nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒05‒02
nineteen papers chosen by

  1. Empirical Assessment and Comparison of Educational Efficiency between Major Countries across the World By Chen, Lipeng; Yu, Yang; Addis, Amsalu K.; Guo, Xiao
  2. Artificial intelligence and productivity: global evidence from AI patent and bibliometric data. By Aleksandra Parteka; Aleksandra Kordalska
  3. Productivity effects of trade in natural resources – comparison with mechanisms of technological specialisation. By Zuzanna Bazychowska; Aleksandra Parteka
  4. Productivity Dynamics in the Retail Trade Sector: The Roles of Large Modern Retailers and Small Entrants By Janghee Cho; Hyunbae Chun; Yoonsoo Lee
  5. Regional Cooperation for Improving Agriculture Production Efficiency: A Strategic Tool for Emission Reduction By Zaman, Kazi Arif Uz
  6. How does research and development affect the nexus of climate change and agricultural productivity in Asian and Pacific countries? By Huynh, Cong Minh
  7. The impact of healthcare IT on clinical quality, productivity and workers By Bronsoler, Ari; Doyle, Joseph; Van Reenen, John
  8. Impacts of Droughts and Floods on Agricultural Productivity in New Zealand as Measured from Space By Elodie Blanc; Ilan Noy
  9. Internet access and its implications for productivity, inequality and resilience By Maria Barrero, Jose; Bloom, Nicholas; Davis, Steven J.
  10. Does government spending efficiency improve fiscal sustainability? By António Afonso; José Alves
  11. Is Our Research Productivity In Decline? A New Approach in Resolving the Controversy By Gennady Shkliarevsky
  12. Board Diversity and Outward FDI: Evidence from Europe By Valeria Gattai; Piergiovanna Natale; Francesca Rossi
  13. Automation and the Workforce: A Firm-Level View from the 2019 Annual Business Survey By Daron Acemoglu; Gary Anderson; David Beede; Catherine Buffington; Eric Childress; Emin Dinlersoz; Lucia Foster; Nathan Goldschlag; John Haltiwanger; Zachary Kroff; Pascual Restrepo; Nikolas Zolas
  14. The Productive Capacity And Environment: Evidence From OECD Countries By Oluc, Ihsan; Ben Jebli, Mehdi; Can, Muhlis; Guzel, Ihsan; Brusselaers, Jan
  15. Have productivity and pay decoupled in the UK? By Teichgräber, Andreas; Van Reenen, John
  16. Markups, intangible capital and heterogeneous financial frictions By Altomonte, Carlo; Favoino, Domenico; Morlacco, Monica; Sonno, Tommaso
  17. The rise and stall of world electricity efficiency:1900-2017, results and implication for the renewables transitions By Pinto, Ricardo; Henriques, Sofia; Brockway, Paul; Heun, Matthew; Sousa, Tânia
  18. Firms and Labor in Times of Violence: Evidence from the Mexican Drug War By Utar, Hale
  19. A Classifier-Lasso Approach for Estimating Production Functions with Latent Group Structures By Daniel Czarnowske

  1. By: Chen, Lipeng; Yu, Yang; Addis, Amsalu K.; Guo, Xiao
    Abstract: Education is a fundamental factor to enhance a country’s comprehensive national strength and international competitiveness. Recently, several governments have been attracting investments in educational sectors in contemplation of meliorating a country’s overall strength. This study empirically assesses and compares the educational efficiency of 29 major countries across the world using panel data for 2010–2016 by employing data envelopment analysis (DEA) and the super-slacks-based measure (super-SBM) model at the static level combined with the Malmquist index (MI) to investigate educational efficiency at the dynamic level. The results indicate, inter alia, huge average education efficiency differences existed among the studied countries, the highest being Japan (3.2845) and lowest Norway (0.4137), there are differences in the bias of technological progress among the studied countries during the sample period and technological progress directly affects the sustainability of educational efficiency, the growth rate of total factor productivity (TFP) index has been reduced in 2010–2013 but increased in 2014–2016 and techno-logical progress has been the dominant factor influencing the rise of the education TFP index. Based on the results, this study identifies the merits and drawbacks of education efficiency across the sample countries and presents relevant recommendations to promote investment in the education sector and human capital.
    Keywords: Educational efficiency; Super-SBM model; Malmquist index; Total factor productivity (TFP) index; Data envelopment analysis (DEA)
    JEL: I21 I25 I28
    Date: 2022–02
  2. By: Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Aleksandra Kordalska (Gdansk University of Technology, Gdansk, Poland)
    Abstract: In this paper we analyse the effects of technological innovation in the artificial intelligence (AI) domain on productivity. We embed the recently released data on patents and publications related to AI into an augmented panel model of productivity growth, estimated for OECD countries, and compared to a non-OECD sample. Our instrumental variables' estimates, accounting for AI endogeneity, provide evidence in favour of the modern (AI) productivity paradox. We show that the development of AI technologies remains a niche innovation phenomenon with a negligible role in the officially recorded productivity growth process. This general result, i.e. the lack of a strong relationship between AI and productivity growth, is robust to changes in the country sample, in the way we quantify labour productivity or the creation of AI technology, in the specification of the empirical model (control variables) or in estimation methods.
    Keywords: technological innovation, productivity paradox, productivity growth, artificial intelligence, patents
    JEL: O33 O47
    Date: 2022–01
  3. By: Zuzanna Bazychowska (Gdansk University of Technology, Gdansk, Poland); Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland)
    Abstract: This paper compares two alternative growth paths, assessing the effects on productivity of specialisation in natural resources (NR) and in technologically advanced products. The empirical analysis exploits product-level export data for 109 developing and 51 developed economies over the period 1996-2018. We document two distinct types of specialisation, based on exports either of natural resources or of technological products, and compare their role in productivity growth by GMM estimation of a conditional convergence model. In general, reliance on natural resource exports slows growth, but we find that the type of resources exported is important: fuel exports hamper growth while specialisation in metals enhances the catch-up in productivity. Technological specialisation, especially in products typical of the Fourth Industrial Revolution, reinforces productivity growth but does not affect the relationship between resources and productivity growth.
    Keywords: natural resources, technological specialisation, productivity growth, convergence
    JEL: O13 O47 O3 Q32
    Date: 2022–04
  4. By: Janghee Cho (Department of Economics, Jeju National University, Jeju); Hyunbae Chun (Department of Economics, Sogang University, Seoul); Yoonsoo Lee (Department of Economics, Sogang University, Seoul)
    Abstract: The massive reallocation and restructuring triggered by the growth of large modern retailers (LMRs) have improved retail productivity worldwide. Using establishment-level census data, we examine the roles of LMRs and small stores in reallocation and productivity growth in the Korean retail trade sector. We find that retail sector productivity growth is accounted for mostly by the entry of small, productive stores. These small stores are more likely to enter counties with LMRs. Moreover, we find that the entrants in LMR counties are more productive than those elsewhere. Our finding of a complementary relationship between small and large stores contrasts with the evidence from developed countries, where retail productivity growth is explained predominantly by more productive, large entrants such as Wal-Mart displacing less productive incumbents.
    Keywords: Entry and Exit, Large Modern Retailer, Market Selection, Productivity, Small Stores
    JEL: L81 O14 O47 R12
    Date: 2022
  5. By: Zaman, Kazi Arif Uz (Asian Development Bank Institute)
    Abstract: The growing population and climatic uncertainties have compelled producers to undertake faster exploitation of the resources in agricultural production to meet global food security, which, in turn, leads to unsustainable and input-led inefficient production growth. The problem is further exacerbated by the increasing emission of GHGs from this production process. We suggest a solution to this by advocating the role of regional cooperation to increase the technical efficiency level in the agricultural production of countries through technology transfer, knowledge sharing, capacity building, and adequate investment under the regional cooperation framework. Concurrently, we link this improvement of production efficiency with the reduction of emissions both theoretically and empirically for all Asian subregions. We first adopt the stochastic frontier model—a widely used statistical technique that frames the production functions while estimating the inefficiencies of economic units. Using 2010–2016 panel data on agriculture production and five inputs—land, labor, capital, fertilizer, and energy—we estimate the agriculture production efficiencies of the countries under five Asian subregions. Estimations reveal that West Asia, Southeast Asia, South Asia, East Asia, and Central Asia have agriculture production efficiencies of 70%, 85%, 66%, 92%, and 76%, respectively. Following the estimations and other calculations, we find that with concerted efforts toward optimizing production efficiencies under (sub)regional cooperation frameworks, an annual emission of 384.5 megatons of CO2eq GHG could have been reduced in Asia while keeping the production at the current level. The potential reduction of emissions equals 16.8% of Asia’s total emissions originating from agricultural activities and 7.1% of that of global emissions.
    Keywords: agriculture production efficiency; regional cooperation; stochastic frontier model; emission reduction; Asian subregions
    JEL: F53 O47 O53 Q15 Q56 R11
    Date: 2022–01
  6. By: Huynh, Cong Minh
    Abstract: This study empirically examines the impact of climate change and agricultural research and development (R&D) as well as their interaction on agricultural productivity in 12 selected Asian and Pacific countries over the period of 1990 – 2018. Results show that both proxies of climate change – temperature and precipitation – have negative impacts on agricultural productivity. Notably, agricultural R&D investments not only increase agricultural productivity but also mitigate the detrimental impact of climate change proxied by temperature on agricultural productivity. Interestingly, climate change proxied by precipitation initially reduces agricultural productivity until a threshold of agricultural R&D beyond which precipitation increases agricultural productivity. The findings imply useful policies to boost agricultural productivity by using R&D in the context of rising climate change in the vulnerable continent.
    Keywords: Agricultural productivity; Asia and Pacific; Climate change; R&D; SGMM
    JEL: D24 O13 O33 Q16 Q54
    Date: 2022–04–03
  7. By: Bronsoler, Ari; Doyle, Joseph; Van Reenen, John
    Abstract: Adoption of health information and communication technologies ('HICT') has surged over the past two decades. We survey the medical and economic literature on HICT adoption and its impact on clinical outcomes, productivity and labor. We find that HICT improves clinical outcomes and lowers healthcare costs, but (i) the effects are modest so far, (ii) it takes time for these effects to materialize, and (iii) there is much variation in the impact. More evidence on the causal effects of HICT on productivity is needed to guide further adoption. There is little econometric work directly investigating the impact of HICT on labor, but what there is suggests no substantial negative effects on employment and earnings. Overall, while healthcare is 'exceptional' in many ways, we are struck by the similarities to the wider findings on ICT and productivity stressing the importance of complementary factors (e.g. management and skills) in determining HICT impacts.
    Keywords: healthcare; technology; productivity; jobs; Programme On Innovation and Diffusion (POID)
    JEL: R14 J01 J1
    Date: 2021–09–14
  8. By: Elodie Blanc; Ilan Noy
    Abstract: This study estimates the impact of excess precipitation (or the absence of rainfall) on productivity of agricultural land parcels in New Zealand. This type of post-disaster damage assessments aims to allow for quantification of disaster damage when on-the-ground assessment of damage is too costly or too difficult to conduct. It can also serve as a retroactive data collection tool for disaster loss databases where data collection did not happen at the time of the event. To this end, we use satellite-derived observations of terrestrial vegetation (the Enhanced Vegetation Index – EVI) over the growing season. We pair this data at the land parcel level identifying five land use types (three types of pasture, and annual and perennial crops) with precipitation records, which we use to identify both excessively dry and excessively wet episodes. Using regression analyses, we then examine whether these episodes of excess precipitation had any observable impact on agricultural productivity. Overall, we find statistically significant declines in agricultural productivity that is associated with both floods and droughts. The average impact of these events, averaged over the affected parcels, however, is not very large; usually less than 1%, but quite different across years and across regions. This average hides a heterogeneity of impacts, with some parcels experiencing a much more significant decline in the EVI.
    Keywords: satellite-derived data, crop productivity, drought, flood
    JEL: Q15 Q54 C23
    Date: 2022
  9. By: Maria Barrero, Jose; Bloom, Nicholas; Davis, Steven J.
    Abstract: About one-fifth of paid workdays will be supplied from home in the post-pandemic economy, and more than one-fourth on an earnings-weighted basis. In view of this projection, we consider some implications of home internet access quality, exploiting data from the new Survey of Working Arrangements and Attitudes. Moving to high-quality, fully reliable home internet service for all Americans ('universal access') would raise earnings-weighted labor productivity by an estimated 1.1% in the coming years. The implied output gains are $160 billion per year, or $4 trillion when capitalized at a 4% rate. Estimated flow output payoffs to universal access are nearly three times as large in economic disasters like the COVID-19 pandemic. Our survey data also say that subjective well-being was higher during the pandemic for people with better home internet service conditional on age, employment status, earnings, working arrangements, and other controls. In short, universal access would raise productivity, and it would promote greater economic and social resilience during future disasters that inhibit travel and in-person interactions.
    Keywords: home internet access; productivity; Covid-19; wellbeing
    JEL: R14 J01 J1
    Date: 2021–09–10
  10. By: António Afonso; José Alves
    Abstract: We evaluate the impact of government spending efficiency on fiscal sustainability for a panel of 35 OECD countries during the period of 2007-2020. To answer our research question we first compute the magnitude of the responses of government revenues to changes in government spending. Next, we make use of so-called government spending efficiency scores, which efficiently indicate how governments can maintain their level of performance whilst using fewer inputs. Our results show that for the input efficiency scores obtained, countries’ fiscal balance and fiscal sustainability is directly improved by the use of less public resources, whilst maintaining the same level of output. In the cases of the output efficiency scores, the commitment of increased government outputs can lead to higher economic growth and the generation of additional government revenues, which also improves fiscal sustainability. Specifically, rationalising public expenditures without jeopardising the actual level of public goods and provision of services is a stronger determinant of fiscal sustainability, as well as for the improvement of the primary budget balance.
    Keywords: fiscal sustainability; spending efficiency; panel data.
    JEL: C23 E21 E62 H5 H62
    Date: 2022–04
  11. By: Gennady Shkliarevsky
    Abstract: This contribution examines the current controversy over research productivity. There are two sides in this controversy. Using extensive data from several industries and areas of research, one side argues that research productivity is currently in decline. The other side disputes this conclusion. It contends that the data used in making this argument are selective and limited; they do not reflect the overall state of research. The conclusion that follows from this critique is that the indicators of research productivity we currently use are not reliable and do not warrant a definitive answer to the problem. The article agrees that we need a new set of indicators in assessing research productivity. It proposes that we should look at global indicators related to knowledge production in general, rather than look at selective data that are inevitably limited in their scope. The article argues that the process of creation plays the essential role in knowledge production. Therefore, the perspective that uses the process of creation as its central organizing principle offers a unique and global view on the production of knowledge and makes a definitive resolution of the controversy possible. The article also outlines some steps for improving research productivity and realizing the full potential of the human capacity to produce knowledge. Key words: Research productivity, knowledge growth, the process of creation, levels of organization, equilibration and the production of disequilibrium.
    Date: 2022–03
  12. By: Valeria Gattai; Piergiovanna Natale; Francesca Rossi
    Abstract: Employing firm-level panel data from 2011 to 2015, we investigate the relationship between board diversity and outward foreign direct investment (OFDI) among firms headquartered in Europe. Previous studies suggest that best-performing firms self-select into OFDI and that board diversity affects firm performance and strategic decisions. Our focus is on board diversity in terms of gender and nationality as determinants of OFDI. After controlling for endogeneity using instrumental variables and control function methods, we find that board diversity positively affects OFDI by increasing firm performance; however, firms with more diverse boards are less likely to open foreign subsidiaries. Our findings also reveal that the negative effect of board diversity on OFDI is stronger in more productive firms.
    Keywords: Board diversity, Outward Foreign Direct Investment (OFDI), Foreign Direct Investment (FDI), Firm performance, Europe
    JEL: F23 G30 J16
    Date: 2022–03
  13. By: Daron Acemoglu; Gary Anderson; David Beede; Catherine Buffington; Eric Childress; Emin Dinlersoz; Lucia Foster; Nathan Goldschlag; John Haltiwanger; Zachary Kroff; Pascual Restrepo; Nikolas Zolas
    Abstract: This paper provides a comprehensive description of the adoption of automation technologies by US firms across all economic sectors by leveraging a new module introduced in the Census Bureau’s 2019 Annual Business Survey. The module collects data from over 300,000 firms on the use of five advanced technologies: AI, robotics, dedicated equipment, specialized software, and cloud computing. We document that the adoption of these technologies remains low (especially for AI and robotics), varies substantially across industries, and concentrates on large and younger firms. However, because larger firms are much more likely to adopt them, 12-64% of US workers and 22-72% of manufacturing workers are exposed to these technologies. Firms report a variety of motivations for adoption, including automating tasks previously performed by labor. Consistent with the use of these technologies for automation, adopters have higher labor productivity and wages and lower labor shares. In particular, the use of these technologies is associated with a 15% increase in labor productivity, which accounts for 20–30% of the higher labor productivity achieved by the largest firms in an industry. Adopters report that these technologies raised skill requirements and led to greater demand for skilled labor, but brought limited or ambiguous effects to their employment levels.
    Date: 2022–04
  14. By: Oluc, Ihsan; Ben Jebli, Mehdi; Can, Muhlis; Guzel, Ihsan; Brusselaers, Jan
    Abstract: There are many economic parameters that may affect environmental degradation. At the forefront of these parameters is the productive economic structures of the countries The present paper discusses the dynamic relationship between carbon dioxide (CO2) emissions, economic growth and productive capacity index (PCI) for a panel of 38 OECD countries spanning the period 2000-2018. The empirical study applied PMG-ARDL approach, panel cointegration techniques and Granger causality tests the examine the short and long-run association between the variables. The cross-sectional dependence test of Pesaran (2004) revealed the use of the second generation panel unit root tests (CADF and CIPS). The cointegration relationships between the variables are proved using Westerlund and Pedroni cointegration tests. The estimated coefficients of PMG-ARDL revealed that the environmental Kuznets curve (EKC) hypothesis is established. Besides, the empirical findings obtained from long-run estimation confirm that productive capacity has a significant role on increasing environmental quality.
    Keywords: Product Capacity Index; CO2 Emissions; Economic Complexity; Economic Structure; Environment
    JEL: E2 F1 F14 Q5 Q54 Q55 Q57
    Date: 2022–03–25
  15. By: Teichgräber, Andreas; Van Reenen, John
    Abstract: In the long-run at the macro level, the real pay of workers tends to follow labour productivity. In recent years, however, there have been concerns that this relationship has broken down and that pay has become "decoupled" from productivity, growing much more slowly. If the mean hourly compensation of workers grows more slowly than GDP per hour, this means the labour share will fall and this has been a well-documented phenomenon in the US since the early 1980s. By contrast, we show that in the UK, employee mean hourly compensation has grown at the same rate as labour productivity between 1981 and 2019. Although there has been no "net decoupling" in this sense, there has been a large divergence between median employee hourly wage growth and productivity growth of about 25 percentage points. About three-fifths of this "total decoupling" is due to increasing inequality (mean wages growing faster than median wages) and one-third is due to the increased non-wage compensation costs, in particular employer pension contributions. However, this analysis relates to employee compensation. The average self-employed worker has seen their income grow by only 50%, compared to 80% for the average employee. Using micro-data, we show that this gap can essentially be all explained by (i) the growth in the numbers of "solo self-employed" (who have relatively low incomes), and (ii) a much greater fall in hours worked by the self-employed than for the employed. Finally, if we "correct" the labour share for self-employment and non-wage labour costs, the UK labour share has fallen by about 3.5 percentage points over the last four decades.
    Keywords: pay; productivity; decoupling; labour share; self-employed
    JEL: E24 J20 J30
    Date: 2021–11–03
  16. By: Altomonte, Carlo; Favoino, Domenico; Morlacco, Monica; Sonno, Tommaso
    Abstract: This paper studies the interaction between financial frictions, intangible investment decisions, and markups at the firm level. In our model, heterogeneous credit constraints distort firms' decisions to invest in cost-reducing technology. The latter interacts with variable demand elasticity to generate endogenous dispersion across firms in markups and pass-through elasticities. We test the model's predictions on a representative sample of French manufacturing firms over the period 2004-2014. We establish causality by exploiting a quasi-natural experiment induced by a policy change that affected firms' liquidity. Our results shed new light on the roots of rising markups and markup heterogeneity in recent years.
    Keywords: markups; financial sontraints; intangibles; productivity; technological change
    JEL: D24 G32
    Date: 2021–01–08
  17. By: Pinto, Ricardo; Henriques, Sofia; Brockway, Paul; Heun, Matthew; Sousa, Tânia
    Abstract: In the coming renewables-based energy transition, global electricity consumption is expected to double by 2050, entailing widespread end-use electrification, with significant impacts on energy efficiency. We develop a long-run, worldwide societal exergy analysis focused on electricity to provide energetic insights for this transition. Our 1900-2017 electricity world database contains the energy carriers used in electricity production, final end-uses, and efficiencies. We find world primary-to-final exergy (i.e. conversion) efficiency increased rapidly from 1900 (6%) to 1980 (39%), slowing to 43% in 2017 as power station generation technology matured. Next, despite technological evolution, final-to-useful end-use efficiency was surprisingly constant (~48%), due to “efficiency dilution”, wherein individual end-use efficiency gains are offset by increasing uptake of less efficient end uses. Future electricity efficiency therefore depends on the shares of high efficiency (e.g. electrified transport and industrial heating) and low efficiency (e.g. cooling and low temperature heating) end uses. Our results reveal past efficiency increases (carbon intensity of electricity production reduced from 5.23 kgCO2/kWh in 1900 to 0.49 kgCO2/kWh in 2017) did little to decrease global electricity-based CO2 emissions, which rose 380-fold. The historical slow-pace of transition in generation mix and electric end-uses suggest strong, urgent incentives are needed to meet climate goals.
    Keywords: Energy efficiency, electricity, Carbon intensity, decarbonisation, energy history, energy end-uses
    JEL: Q40
    Date: 2022–03–15
  18. By: Utar, Hale (Grinnell College)
    Abstract: This paper examines how firms in an emerging economy are affected by violence due to drug trafficking. Employing rich longitudinal plant-level data covering all of Mexico from 2005–2010, and using an instrumental variable strategy that exploits plausibly exogenous spatiotemporal variation in the homicide rate during the outbreak of drug-trade related violence in Mexico, I show that violence has a significant negative impact on plant output, product scope, employment, and capacity utilization. Resilience to violence differs widely across different types of employment within firms and across firms with different characteristics. Employment decline is driven by bluecollar employment only. Dissecting within- and cross-plant heterogeneity points to a local labor supply channel where particularly plants utilizing low-wage, female, blue-collar workers are impacted. Consistent with a blue-collar labor supply shock, the results show a positive impact on average blue-collar wages and a negative impact on average white-collar wages at the firm level. Output elasticity of violence is also shown to be larger among low-wage, female-intensive but also domestically buying and selling plants. These findings show the rise of drug violence has significant distortive effects on domestic industrial development in Mexico and shed light on the characteristics of the most affected firms and the channels through which they are affected.
    Keywords: firms, violence, organized crime, manufacturing, drug war, Mexico, labor, technology, productivity, reallocation, gender
    JEL: L25 L60 O12 O14 O18 O19 R11 O54 F14
    Date: 2022–03
  19. By: Daniel Czarnowske
    Abstract: I present a new estimation procedure for production functions with latent group structures. I consider production functions that are heterogeneous across groups but time-homogeneous within groups, and where the group membership of the firms is unknown. My estimation procedure is fully data-driven and embeds recent identification strategies from the production function literature into the classifier-Lasso. Simulation experiments demonstrate that firms are assigned to their correct latent group with probability close to one. I apply my estimation procedure to a panel of Chilean firms and find sizable differences in the estimates compared to the standard approach of classification by industry.
    Date: 2022–03

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