nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒03‒21
nine papers chosen by

  1. Land Misallocation and Productivity By Chaoran Chen; Diego Restuccia; Raul Santaeulalia-Llopis
  2. The contribution of robots to productivity growth in 30 OECD countries over 1975–2019 By Gilbert Cette; Aurélien Devillard; Vincenzo Spiezia
  3. Assessing Misallocation in Agriculture: Plots versus Farms By Fernando M. Aragón; Diego Restuccia; Juan Pablo Rud
  4. Misallocation and Capital Market Integration: Evidence from India By Natalie Bau; Adrien Matray
  5. Human Capital Reallocation Across Firms: Evidence from Idiosyncratic Shocks By Erik P. Gilje; Jérôme P. Taillard; Linghang Zeng
  6. FDI Spillover Effects on Innovation Activities of Knowledge-using and Knowledge-creating Firms: Evidence from an Emerging Economy By Iraj Hashi; Mehtap Hisarciklilar; Slavo Radošević; Nebojša Stojčić; Nina Vujanović
  7. A Structural Empirical Model of R&D Investment, Firm Heterogeneity, and Industry Evolution By Yanyou Chen; Daniel Xu
  8. Is infrastructure capital really productive? Non-parametric modeling and data-driven model selection in a cross-sectionally dependent panel framework By Antonio Musolesi; Giada Andrea Prete; Michel Simioni
  9. 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

  1. By: Chaoran Chen; Diego Restuccia; Raul Santaeulalia-Llopis
    Abstract: Using detailed household-level data from Malawi on physical quantities of outputs and inputs in agricultural production, we measure total factor productivity (TFP) for farms controlling for land quality, rain, and other transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP implying substantial factor misallocation. The agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor of 2.8-fold nationwide and 1.8-fold within enumeration areas, the narrowest geographical category in our data. Constructing a panel to estimate household-farm productivity that controls for transitory variation such as potential measurement error, the agricultural output gain is still quite substantial, between 1.7 to 2.0-fold, while the pattern of misallocation of near zero correlation of inputs and productivity remains essentially the same. We also provide suggestive evidence of the connection between misallocation and land markets and illustrate how an efficient allocation can substantially reduce agricultural income inequality and poverty.
    Keywords: misallocation, land, productivity, agriculture, Malawi, micro data.
    JEL: O1 O4
    Date: 2022–03–04
  2. By: Gilbert Cette (Banque de France - Banque de France - Banque de France); Aurélien Devillard (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Vincenzo Spiezia (OECD - The Organisation for Economic Coopération and Development)
    Abstract: Using a new and original database, our paper contributes to the growth accounting literature by singling out the contribution of robots through two channels: capital deepening and TFP. The contribution of robots to productivity growth through capital deepening and TFP appears to have been significant in Germany and Japan in the sub-period 1975–1995 and in several Eastern European countries in 2005–2019. However, robotization does not appear to be the source of a significant revival in productivity.
    Keywords: growth,productivity,robots
    Date: 2021–03
  3. By: Fernando M. Aragón; 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.
    JEL: O11 O13 O4 O55 Q1
    Date: 2022–02
  4. By: Natalie Bau (University of California at Los Angeles); Adrien Matray (Princeton University)
    Abstract: We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in firms' input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. For domestic firms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 25%, physical capital by 57%, wage bills by 27%, and reduces MRPK by 35% relative to low MRPK firms. There are no effects on low MRPK firms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that foreign capital partially substitutes for an efficient banking sector. Finally, we develop a novel method to use natural experiments to bound the effect of changes in misallocation on treated industries' aggregate productivity. Treated industries' Solow residual increases by 4-17%.
    Keywords: India, aggregating reduced-form estimates, foreign capital liberalization
    JEL: F21 F38 F6 O1 O11 O12 O4
    Date: 2020–10
  5. By: Erik P. Gilje; Jérôme P. Taillard; Linghang Zeng
    Abstract: We study human capital reallocation following firm-specific idiosyncratic shocks. Theory offers diverging predictions as to whether human capital gets reallocated to its most productive use following these shocks. To empirically test these predictions, we focus on relegation battles in the English Premier League. This setting offers well identified idiosyncratic shocks as well as both individual-level and firm-level productivity metrics. We find that human capital exits firms after a negative idiosyncratic shock. Specifically, we find that more productive players move to more productive clubs and maintain their long-term productivity. They get replaced with lower productivity players. Overall, our results show that in a setting with highly transferable skills, idiosyncratic shocks lead to a reallocation of human capital that moves an industry towards a better overall match between individual-level and firm-level productivity.
    JEL: G31 G32 G33 J24
    Date: 2022–02
  6. By: Iraj Hashi; Mehtap Hisarciklilar; Slavo Radošević; Nebojša Stojčić; Nina Vujanović (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The beneficial effects of innovation for firms’ performance and competitiveness are well documented, but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly a knowledge-use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of the innovation process (from decision to innovate to productivity) among knowledge-using and knowledge-creating firms in an emerging European economy. The results show that the innovation process in emerging economies is closer to the imitation than the creation of novel products. Local firms benefit from foreign counterparts in the early phase of the innovation process. Stronger FDI effects are found among firms that undertake innovation through knowledge use rather than through knowledge generation.
    Keywords: knowledge use; knowledge generation; FDI; innovation; emerging economy
    JEL: F21 F23 L25 C31 L21
    Date: 2022–03
  7. By: Yanyou Chen; Daniel Xu
    Abstract: This paper develops and estimates an industry equilibrium model of manufacturing plants in the Korean electric motor industry from 1991 to 1996. Plant-level decisions on R&D, physical capital investment, entry, and exit are integrated in a dynamic setting with knowledge spillovers. We use a simulated method of moments estimator and the novel approximation method of Weintraub, Benkard and Van Roy (2008) to estimate the R&D cost, magnitude of knowledge spillovers, adjustment costs of physical investment, and plant scrap value distribution. Knowledge spillovers are essential to explaining the firm-level productivity evolution and the equilibrium market configuration. A counterfactual experiment reveals that a 15% R&D subsidy maximizes industry output and is broadly consistent with a past policy initiative of the Korean government.
    JEL: L11 O33
    Date: 2022–02
  8. By: Antonio Musolesi (University of Ferrara – Department of Economics and Management (Ferrara, Italy); SEEDS); Giada Andrea Prete (University of Ferrara – Department of Economics and Management (Ferrara, Italy); SEEDS); Michel Simioni (MOISA, INRAE, University of Montpellier and TSE, University of Toulouse, France)
    Abstract: This paper provides a broad replication of Calderón et al. (2015). We address some complex and relevant issues, namely functional form, non-stationary variables and cross-sectional dependence. In particular, by adopting the CCE framework, we consider both parametric – static and dynamic - and non-parametric specifications, thus allowing for different degrees of flexibility. Contrary to Calderón et al. (2015), we find a lack of significance of the infrastructure index, with an estimated elasticity very close to zero for all estimates. Moreover, by employing the data-driven model selection procedure proposed by Gioldasis et al. (2021), it is found that non-parametric specifications provide the best predictive performance and that CCE models always overperform with respect to traditional panel data methods that employ cross-sectional demeaning to account for cross-sectional dependence.
    Keywords: Cross-sectional dependence; factor models; moving block bootstrap; non-parametric regression; spline functions; public capital hypothesis
    JEL: C23 C5 O4
    Date: 2022–03
  9. 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

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