nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒03‒28
ten papers chosen by

  1. The Structural and Productivity Effects of Infrastructure Provision in Developed and Developing Countries By Orea, Luis; Álvarez, Inmaculada C.; Servén, Luis
  2. Environmental Productivity Analysis : an Illustration with the Ecuadorian Oil Industry By Arnaud Abad; Michell Arias
  3. Consequences of zombie businesses: Australia’s experience By Joel Bowman
  4. Covid-19 Economic Stimulus and State-level Power Sector Performance: Analyzing the Efficiency Parameters By Kaur, Amandeep; Chakraborty, Lekha S; Rangan, Divy
  5. Inefficient markets for energy efficiency - Empirical evidence from the German rental housing market By Lisa Taruttis
  6. M&As and Their Economic Effects on Target Companies By Ali-Yrkkö, Jyrki; Mattila, Juri; Pajarinen, Mika; Ylhäinen, Ilkka
  7. What Remains of the Cambridge Critique? Potential Conclusions and Directions for Further Research Following from Recent Investigations in Capital Theory By Schefold, Bertram
  8. Identifying the elasticity of substitution between capital and labour. A pooled GMM panel estimator By Thomas von Brasch; Arvid Raknerud; Trond C. Vigtel
  9. A Good Crisis (not) Wasted: How Exploiting and Expanding Dynamic Capabilities Shape Corporate Performance During the Covid Pandemic By Jacques Bughin; Francis Hinterman; Sybille Berjoan
  10. Profit smoothing of European banks under IFRS 9 By Oľga Jakubíková

  1. By: Orea, Luis; Álvarez, Inmaculada C.; Servén, Luis
    Abstract: In this paper, we provide an empirical assessment of the effects of infrastructure provision on structural change and aggregate productivity using industry-level data for a set of developed and developing countries over 1995-2010. A distinctive feature of our empirical strategy is that it allows the measurement of the resource reallocation directly attributable to infrastructure provision. To achieve this, we propose a two-level top-down decomposition of aggregate productivity that combines and extends several strands of the literature. In our empirical application, we find significant production losses attributable to misallocation of inputs across firms, especially among African countries. Our empirical application also shows that infrastructure provision has stimulated aggregate TFP growth through both within and between-industry productivity gains.
    Date: 2022
  2. By: Arnaud Abad (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Michell Arias (UPVD - Université de Perpignan Via Domitia)
    Abstract: In this paper, environmental productivity variation is analysed through the pollution-adjusted Malmquist and Hicks-Moorsteen productivity indices. These productivity indices are defined as combination of multiplicative pollution-adjusted distance functions. Non convex pollution-generating technology is assumed to estimate the pollution-adjusted Malmquist and Hicks-Moorsteen productivity measures. The main sources of the pollution-adjusted productivity change are displayed. An empirical illustration is provided by considering a sample of 20 Ecuadorian oil companies over the period 2012-2018. The results are estimated through a non parametric analytic framework.
    Keywords: Non Convexity,Ecuadorian Oil industry,Environmental Efficiency and Productivity Indices,Pollution-generating Technology
    Date: 2022–02–15
  3. By: Joel Bowman
    Abstract: This paper assesses the consequences of zombie businesses in Australia between 2001/02 to 2018/19. Zombie businesses are broadly defined as businesses whose ability to meet interest expenses from current profits is less compared with other firms operating within the same industry. This work finds that an increasing share of labour sunk into zombie businesses is correlated with weaker activity for viable businesses operating within the same industry. However, it does not find that zombie firms adversely affect the allocative efficiency of labour and capital and does not reduce the responsiveness of business exits to productivity. Further, the spillover effect of zombie firms does not appear to be propagated by the crowding out of financing or the imposition of additional entry barriers for firms operating within the same industry. Overall, the stable share of labour allocated to zombie firms at an aggregate level since 2007 suggests that it is unlikely that the adverse effects of zombie firms explain the slowdown in Australia’s economic activity since the mid 2000s.
    Keywords: Zombie Firms, Labour Productivity, Firm Dynamics, Resource Allocation
    JEL: D24 E22 G33 J24 L25
    Date: 2022–03
  4. By: Kaur, Amandeep; Chakraborty, Lekha S; Rangan, Divy
    Abstract: Against the backdrop of the COVID-19 pandemic, the Government of India, as part of economic stimulus package, increased the borrowing limit of the States from 3 to 5 per cent of GSDP. The power sector reform at the State-level is one of the criteria to avail this extra-borrowing. We analyse the efficiency parameters of power sector and observe that there are statewise differentials in the financial and operational indicators of power sector. We notice that the average AT&C (Aggregate Technical and Commercial) losses that should have been 15% by 2018-19, presently, on average, stand at 26.15%. The ACS-ARR gap (the gap between Average Cost and Average Revenue) has also widened. The power tariff revisions have also not been implemented in the States, and the operational parameters in our analysis indicate widening inefficiencies across States in power infrastructure.
    Keywords: Power Infrastructure , State Government , Covid19, Economic Stimulus, Efficiency
    JEL: E62 H3 H7
    Date: 2021
  5. By: Lisa Taruttis (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Improving the energy efficiency of residential buildings is of paramount importance to reduce CO2 emissions and hence to achieve a climate-neutral building stock – the objective of the German government for 2045. Thereby, a focus on the existing building stock is needed, as regulations for new buildings are already quite tight in terms of energy efficiency, and a large proportion of the dwelling stock of 2045 already exists today. For the important segment of rental housing, split incentives are often invoked as an impediment for energy-related investments. Yet this implicitly takes the tenant-landlord relationship as given. On the market where prospective renters meet the dwelling offers, competitive forces and rational behavior on both sides would imply that the monthly net rent should reflect (with opposite sign) differences in expected monthly heating costs – other things being equal. We test this hypothesis by specifying a hedonic price model that reflects this gross-cost-of-renting perspective and applying it on a detailed dataset including dwelling and neighborhood characteristics. As a case study, we use data for the German state of North Rhine-Westphalia, which implies that variations in regulatory and meteorological conditions are small, while large socioeconomic differences across subregions exist (e.g., in terms of purchasing power or unemployment rates). Drawing on 844,229 observations from 2014 to 2020 on a small spatial scale, we find a premium for more efficient apartments; however, it is rather small. The expected energy cost savings exceed the premium by approximately a factor of six. Rather, we find large discounts if apartments use heating technologies that are known to be inefficient. The paper explores various explanations for these outcomes, considering both landlord and renter behavior as well as institutional settings.
    Keywords: Hedonic Analysis, Rental market, Housing market, Energy Efficiency, Residential Buildings
    JEL: C21 Q40 R21 R31
    Date: 2022–02
  6. By: Ali-Yrkkö, Jyrki; Mattila, Juri; Pajarinen, Mika; Ylhäinen, Ilkka
    Abstract: Abstract This study examines mergers and acquisitions and their economic impact on companies. The study examined which companies in Finland become the targets of acquisitions, how the economic activities of the target companies develop after the change of ownership and whether there is a difference between domestic and foreign acquisitions in these respects. The study was conducted using firm-level data that included nearly 2,000 acquisitions, supplemented by a qualitative review of 19 research interviews. The results of the study show that companies’ innovation activities have a positive relation to the likelihood of being acquired, especially by foreign buyers. However, foreign acquisitions did not have a significant impact on the development of the value added, productivity, profitability or employment of target companies when compared with the control group.
    Keywords: Mergers and acquisitions, M&A, Impact, Foreign ownership, Foreign company, Productivity
    JEL: D22 F23 G34 O30
    Date: 2022–03–23
  7. By: Schefold, Bertram (Johann Wolfgang Goethe-Universitat)
    Abstract: The debate on capital theory is not any more on the discussions about the historical formation of neoclassical ideas in their original, most abstract form, but about the tools – certainly influenced by those ideas – which are used in teaching all over the world in applied economics. One focus still is on the macroeconomic aggregate production function, almost seventy years after Joan Robinson attacked this concept. It has turned out that reswitching is rare – once the most effective argument against the production function – and that an approximate surrogate production function can be constructed, using the approach of random matrices. This seems to weaken the critique, but a new one has emerged, which shows that the number of effective techniques on the envelope is small and that the possibilities of substitution between capital and labour are quite restricted in the relevant range of the rate of profit. This new turn in the debates on the critique of capital theory has recently come under attack by Fabio Petri of the University of Siena. The present paper constitutes the reply. It deals with the methodological difference between a fundamental critique, which was primarily directed against the logic of the pure late 19th century neoclassical theory and one attacking the applied uses of that theory in the form of the macroeconomic production function. It asks why the valid criticisms of the neoclassical conception of capital as a homogeneous factor seem to have had a lesser impact than the reswitching argument. It discusses reswitching and reverse capital deepening as relevant but, as far as basic commodities are concerned, rare phenomena. It assesses the usefulness of empirical input-output research in this area, mentions some results and concludes with a reflection on the recent ‘zero-substitution’ proposition.
    Keywords: Capital theory; production function; reswitching; Sraffa; employment
    JEL: B24 C62 C67 D57
    Date: 2022–03–23
  8. By: Thomas von Brasch; Arvid Raknerud; Trond C. Vigtel (Statistics Norway)
    Abstract: Simultaneity represents a fundamental problem when estimating the elasticity of substitution between capital and labour. To overcome this problem, a wide variety of external instruments has been applied in the literature. However, the use of instruments may lead to wrong inference if they are either weak, or endogenous to the system being estimated. In this paper, we extend the widely used Feenstra (1994) estimator, which does not depend on external instruments, to make it applicable to the problem of estimating the elasticity of substitution between capital and labour. We propose a pooled GMM (PGMM) estimator, examine its properties in a Monte Carlo study and apply it to a Norwegian sample of manufacturing firms. We identify the conditions under which P-GMM yields unbiased estimates and compare it to a fixed effects estimator which is unbiased when factor prices are exogenous – a typical assumption in the literature. We find that the fixed effects estimator is heavily downward biased in the presence of simultaneity. In contrast, the P-GMM estimator is nearly unbiased provided the number of time periods (T) is not too small (say, more than 10). In our application, with an unbalanced sample and T = 12, we estimate the elasticity of substitution to be 1.8 using P-GMM and 1.0 using a fixed effects estimator. Hence, neglecting simultaneity may lead to the conclusion that capital and labour are complements when, in fact, they are substitutes
    Keywords: Elasticity of Substitution; Simultaneity; Factor Demand; Non-Linear GMM; Pooled Estimator
    JEL: C13 C15 C33 C51
    Date: 2022–03
  9. By: Jacques Bughin; Francis Hinterman; Sybille Berjoan
    Abstract: Using the covid-19 pandemic in a time window of 18 months (from March 2020 to Sept 2021) as a case study of major turbulences, we estimate how dynamic capabilities have shaped corporate resilience and rebound performance, for large multi-billion revenue generating firms worldwide. Four findings stand out. First, dynamic capabilities are positively correlated with boost in profit performance post-covid pandemic peak, but their role and importance act asymmetrically between resilient and non-resilient firms (defined as ability to (not) recover profit pre-covid). Second, among the portfolio of dynamic capability domains studied (innovation, agility, digital technology, sustainability), innovation and agility are the most relevant ones to affect resilience and performance. Third, “doubling down” on dynamic capabilities during the crisis is also important, as the crisis allows firms to seize opportunities at the expense of weaker ones that may be stuck in a retrenchment posture. Third, the seizing/reconfiguring opportunity has larger payoff after lockdown, when market opportunities are no longer constrained. Those findings are general, as they are found for a large variety of 18 industries studied.
    Keywords: resilience, performance, dynamic capabilities, innovation, agility, digital technology, sustainability
    Date: 2022–03
  10. By: Oľga Jakubíková
    Abstract: The aim of this paper is to examine whether banks engage in profit smoothing using loan loss provisions under the new provisioning rules according to IFRS 9. Due to relatively loose definitions of provisioning principles and use of macroeconomic predictions under IFRS 9, there is certain managerial discretion expected allowing banks to reduce the variability of profits over time using loan loss provisions. The hypothesis that banks use loan loss provisions to smooth their profits under IFRS 9 was tested with panel regression analysis on the panel of 27 EU member countries for period 1Q2015 - 2Q2021. The evidence of profit smoothing was not confirmed neither in IFRS 9, nor in IAS 39 period, therefore, the hypothesis was rejected on 1% significance level.
    Keywords: IFRS 9, loan loss provisions, profit smoothing
    JEL: G12 G21 G32
    Date: 2022–01–26

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