be more profitable and financially stable. Importantly, the study finds that reliance on non-interest revenue sources acts as an economically important shock absorber in times of declining profits such as witnessed in the ongoing COVID-19 pandemic. From a policy perspective, these results encourage banks to leverage on new technologies to create non-traditional products whose operating marginal costs are small. This also calls for regulators to remain open to such innovations.
    Date: 2022
  14. By: Smart, Jenny; Benin, Samuel; Marenya, Paswel; Takeshima, Hiroyuki; Smart, Francis
    Abstract: To help better understand the linkages between public investments and maize productivity within the broader cereals sector, this study estimates the effect of public spending in different sectors (e.g., agriculture, infrastructure, health, education, social protection, and defense) on the area harvested and yield of maize and other major cereals (wheat, rice, sorghum, and millet). The data used are compiled from multiple sources, resulting in a national-level panel dataset of 81 maize-producing countries from 1980 to 2015. We estimate a seemingly unrelated regression (SUR), consisting of eight equations (four for area shares and four for yields for each maize, wheat, rice, and millet/sorghum respectively), with country and year fixed effects and county-specific time trends. We find government expenditure (GE) on agriculture for example has a positive effect on area harvested for rice and sorghum/millet, a negative effect on area harvested for maize and wheat, and a positive effect on maize, wheat, and rice yields. GE on the social sector (education, health, and social protection) has mixed effects on area harvested for maize, wheat, and rice, but negative effects on their yields. GE on infrastructure (transport and communications) also has mixed effects on area harvested for rice and sorghum/millet, but positive effects on wheat and rice yields. GE on defense has negative effects on wheat and rice yields. CGIAR expenditures have mixed effects on area harvested for wheat (positive) and rice and sorghum/millet (negative), but no effect on yields. On the productivity effects, we find that it seems that GE on agriculture and infrastructure have been beneficial to the different cereals (except sorghum/millet), whereas GE on the social sector and defense have had the opposite effect. Although the role of agricultural research and development in raising cereal productivity and incomes and in reducing poverty is well established, deficiencies in governance, political institutions, and other factors have led to missed opportunities. Complementary investments, such as in rural infrastructure, are critical.
    Keywords: WORLD; maize; cereals; public investment; productivity; cross-country panel; Seemingly Unrelated Regression (SUR); Statistics of Public Expenditure for Economic Development (SPEED)
    Date: 2021
  15. By: Wafa Sahraoui (Université de Sousse); Rimvie Enoc Kabore (LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE])
    Date: 2021–12–27

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