nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒06‒13
nine papers chosen by

  1. A Ray-Based Input Distance Function to Model Zero-Valued Output Quantities: Derivation and an Empirical Application By Juan José Price; Arne Henningsen
  2. Evaluating Horizontal Mergers in Swedish District Courts Using Plant Capacity Concepts: With a Focus on Nonconvexity By Kristiaan KERSTENS; Xiaoqing CHEN
  3. Green credit policy and total factor productivity: Evidence from Chinese listed companies By Shu, Guo; ZhongXiang, Zhang
  4. Joint foreign ownership and global value chains effects on productivity: A comparison of firms from Poland and Germany. By Sabina Szymczak; Aleksandra Parteka; Joanna Wolszczak-Derlacz
  5. Agricultural Total Factor Productivity and the environment: A guide to emerging best practices in measurement By Jean Christophe Bureau; Jesús Antón
  6. Multiproduct Mergers and the Product Mix in Domestic and Foreign Markets By Jackie M.L. Chan; Michael Irlacher; Michael Koch
  7. Firms and Inequality By Jan De Loecker; Tim Obermeier; John Van Reenen
  8. Physicians and the Production of Health: Returns to Health Care during the Mortality Transition By Liebert, Helge; Mäder, Beatrice
  9. A Class of Behavioral Models for the Profit-Maximizing Firm By Philippe Choné; Laurent Linnemer

  1. By: Juan José Price (Business School, Universidad Adolfo Ibáñez); Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We derive and empirically apply an input-oriented distance function based on the stochastic ray production function suggested by Löthgren (1997, 2000). We show that the derived ray-based input distance function is suitable for modeling production technologies based on logarithmic functional forms (e.g., Cobb-Douglas and Translog) when control over inputs is greater than control over outputs and when some productive entities do not produce the entire set of outputs — two situations that are jointly present in various economic sectors. We also address a weakness of the stochastic ray function, namely its sensitivity to the outputs’ ordering, by using a model-selection approach and a model-averaging approach. We estimate a ray-based Translog input distance function with a data set of Danish museums. These museums have more control over their inputs than over their outputs, and many of them do not produce the entire set of outputs that is considered in our analysis. Given the importance of monotonicity conditions in efficiency analysis, we demonstrate how to impose monotonicity on ray-based input distance functions. As part of the empirical analysis, we estimate technical efficiencies, distance elasticities of the inputs and outputs, and scale elasticities and establish how the production frontier is affected by some environmental variables that are of interest to the museum sector.
    Keywords: Stochastic ray production frontier, distance function, input-oriented efficiency, zero output quantities, model averaging, monotonicity, museums.
    JEL: C51 D22 D24
    Date: 2022–06
  2. By: Kristiaan KERSTENS (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France); Xiaoqing CHEN (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China, and IESEG School of Management, 3 rue de la Digue, F-59000 Lille, France)
    Abstract: This contribution investigates the effects of horizontal mergers and acquisitions on the plant capacity utilisation of the Swedish district courts over the periods 2000-2017. More specifically, we empirically demonstrate the decomposition of input-oriented and output-oriented technical efficiency by incorporating several concepts of plant capacity utilisation. Moreover, we also explore the impact of convexity on input-oriented and output-oriented measures of plant capacity in the short-run scenario in an attempt to discover the potential rationale behind the merger wave. To the best of our knowledge, we are the first to assess horizontal mergers by employing plant capacity utilisation concepts. The results indicate that the horizontal mergers improve capacity utilisation. Furthermore, the nonconvex frontier method provides a more conservative estimate of plant capacity changes of this merger wave.
    Keywords: : Data Envelopment Analysis, Free Disposal Hull, Plant capacity utilisation, Horizontal mergers and acquisitions
    JEL: O13 O47 P28
    Date: 2022–05
  3. By: Shu, Guo; ZhongXiang, Zhang
    Abstract: The green credit policy plays a vital role in promoting enterprise upgrading. Using a thirteen year panel data of listed companies in China (2007 2019), this study uses the difference in differences (DID) method to examine the effects of the Green Credit Guidelines in 2012 (GCG2012) on the firm level total factor productivity (TFP). Our results show that the GCG2012 significantly increases the TFP of companies in green credit restricted industries. This finding remains robust through employing the PSM-DID model, alternating the treatment group, changing the sample period, and controlling the effects of other environmental policies and financial crises. This effect is more pronounced for private enterprises, companies with worse debt paying ability, companies in highly competitive industries and companies in regions with higher financial liberalization. The impact mechanism test indicates that increasing the green innovation and reducing the agency costs (including green agency costs and traditional agency costs) are two possible channels to boost firm level TFP. Further analysis shows that the GCG2012 is effective not only for heavily polluting industries but also for light polluting industries, and that the GCG2012 can improve the economic performance of firms in green credit restricted industries. Overall, this study reveals the micro mechanisms behind the long term impact of the GCG2012 policy on firm level TFP, providing empirical evidence and policy suggestions for improving green credit policies and promoting green development.
    Keywords: Environmental Economics and Policy, Production Economics, Productivity Analysis
    Date: 2022–05–31
  4. By: Sabina Szymczak (Gdansk University of Technology, Gdansk, Poland); Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland)
    Abstract: The study confronts the joint effects of foreign ownership and its involvement in global value chains (GVC) on the productivity performance of firms from a catching-up country (Poland) and a leader economy (Germany). Domestic owned firms are less productive than foreign ones, which is particularly true at low GVC participation levels. However, as GVC involvement increases, the foreign ownership productivity premium decreases, leading to productivity catching up between foreign and domestic owned firms. This mechanism is similar in Poland and Germany. However, in the leader country (Germany), domestically-owned firms' productivity performance is more stable along the GVC distribution.
    Keywords: GVC, FDI, productivity, firms, Amadeus database
    JEL: F23 F21 F61 D24 D22
    Date: 2022–05
  5. By: Jean Christophe Bureau (National Research Institute for Agriculture, Food and Environment); Jesús Antón (OECD)
    Abstract: Increased productivity and sustainability of the agricultural sector are core policy objectives in OECD and non-OECD countries. This Guide provides an overview of the current state of the art in measuring sustainable productivity of the agricultural sector and analysing sources of growth in a reliable and comparable manner across countries in a way useful for policy makers. It draws on the contributions from members of the OECD Network on Agricultural Total Factor Productivity (TFP) and the Environment that brings together relevant experts from academia and national statistical agencies. Its insights will be key for designing policies necessary to meet the triple challenge of feeding a growing world population and providing incomes to food system actors whilst ensuring environmental sustainability.The Guide presents recommendations in two areas. First, on how to improve the traditional calculation of TFP based on market prices inputs and outputs, proposing harmonised methods on capital measurement, land pricing, output aggregation and quality adjustment. Second, on how to account for environmental outcomes, considering a reduction in pollution or emissions as a productivity gain, but the increased use of natural capital as a productivity loss. A main challenge is the estimation of “shadow prices” for non-market inputs and outputs. It is recommended to pursue several complementary avenues: investing in improving TFP methodologies and data; continuing investigating its expansion to include environmental outcomes; and mapping traditional TFP with other indicators of agri-environmental performance.
    Keywords: Agricultural productivity, Economic growth, Environmental sustainability
    JEL: O11 O13 O41 O47
    Date: 2022–05–30
  6. By: Jackie M.L. Chan; Michael Irlacher; Michael Koch (Aarhus University)
    Abstract: This paper investigates the effects of mergers on the product mix of multiproduct firms. Thus, we open the black box of post-merger efficiency improvements to reveal a new margin of adjustment along the product dimension. We analyze horizontal mergers in a theoretical model where oligopolistic firms employ a flexible manufacturing technology and allocate assets between differentiated varieties. After a merger, acquirers drop products from their consolidated domestic product portfolio and reallocate assets towards core varieties. We further demonstrate that such merger-induced efficiency gains imply greater activity in foreign markets. Using detailed Danish register data, we document novel facts regarding mergers and multiproduct firms and find empirical evidence strongly supporting the model’s predictions. Our results show that the number of domestic products of the post-merger acquirer falls relative to the sum of the premerger acquirer and target, that skewness of domestic sales rises towards core products, and that export activity increases.
    Keywords: Multiproduct firms; Horizontal mergers; Flexible manufacturing; Exports; Product mix; Event Study
    JEL: F12 F14 G34 L22 L25
    Date: 2022–04
  7. By: Jan De Loecker; Tim Obermeier; John Van Reenen
    Abstract: In the last few decades, dramatic changes have been documented in the US business landscape. These include rising productivity and pay dispersion between firms, higher aggregate markups (of price over variable costs), growing dominance of big companies ("superstar firms"), a fall in the labour share of GDP and a decline in business dynamism. We review the existing literature and present a new analysis using comprehensive firm level panel data, to show that qualitatively, these trends are also apparent in the UK. This similarity suggests that common trends in technology (or globalisation) have been the driving force behind these changes, rather than country-specific institutions (such as weaker US antitrust enforcement). Since (at least) the mid-1990s, there has been a large increase in UK firm-level inequality (especially in the upper tails) of productivity, wages, markups, and labour shares. Of course, inequality between firms is much less of a concern than inequality between people. However, it can signal economic problems, such as a slowdown in the diffusion of ideas between leading and laggard firms and can foster higher wage inequality. Indeed, there has been little aggregate UK productivity growth since the Global Financial Crisis, and this has been a serious drag on median and mean real wages. We suggest a simple theoretical framework for understanding some of these trends and quantitatively analyse why, despite increasing markups, the, the UK labour share has not fallen as sharply as that in the US. Finally, we suggest some policy options in response to these worrying trends, include modernising competition rules to deal with the growth of superstar firms and strengthening worker bargaining power.
    Keywords: firms inequality, financial crisis
    Date: 2022–12
  8. By: Liebert, Helge (University of Zurich); Mäder, Beatrice (University of St. Gallen)
    Abstract: This paper investigates the returns to health care provision during the mortality transition. We construct a new panel data set covering German municipalities from 1928 to 1936. The endogeneity of health care supply is addressed by using the expulsion of Jewish physicians from statutory health insurance as exogenous variation in regional physician supply. Increases in the supply of physicians reduce infant mortality and mortality from common childhood diseases. Using a semiparametric control function approach, we find diminishing marginal returns to health care provision. The results are consistent with historical trends in infant mortality over the 20th century.
    Keywords: infant mortality, physicians, health care supply, mortality transition, semiparametric IV
    JEL: I10 I18 N34
    Date: 2022–04
  9. By: Philippe Choné; Laurent Linnemer
    Abstract: We study the behavior of a firm that consistently maximizes a misspecified profit function. We provide an equilibrium concept where the misspecification error remains undetected. We examine the uniqueness and stability of the equilibria. The model of the price-taking firm belongs to this class. In one of these models, the cost-taking firm, the equilibrium price increases with fixed costs. The behavioural price can be lower or higher than the rational price, meaning consumers can benefit from the lack of rationality. Finally in a long-run perspective where the cost is endogenous, we show that the behavioral and rational firms end with the same level of output.
    Keywords: behavioural model of a firm, misspecified profit function, fixed costs
    JEL: L12 L21 L23 L25 M41
    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.