nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒04‒04
thirteen papers chosen by

  1. Firm Productivity Growth and the Knowledge of New Workers By Michael Kirker; Lynda Sanderson
  2. Productivity of the English National Health Service: 2019/20 update. By Anastasia Arabadzhyan; Adriana Castelli; Martin Chalkley; James Gaughan; Maria Ana Matias
  3. Place-based policies and agglomeration economies: Firm-level evidence from special economic zones in India By Görg, Holger; Mulyukova, Alina
  4. Performance Analysis with Unobserved Inputs: An Application to Endogenous Automation in Railway Traffic Management By Laurens Cherchye; Bram De Rock; Dieter Saelens; Marijn Verschelde; Bart Roets
  5. Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms By Audinga Baltrunaite; Sara Formai; Andrea Linarello; Sauro Mocetti
  6. Does Over-education Raise Productivity and Wages Equally ?The Moderating Role of Workers’ Origin and Immigrants’ Background By Valentine Jacobs; François Rycx; Mélanie Volral
  7. JAQ of All Trades: Job Mismatch, Firm Productivity and Managerial Quality By Luca Coraggio; Marco Pagano; Annalisa Scognamiglio; Joacim Tåg
  8. Can Technology Mitigate the Impact of Heat on Labor Productivity? Experimental Evidence from India By Anna Custers; Prathap Kasina; Deepak Saraswat; Anjali P. Verma
  9. Globalisation, productivity growth, and labour compensation By Dreger, Christian; Fourné, Marius; Holtemöller, Oliver
  10. Contribution of Human Capital Accumulation to Canadian Economic Growth By Audra Bowlus; Youngmin Park; Chris Robinson
  11. Structural change and firm dynamics in the south of Italy By Francesco Bripi; Raffaello Bronzini; Elena Gentili; Andrea Linarello; Elisa Scarinzi
  12. The determinants of AI innovation across European firms By Igna, Ioana; Venturini, Francesco
  13. Improving agricultural productivity in Papua New Guinea: Strategic and policy considerations By Benny, Dickson; Benson, Todd; Ivekolia, Mark; Kedir Jemal, Mekamu; Ovah, Raywin

  1. By: Michael Kirker; Lynda Sanderson (The Treasury)
    Abstract: Linked employer-employee data from New Zealand is used to study the relationship between a firm’s productivity growth and its exposure to outside knowledge through the hiring of new workers with previous work experience. The estimated relationship between productivity growth and hiring is compared to the predictions implied by two different channels: worker quality and knowledge spillover. Although it is not possible to identify a causal relationship, the productivity of a worker’s previous employer is correlated with subsequent productivity growth at the hiring firm. The patterns of this correlation are consistent with both the worker quality and knowledge spillover channels operating simultaneously. Furthermore, if knowledge spillover is occurring, the results suggest the type of knowledge spilling over relates to technological knowledge allowing firms to become more capital intensive, rather than knowledge that improves the efficiency of utilising existing inputs.
    Keywords: productivity; labour mobility; human capital; knowledge diffusion
    JEL: D24 J24 J62 O33
    Date: 2022–03
  2. By: Anastasia Arabadzhyan (Centre for Health Economics, University of York, York, UK.); Adriana Castelli (Centre for Health Economics, University of York, York, UK.); Martin Chalkley (Centre for Health Economics, University of York, York, UK.); James Gaughan (Centre for Health Economics, University of York, York, UK.); Maria Ana Matias (Centre for Health Economics, University of York, York, UK.)
    Abstract: This report updates the Centre for Health Economics’ time-series of National Health Service (NHS) productivity growth for the period 2018/19 to 2019/20. NHS productivity growth is measured by comparing the growth in outputs produced by the NHS to the growth in inputs used to produce them. NHS outputs include all the activities undertaken for NHS patients wherever they are treated in England. It also accounts for changes in the quality of care provided to those patients. NHS inputs include the number of doctors, nurses, and support staff providing care, the equipment, and clinical supplies used, and the facilities of hospitals and other premises where care is provided.
    Date: 2022–03
  3. By: Görg, Holger; Mulyukova, Alina
    Abstract: This paper exploits time and geographic variation in the adoption of Special Economic Zones in India to assess the direct and spillover effects of the program. We combine geocoded firm-level data and geocoded SEZs using a concentric ring approach, thus creating a novel dataset of firms with their assigned SEZ status. To overcome the selection bias we employ inverse probability weighting with time-varying covariates in a difference-in-differences framework. Our analysis yields that conditional on controlling for initial selection, the establishment of SEZs induced no further productivity gains for within SEZ firms, on average. This effect is predominantly driven by relatively less productive firms, whereas more productive firms experienced significant productivity gains. However, SEZs created negative externalities for firms in the vicinity which attenuate with distance. Neighbouring domestic firms, large firms, manufacturing firms and non-importer firms are the main losers of the program. Evidence points at the diversion of inputs from non-SEZ to SEZ-firms as a potential mechanism.
    Keywords: Special Economic Zones,India,TFP growth,firm performance,spillovers,time-varyingtreatment
    JEL: O18 O25 P25 R10 R58 R23 F21 F60
    Date: 2022
  4. By: Laurens Cherchye; Bram De Rock; Dieter Saelens; Marijn Verschelde; Bart Roets
    Abstract: Performance analytics are commonly used in managerial decision making, but are vulnerable to an omitted variable bias issue when there is incomplete information on the used production factors. In this paper, we relax the standard assumption in productive efficiency analysis that all input quantities are observed, and we propose a nonparametric methodology for cost inefficiency measurement that accounts for the presence of unobserved inputs. Our main contribution is that we bridge the OR/MS and the economic literature by addressing the general critique of Stigler (1976) on the concept of inefficiency (Leibenstein, 1966), which states that found inefficiencies reflect unobserved inputs rather than waste. Our methodology explicitly differentiate between cost inefficiency (i.e. waste; deviations from optimizing behavior) and unobserved input usage (i.e. optimally chosen input factors that are unobserved to the empirical analyst). We apply our novel method to a purpose-built dataset on Belgian railway traffic management control rooms. Our _findings show the existence of meaningful inefficiencies that cannot be attributed to use of unobserved inputs or environmental factors. In addition, we document how the omitted variable bias impacts cost efficiencies of individual observations in a dissimilar way in case the use of unobserved inputs is not controlled for.
    Keywords: efficiency measurement, unobserved heterogeneity, omitted variable
    Date: 2022–03
  5. By: Audinga Baltrunaite (Bank of Italy); Sara Formai (Bank of Italy); Andrea Linarello (Bank of Italy); Sauro Mocetti (Bank of Italy)
    Abstract: We explore the role of ownership, governance and management characteristics as potential drivers of the performance gaps between firms located in the Centre and North and in the South of Italy. First, we document that southern firms are characterized by more frequent family ownership and a higher fraction of local and family directors on the board. Moreover, entrepreneurs and managers of southern firms have lower education levels and are less inclined to adopt structured managerial practices and advanced technology. Second, we examine to what extent these differences account for the performance gap between the two areas. We find that managers’ human capital explains one tenth of the difference in firm size, while family ownership accounts for one tenth of the differences in productivity. Although the analysis is purely descriptive, our findings suggest that ownership, governance and management play a significant role in explaining firm performance and account for a non-negligible fraction of the North-South divide.
    Keywords: ownership, family firms, corporate governance, managerial practices, human capital, firm size, productivity, technology
    JEL: G30 L20 M10
    Date: 2022–03
  6. By: Valentine Jacobs; François Rycx; Mélanie Volral
    Abstract: We provide first evidence of the impact of over-education, among natives and immigrants, on firm-level productivity and wages. We use Belgian linked panel data and rely on the methodology from Hellerstein et al. (1999) to estimate ORU (over-, required, and under-education) equations aggregated at the firm level. Our results show that the over-education wage premium is higher for natives than for immigrants. However, since the differential in productivity gains associated with over-education between natives and immigrants outweighs the corresponding wage premium differential, we conclude – based on OLS and dynamic GMM-SYS estimates – that over-educated native workers are in fact underpaid to a greater extent than their over-educated immigrant counterparts. This conclusion is refined by sensitivity analyses, when testing the role of immigrants’ background (e.g. region of birth, immigrant generation, age at arrival in the host country, tenure).
    Keywords: Immigrants; Over-Education; Productivity; Wages; Linked Panel Data; Belgium
    JEL: J24 J71
    Date: 2022–02–24
  7. By: Luca Coraggio (Università di Napoli Federico II); Marco Pagano (University of Naples Federico II, CSEF and EIEF.); Annalisa Scognamiglio (Università di Napoli Federico II and CSEF); Joacim Tåg (Research Institute of Industrial Economics (IFN))
    Abstract: Does the matching between workers and jobs help explain productivity differentials across firms? To address this question we develop a job-worker allocation quality measure (JAQ) by combining employer-employee administrative data with machine learning techniques. The proposed measure is positively and significantly associated with labor earnings over workers’ careers. At firm level, it features a robust positive correlation with firm productivity, and with managerial turnover leading to an improvement in the quality and experience of management. JAQ can be constructed for any employer-employee data including workers’ occupations, and used to explore the effect of corporate restructuring on workers’ allocation and careers.
    Keywords: jobs, workers, matching, mismatch, machine learning, productivity, management.
    JEL: D22 D23 D24 G34 J24 J31 J62 L22 L23 M12 M54
    Date: 2022–03–30
  8. By: Anna Custers (World Bank); Prathap Kasina (Innovations for Poverty Action); Deepak Saraswat (University of Connecticut); Anjali P. Verma (University of Texas at Austin)
    Abstract: This paper analyses the role of technology in reducing heat-induced labor productivity losses. For this, we use a field experiment in India which randomized the use of productivity-augmenting digital mode versus classic paper-and-pen mode for conducting 2000 household surveys. Combining this experimentally induced variation in survey mode with day-to-day variation in temperature, we estimate the impact of survey mode on surveyor productivity as temperature rises. We find that as temperature rises and working conditions start to deteriorate, using digital-mode results in 5 per-cent higher surveyor-productivity compared to paper surveys. These relative productivity gains are mainly concentrated in extremely hot days - where the adverse impact of heat is likely at its peak. Further analysis shows that these impacts are not driven by differences in effort of surveyors or differences in the characteristics of respondents, thereby pointing to the role of technology in reducing the adverse effects of heat.
    Keywords: Temperature, Labor Productivity, Mode of Survey, Productivity Augmenting Technology
    JEL: J24 M11 Q51 Q55
    Date: 2022–03
  9. By: Dreger, Christian; Fourné, Marius; Holtemöller, Oliver
    Abstract: Since the onset of globalisation, production activities have become increasingly fragmented and organised in global value chains (GVC). These networks facilitate trade in intermediaries across industrial sectors and countries and change the conditions for policies to respond to shocks. In this paper, we contribute to the understanding of the effects of GVC on productivity and labour shares in advanced and emerging economies. As indicators for globalisation we use the foreign share in intermediate inputs and the foreign share in value added, extracted from international input output tables. Estimates based on local projections reveal a positive relationship between globalisation and productivity. Moreover, we are able to reject the hypothesis that a higher degree of international integration in country-industry pairs is negatively associated with the change in the labour share for advanced countries.
    Keywords: global value chains,globalisation,international trade integration,labour share,productivity
    JEL: F4 F6 J3
    Date: 2022
  10. By: Audra Bowlus; Youngmin Park; Chris Robinson
    Abstract: This paper quantifies the contribution of human capital accumulation to the growth of real gross domestic product (GDP) in Canada. GDP growth is decomposed into contributions from physical capital, hours worked, human capital supplied per hour and total factor productivity. Using a “flat spot” identification strategy, we separately estimate the price and quantity of human capital using wage data from the Labour Force Survey. We find that growth in human capital supplied per hour explains around one-fifth of GDP growth and two-thirds of the Solow residual over the period from 1997 to 2018. While growth in hours worked is expected to slow down in the near future, human capital supplied per hour is expected to continue to be an important driver of GDP growth.
    Keywords: Econometric and statistical methods; Labour markets; Potential output; Productivity
    JEL: D24 E24 J24 J31 O47
    Date: 2022–03
  11. By: Francesco Bripi (Bank of Italy); Raffaello Bronzini (Bank of Italy); Elena Gentili (Bank of Italy); Andrea Linarello (Bank of Italy); Elisa Scarinzi (Bank of Italy)
    Abstract: In this paper, we study the structural change in the Centre-North and the South of Italy, focusing on its implications for productivity dynamics and its microeconomic determinants. We document three main results. First, between 2001 and 2018 the deindustrialization process involved both parts of Italy, but in the South it started after the financial crisis and was more pronounced. In the southern regions, the employment shares in low knowledge-intensive services increased more than in the Centre-North, whereas those in the high knowledge-intensive services increased less. Second, structural changes slowed down productivity growth in the Centre-North, but had no role in the fall of productivity registered in the South. Finally, in the Centre-North employment growth has been driven by the net creation of jobs among incumbents and larger firms. In contrast, employment dynamics in the southern regions largely reflected the process of firms entering and exiting the market, in particular in less knowledge-intensive service sectors, and in young and smaller enterprises.
    Keywords: structural change, firm dynamics, North-South gap, productivity growth, shift-share analysis
    JEL: R00 R11 L16 O41 O47
    Date: 2022–03
  12. By: Igna, Ioana (CIRCLE, Lund University); Venturini, Francesco (University of Perugia)
    Abstract: Using patent data for a panel sample of European companies between 1995 and 2016 we explore whether the innovative success in Artificial Intelligence (AI) is related to earlier firms’ research in the area of Information and Communication Technology (ICT), and identify which company characteristics and external factors shape this performance. We show that AI innovation has been developed by the most prolific firms in the field of ICT, presents strong dynamic returns (learning effects), and benefits from complementaries with knowledge developed in network and communication technologies, high-speed computing and data analysis, and more recently in cognition and imaging. AI patent productivity increases with the scale of research but is lower in presence of narrow and mature technological competencies of the firm. AI innovating companies are found to benefit from spillovers associated with innovations developed in the field of ICT by the business sector; this effect, however, is confined to frontier firms. Our findings suggest that, with the take-off of the new technology, the technological lead of top AI innovators has increased mainly due to the accumulation of internal competencies and the expanding knowledge base. These trends help explain the concentration process of the world’s data market.
    Keywords: AI; ICT; patenting; European firms
    JEL: O31 O32 O34
    Date: 2022–03–02
  13. By: Benny, Dickson; Benson, Todd; Ivekolia, Mark; Kedir Jemal, Mekamu; Ovah, Raywin
    Abstract: If smallholder farming households in Papua New Guinea achieve higher crop productivity levels, progress will be made along several dimensions of the development vision for PNG – increasing GDP for the agricultural sector and the overall economy; driving growth, diversification, and transformation of local rural economies; improving food consumption; and reducing poverty. In this paper, we examine recent data on yields for the most important crops grown in PNG, assess what yields might be achieved based on productivity data from areas of Indonesia with similar growing conditions, and sketch where policy reforms could provide incentives and access to technologies to achieve higher crop yields by all farmers across PNG.
    Keywords: PAPUA NEW GUINEA; OCEANIA; agricultural productivity; policies; crop yield; cash crops; smallholders; agriculture; food security; poverty reduction
    Date: 2022

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.