nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒06‒20
twenty-one papers chosen by

  1. Procedures for ranking technical and cost efficient units: With a focus on nonconvexity By Kristiaan Kerstens; Jafar Sadeghi; Mehdi Toloo; Ignace van de Woestyne
  2. Performance of Exiting Firms in Japan: An Empirical Analysis Using Exit Mode Data By Yojiro Ito; Daisuke Miyakawa
  3. Management and misallocation in Mexico By Nicholas Bloom; Leonardo Iacovone; Mariana Pereira-Lopez; John Van Reenen
  4. Pay, productivity and management By Nicholas Bloom; Scott W. Ohlmacher; Cristina J. Tello-Trillo; Melanie Wallskog
  5. Relationship between Logistics Cost and Relative Firm Efficiency in Indian Food Processing Sector By Ramandeep Kumar Sharma; Khushdeep Dharni; Akashdeep Smagh; Pushpinder Vashisht
  6. The impact of healthcare IT on clinical quality, productivity and workers By Ari Bronsoler; Joseph Doyle; John Van Reenen
  7. An Alternative Ranking of DMUs Performance for the ZGS-DEA Model By Panagiotis Ravanos; Giannis Karagiannis
  8. Estimating the Revenue Efficiency of Public Service Providersin the Presence of Demand Constraints By Hong Ngoc Nguyen; Christopher O’Donnell
  9. Internet access and its implications for productivity, inequality and resilience By Jose Maria Barrero; Nicholas Bloom; Steven J. Davis
  10. Who Wins and Who Loses from State Subsidies? By Du, Jun; Girma, Sourafel; Görg, Holger; Stepanok, Ignat
  11. The new industrial revolution: The optimal choice for flexible work companies By Becchetti, Leonardo; Salustri, Francesco; Solferino, Nazaria
  13. Have productivity and pay decoupled in the UK? By Andreas Teichgraeber; John Van Reenen
  14. Offshoring, domestic employment and production: Evidence from the German International Sourcing Survey By Kaus, Wolfhard; Zimmermann, Markus
  15. Going for growth that's sustainable and equitable By John Van Reenen
  16. Online productivity and types of assignments in a Japanese workplace By Kostiantyn Ovsiannikov; Koji Kotani; Hodaka Morita
  17. Zombie-Lending in the United States: Prevalence versus Relevance By Maximilian Göbel; Nuno Tavares
  18. Robot Adoption, Organizational Capital and the Productivity Paradox By Rodimiro Rodrigo
  19. A Cost-Benefit Analysis of High-Quality University Education in Brazil By Azzoni, Carlos R.; Vassalo, Moisés
  20. A Functional Analysis of the Banking Industry By Riccardo Zolea
  21. Is infrastructure capital really productive? Non-parametric modeling and data-driven model selection in a cross-sectionally dependent panel framework By Musolesi, Antonio; Prete, Giada Andrea; Simioni, Michel

  1. By: Kristiaan Kerstens (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Jafar Sadeghi; Mehdi Toloo; Ignace van de Woestyne
    Abstract: This contribution extends the literature on super-efficiency by focusing on ranking cost-efficient observations. To the best of our knowledge, the focus has always been on technical super-efficiency and this focus on ranking cost-efficient observations may well open up a new topic. Furthermore, since the convexity axiom has both an impact on technical and cost efficiency, we pay a particular attention to the effect of nonconvexity on both super-efficiency notions. Apart from a numerical example, we use a secondary data set guaranteeing replication to illustrate these efficiency and super-efficiency concepts. Two empirical conclusions emerge. First, the cost super-efficiency notion ranks differently from the technical super-efficiency concept. Second, both cost and technical super-efficiency notions rank differently under convex and nonconvex technologies.
    Keywords: Data envelopment analysis,Free disposal hull,Technical efficiency,Cost efficiency,Super-efficiency
    Date: 2022–07–01
  2. By: Yojiro Ito (Economist, Institute for Monetary and Economic Studies (currently, Personnel and Corporate Affairs Department), Bank of Japan (E-mail:; Daisuke Miyakawa (Associate Professor, Hitotsubashi University Business School (E-mail:
    Abstract: Studies on firm performance have found that exiting firms in Japan persistently show better performance than surviving firms, and this persistence adversely affects aggregate productivity. We use the panel data of business enterprises along with unique information on their exit modes (i.e., default, voluntary closure, and merger) to show that a large part of such a "negative exit effect" is attributed to the firms exiting through mergers. Further, we confirm that the causal effect of those mergers results in positive growth in the productivity of merging firms. Given that the size of such a positive causal effect overwhelms the negative exit effect, resource reallocation through mergers positively contributes to the aggregate growth in productivity for Japanese firms.
    Keywords: Productivity dynamics, Exit effects, Mergers
    JEL: D24 G33 G34 O47
    Date: 2022–05
  3. By: Nicholas Bloom; Leonardo Iacovone; Mariana Pereira-Lopez; John Van Reenen
    Abstract: We argue that greater misallocation is a key driver of the worse management practices in Mexico compared to the US. These management practices are strongly associated with higher productivity, growth, trade, and innovation. One indicator of greater misallocation in Mexico is the weaker size-management relationship compared to the US, particularly in the highly distorted Mexican service sector. Second, the size-management relationship is weaker in smaller markets, measured by distance to the US for manufacturing firms and population density for service firms. Third, municipalities with weaker institutions, measured by contract enforcement, crime, and corruption, have a weaker size-management relation. These results are consistent with frictions lowering aggregate management quality and productivity.
    Keywords: misallocation, management, performance, services, manufacturing, Mexico
    Date: 2022–12
  4. By: Nicholas Bloom; Scott W. Ohlmacher; Cristina J. Tello-Trillo; Melanie Wallskog
    Abstract: Using confidential Census matched employer-employee earnings data we find that employees at more productive firms, and firms with more structured management practices, have substantially higher pay, both on average and across every percentile of the pay distribution. This pay-performance relationship is particularly strong amongst higher paid employees, with a doubling of firm productivity associated with 11% more pay for the highest-paid employee (likely the CEO) compared to 4.7% for the median worker. This pay-performance link holds in public and private firms, although it is almost twice as strong in public firms for the highest-paid employees. Top pay volatility is also strongly related to productivity and structured management, suggesting this performance-pay relationship arises from more aggressive monitoring and incentive practices for top earners.
    Keywords: Productivity
    Date: 2022–12
  5. By: Ramandeep Kumar Sharma (Mississippi State University [Mississippi]); Khushdeep Dharni (Punjab Agricultural University); Akashdeep Smagh; Pushpinder Vashisht
    Abstract: Logistics plays an important role in determining the profits for a business enterprise through a dual influence on revenues and costs. Logistics are considered critical in the growth and performance of the food processing sector. The present study was undertaken to examine the relative performance of food processing units in India on the basis of logistics cost. Data Envelopment Analysis (DEA) was used to study the relative performance and the set considered for analysis consisted of 32 food processing units with the period of analysis covering 5 years from 2007-2011. Results indicate that no food processing unit was efficient throughout the period of analysis. Logistic regression results indicate that with a unit increase in logistics cost likelihood of the firm being efficient decreased 0.642 times. The results of the study underline the criticality of logistics management in the context of the food processing sector in India. For improving firm efficiency, it is imperative for Indian food processing companies to ensure efficiency in logistics operations.
    Date: 2021
  6. By: Ari Bronsoler; Joseph Doyle; John Van Reenen
    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
    Date: 2021–09–14
  7. By: Panagiotis Ravanos (Department of Economics, University of Macedonia); Giannis Karagiannis (Department of Economics, University of Macedonia)
    Abstract: The Zero-Sum Gains Data Envelopment Analysis (ZSG-DEA) model was developed to evaluate the performance of Decision Making Units (DMUs) under output interdependency, which is evident when the total (over DMUs) observed output is a priori fixed. In this paper, we take a closer look at the derivation and interpretation of the ZSG-DEA efficiency scores and we explain why these are not really comparable across DMUs. Moreover, we verify that DMUs’ ranking based on their ZSG-DEA efficiency scores is in fact incompatible with output interdependency, which requires total potential output of DMUs to be equal to their total observed output. Then, we propose an alternative metric of DMUs’ performance that is both consistent with output interdependency and comparable across DMUs. This metric is used for classifying DMUs into three (high, average or low performance) groups and for ranking them within these groups. To illustrate its empirical applicability, we use data from the Olympic Games, where output interdependency is clearly evident since the total number of awarded (gold, silver, and bronze) medals is a priori fixed.
    Keywords: Data Envelopment Analysis (DEA); Output Interdependency; Fixed-Sum Output; Zero-Sum Gains (ZSG); Performance Metric
    Date: 2022–06
  8. By: Hong Ngoc Nguyen (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia); Christopher O’Donnell (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: Evaluating the performance of public service providers is often complicated by the fact that they must choose input levels before demands for their services are known. We consider an even more complicated situation in which service providers have no opportunity to directly influence demands. This means that their predetermined inputs may be more than what is required to meet realised demands. In such cases, conventional measures of revenue efficiency used in the operational research literature will generally mis-classify rational and efficient managers as inefficient. We develop a more appropriate measure of revenue efficiency that accounts for exogenously-determined demands. We explain how data envelopment analysis (DEA) methods can be used to estimate our measure, and also how they can be used to assess the consequences (if any) of providers having to choose input levels before demands are known. The methodology is applied to hospital and health service (HHS) providers in Queensland (Australia). We obtain estimates of revenue efficiency that are quite different from estimates obtained using a conventional approach. Our results also indicate that HHS providers were not disadvantaged by having to choose input levels before demands were known.
    Keywords: climate change, adaptive capacity, adaptation readiness, composite index, inequity
    JEL: Q54 Q56
    Date: 2022–05
  9. By: Jose Maria Barrero; Nicholas Bloom; Steven J. Davis
    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
    Date: 2021–09–10
  10. By: Du, Jun (Aston University); Girma, Sourafel (University of Nottingham); Görg, Holger (Kiel Institute for the World Economy); Stepanok, Ignat (Institute for Employment Research (IAB), Nuremberg)
    Abstract: China is perceived to rely on subsidizing firms in targeted industries to improve their performance and stay competitive. We implement an approach that allows for the joint estimation of direct and indirect effects of subsidies on subsidized and non-subsidized firms. We find that firms that receive subsidies experience a boost for productivity. However, our approach highlights the importance of indirect effects, which are generally neglected in the literature. We find that, in general but not always, non-subsidized firms experience reductions in their productivity growth if they operate in a cluster where other firms are subsidized. These negative externalities depend on the share of firms that receive subsidies in the cluster. Aggregating direct and indirect effects into a (weighted) total effect shows that this negative indirect effect tends to dominate. We interpret our results in the light of a simple heterogenous firm type model, which highlights that subsidization, in a competitive environment of firms, may potentially harm non-subsidized firms.
    Keywords: subsidies, firm performance, treatment effects, externalities, China
    JEL: H25 H32 L25
    Date: 2022–04
  11. By: Becchetti, Leonardo; Salustri, Francesco; Solferino, Nazaria
    Abstract: The forced remote working relationships experienced during the COVID-19 pandemics made employers and employees more aware of the productivity gains arising from the digital revolution. To investigate the characteristics of such gains, we model firms' production allowing companies to choose among three types of (face-to-face in presence, remote synchronous, and remote asynchronous) employees relationships. The introduction of remote interactions allows us to outline five features affecting workers productivity such as i) mobility reduction, ii) frequency of interactions, iii) optimal time/place, iv) work-life balance, and v) relationship decay effects. We calculate the optimal share of the three types of relationships that maximise corporate profits conditional to reasonable parametric assumptions on the five effects under perfect and asymmetric information. We as well assess the potential productivity growth of companies that use only faceto- face interactions when allowing also remote interactions. We finally discuss existing private business contracts that introduced hybrid combinations of in-person and remote work activities for their employees, that are aligned with our theoretical findings and call for new industrial and environmental policies at national and supranational level.
    Keywords: flexible work,remote work,digital relationship,productivity
    JEL: J24 O30
    Date: 2022
  12. By: Carlsson, Mikael (Uppsala University); Clymo, Alex (University of Essex); Joslin, Knut-Eric (Kristiania University College)
    Abstract: We characterize the dispersion of firm-level productivity and demand shocks using Swedish microdata including prices and utilization and analyse the consequences for firms and the aggregate economy. Demand dispersion increases by more than TFPQ dispersion in recessions. Productivity shocks pass through incompletely to prices and have limited effect on sales dispersion. Demand shocks explain most of the variation in sales dispersion. In a heterogeneousfirm model matching the micro facts, demand dispersion has unambiguously negative effects on output via a “wait and see” channel. Productivity dispersion does not generate “wait and see” effects, but affects output negatively by inducing markup dispersion.
    Keywords: demand estimation; productivity; variable markups; business cycles; dispersion; uncertainty; passthrough; adjustment costs
    JEL: D21 D22 D81 E32 L11
    Date: 2022–05–01
  13. By: Andreas Teichgraeber; John Van Reenen
    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
    Date: 2021–11–03
  14. By: Kaus, Wolfhard; Zimmermann, Markus
    Abstract: This paper analyses the effect of offshoring (i.e., the relocation of activities previously performed in-house to foreign countries) on various firm outcomes (domestic employment, production, and productivity). It uses data from the International Sourcing Survey (ISS) 2017 for Germany, linked to other firm level data such as business register and ITGS data. First, we find that offshoring is a rare event: In the sample of firms with 50 or more persons employed, only about 3% of manufacturing firms and 1% of business service firms have performed offshoring in the period 2014-2016. Second, difference-in-differences propensity score matching estimates reveal a negative effect of offshoring on domestic employment and production. Most of this negative effect is not because the offshoring firms shrink, but rather because they don't grow as fast as the non-offshoring firms. We further decompose the underlying employment dynamics by using direct survey evidence on how many jobs the firms destroyed/created due to offshoring. Moreover, we do not find an effect on labour productivity, since the negative effect on domestic employment and production are more or less of the same size. Third, the German data confirm previous findings for Denmark that offshoring is associated with an increase in the share of 'produced goods imports', i.e. offshoring firms increase their imports for the same goods they continue to produce domestically. In contrast, it is not the case that offshoring firms increase the share of intermediate goods imports (a commonly used proxy for offshoring), as defined by the BEC Rev. 5 classification.
    Keywords: international sourcing,offshoring,productivity
    JEL: D24 L60 O30
    Date: 2022
  15. By: John Van Reenen
    Abstract: In the second anniversary lecture marking 30 years since CEP began, former director John Van Reenen focused on productivity, an issue that has been at the heart of the Centre's work for three decades. He sets out how technological innovation and better management can bring about growth that is both inclusive and compatible with efforts to address the world's climate emergency.
    Keywords: Technological change, Productivity, environment, innovation, management, growth, climate
    Date: 2021–06–15
  16. By: Kostiantyn Ovsiannikov (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology); Hodaka Morita (Hitotsubashi University)
    Abstract: With the advance of the COVID-19 pandemic, many companies in the world have embraced telework. Despite the large volume of related studies, only few of them have addressed telework in relation to types of assignments and employment. In this context, we pose an open question of how productivity in an online environment depends on formats of work, remuneration systems and socioeconomic factors in comparison to a face-to-face environment. We collect the data of 500 Japanese employees through the stratified questionnaire survey, empirically examining and characterizing the perceived telework productivity for carrying out simple and creative tasks in individual and group formats as compared with face-to-face productivity. The three main findings are obtained. First, online productivity tends to be noticeably low for group format as compared to individual format, especially when carrying out creative tasks. Second, we find that managerial affiliation and sleeping hours tend to translate into, respectively, low group productivity and low individual productivity for both simple and creative tasks. Third, our study demonstrates that online productivity is unconditionally exacerbated under a seniority-based system as compared to a performance-based system. Overall, our findings reveal the difficulties faced by employees when performing group tasks remotely, pointing at the importance of professional incentives for increasing collective productivity of telework. The caveats we identified can thereby help companies to improve their transition from a face-to-face to an online environment.
    Keywords: Human resource management, Employee attitudes, Organizational culture, Institutions
    Date: 2022–05
  17. By: Maximilian Göbel; Nuno Tavares
    Abstract: Extraordinary fiscal and monetary interventions in response to the COVID-19 pandemic have revived concerns about zombie prevalence in advanced economies. The literature has al- ready linked this phenomenon - observed over the course of the last two decades - to impeding the performance of healthy firms in Japan and Europe. To make the case for the United States, we analyze banks' and capital markets' zombie-lending practices on the basis of a sample of publicly listed U.S. companies. Our results suggest that zombie prevalence and zombie-lending per se are not a defining characteristic of the U.S. economy. Nevertheless, we find evidence for negative spillovers of zombie-lending on productivity, capital-growth, and employment-growth of non-zombies as well as on overall business dynamism. It is predominantly the class of healthy small- and medium-sized companies that is sensitive to zombie-lending activities, with financial constraints further amplifying these effects.
    Keywords: zombie lending; business dynamism; bank credit; non-viable firms; productivity
    JEL: D24 E24 G21 L25 O40
    Date: 2022–05
  18. By: Rodimiro Rodrigo (Department of Economics, Georgetown University)
    Abstract: Major technological changes have come with an adjustment period of stagnant productivity before the economy operates at its full potential. The mechanism of this adoption process is still not well understood. Using event studies, I document that productivity increases with a five-year lag after the adoption of industrial robots in Brazilian local labor markets. Combining employer-employee matched data with a novel measure of robot adoption, I provide first evidence of establishment-level labor reorganization and organizational capital depreciation induced by the automation process. During the five years after adoption, labor switching across occupations increases within firms, moving from production to support activities. I show that firms’ organizational capital measured by workers’ firm-occupation-specific experience depreciates and then slowly re-accumulates. When these processes stop, the productivity gains reach their maximum. I use these results to estimate a general equilibrium model with heterogeneous firms, endogenous robot adoption, and organizational capital accumulation. The model accounts for the productivity paradox, the diffusion of industrial robots, and the change in the aggregate skill demand. The model highlights the role of organizational costs accompanying the adoption of new technologies. I illustrate its usefulness by using it to characterize the implications of the “innovator’s dilemma.” Classification- E24, J62, L23, O32, O33
    Keywords: Labor Productivity, Occupational Mobility, Technological Change, Automation
    Date: 2022–02–27
  19. By: Azzoni, Carlos R. (Departamento de Economia, Universidade de São Paulo); Vassalo, Moisés (Federal University of Itajuba)
    Abstract: With a strictly economic view, this study estimates the productivity differential of graduates from three of the best universities in Brazil (USP, Unicamp, and Unesp) compared to professionals trained by other higher education institutions. We performed a cost-benefit analysis comparing the value of the aggregate productivity differential with the expenditures incurred. We compared the productivity levels of over 138,000 graduates of the three universities between 2005 and 2015 with more than 13 million professionals in the labor market in 2018. The results indicate that a person with a degree in these universities had 62% higher productivity levels (gross differential). When we control for the personal characteristics (gender, age) and the quality of employment obtained (sector of activity, tenure, location, and specific occupation), the difference reduces to 24% (net differential). For jobs in the private sector, the net difference is 30%. We concluded that the effects of high-quality teaching alone account for 81.5% of the costs involved in the operation of the three universities.
    Keywords: Cost-Benefit Analysis; productivity;
    JEL: R10
    Date: 2022–05–17
  20. By: Riccardo Zolea
    Abstract: This paper proposes a functional analysis of input, output and capital of the banking sector in an endogenous money framework with the aim of determining the aggregates on which to calculate the bank profit rate. Although banks create bank money, State money is not producible by banks, which need it as an input. Deposits are the cheapest source of central bank money already in the system, so it can be argued that deposits are inputs to the banking industry. Assuming that loans are the banking output, we investigate what role regulation plays in defining a banking production technique. The framework developed from Basel Accords imposes a level of equity proportional to the level of risk-weighted bank assets. Thus, a bank capital-to-output ratio defined by these rules is conceivable.
    Keywords: Bank; deposit; capital; input-output analysis; post-Keynesian approach; MMT.
    JEL: E51 E12 G21
    Date: 2022–06
  21. By: Musolesi, Antonio; Prete, Giada Andrea; Simioni, Michel
    JEL: C23 C5 O4
    Date: 2022–05–19

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