nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒08‒08
seventeen papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. The UK's Great Demand and Supply Recession By Nick Jacob; Giordano Mion
  2. Global Impacts of Agricultural Productivity Growth By Hertel, Thomas W.
  3. Accounting for the slowdown in UK innovation and productivity By Peter Goodridge; Jonathan Haskel
  4. Farm Size and Productivity -The Role of Family Labor By Muhammad Ayaz; Mazhar Mughal
  5. Levelling Up: The Need for an Institutionally Coordinated Approach to National and Regional Productivity By Philip McCannn
  6. Research and productivity in Indonesian agriculture By Peter Warr
  7. Green credit policy and total factor productivity: Evidence from Chinese listed companies By Shu Guo; ZhongXiang Zhang
  8. Evaluating environmental effects of the adoption of automatic milking systems in Norway By Martinsson, Elin; Storm, Hugo
  9. The UK Productivity Puzzle in an International Comparative Perspective By John Fernald; Robert Inklaar
  10. Tradability, Productivity, and Regional Disparities: theory and UK evidence By Patricia Rice; Anthony J.Venables
  11. Family Firms and Input Procurement: Firm-Level Evidence from Italy By Pietro De Ponti; Valeria Gattai
  12. The Impact of ICT and Intangible Capital Accumulation on Labour Demand Growth and Functional Income Shares By Robert Stehrer
  13. ICT, Human Capital, and Productivity in Chinese Cities By Qing Li; Yanrui Wu
  14. In search for the Most Preferred Solution in Value Efficiency Analysis By Panagiotis Ravanos; Giannis Karagiannis
  15. Informal versus Formal: Microfirms' Productivity Gaps By Gutiérrez, L. H.; Rodríguez- Lesmes, P.
  16. Spillover Effects of Foreign and Domestic Exporting Firms on Export Decisions of Local Manufacturing Firms: Evidence from Viet Nam By Quang Hoan Truong; Van Chung Dong
  17. Public capital and institutions' quality in the Italian regions By F. Aresu; E. Marrocu; R. Paci

  1. By: Nick Jacob; Giordano Mion
    Abstract: We revisit UK's poor productivity performance since the Great Recession by means of both a suitable theoretical framework and firm-level prices and quantities data for detailed products allowing us to both measure demand, and its changes over time, and distinguish between quantity total factor productivity (TFP-Q), i.e., the capacity to turn inputs into more physical output (number of shirts, liters of beer), and what we call revenue total factor productivity (TFP-R), i.e., productivity calculated using revenue (or value-added) as a measure of output and so the capacity to turn inputs into more revenue. This in turn allows us to measure how changes in TFP-Q, demand and markups ultimately affected revenue TFP, as well as labour productivity, over the Great Recession. Our findings suggest that the poor UK firms' productivity performance post -recession is due to both a weakening of demand and a decreasing TFP-Q pushing down sales, markups, revenue TFP and labour productivity.
    Keywords: demand, great recession, prices, revenue tfp, total factor productivity, united kingdom
    JEL: D24 E01 L11 O47 O52
    Date: 2021–03
  2. By: Hertel, Thomas W.
    Keywords: Productivity Analysis, International Relations/Trade
    Date: 2022–02
  3. By: Peter Goodridge (x The Productivity Institute, Alliance Manchester Business School); Jonathan Haskel (Bank of England; Imperial College Business School; CEPR and IZA)
    Keywords: productivity, growth, slowdown, innovation, knowledge, intangibles, investment, capital, TFP
    Date: 2022–06
  4. By: Muhammad Ayaz (TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique); Mazhar Mughal (ESC PAU - Ecole Supérieure de Commerce, Pau Business School, TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this study, we draw a theoretical model to demonstrate that small farms achieve lower total factor productivity (TFP) compared to large farms, even though their yield may be higher. We argue that taking into account family labor modifies the farm size-productivity relationship. We test our hypotheses on geocoded data from 5,645 agriculture farms in Pakistan using Pakistan household integrated economic survey 2018-19 and labor force survey 2018 combined with remote sensing data to account for farm-specific topographic features. We base our analysis on OLS and stochastic frontier analysis. We find that family labor is the key to understanding the nature and strength of the farm size-productivity relationship. Farm size's association, both with yield and TFP, turns positive when we measure family labor in terms of market wage rate rather than marginal product. Farm yield decreases by-0.07% with a one percent increase in farm size but gets insignificant or increases by 0.034% when family labor cost is measured at market wages rather than the marginal product. We find that higher family labor intensity, labor market distortion due to the notion of family dishonor, and suboptimal crop selection by small farms play a crucial role in this context.
    Keywords: technical efficiency,family dishonor,TFP,family labor,productivity,Farm size,Pakistan.
    Date: 2022–05–16
  5. By: Philip McCannn (Alliance Manchester Business School, The Productivity Institute)
    Keywords: Productivity, Levelling Up, Institutions
    Date: 2022–07
  6. By: Peter Warr
    Abstract: Total factor productivity growth contributed 38 per cent of Indonesia’s agricultural output growth from the mid-1970s to the mid-2000s. This study uses time series data analysed with the error correction mechanism to examine the contribution of Indonesian publicly funded agricultural research to this outcome, allowing for other possible determinants of productivity growth, including international agricultural research, extension, government price policy and weather. The results imply a 27% real annual rate of return from a marginal increase in Indonesian agricultural research expenditure. Indonesia’s public agricultural research explains virtually all of its agricultural total factor productivity growth between 1975 and 2006.
    Keywords: Agricultural research; Indonesia; error correction mechanism.
    JEL: O13 O33 C22
    Date: 2022
  7. By: Shu Guo (Ma Yinchu School of Economics, Tianjin University and China Academy of Energy, Environmental and Industrial Economics); ZhongXiang Zhang (Ma Yinchu School of Economics, Tianjin University and China Academy of Energy, Environmental and Industrial Economics)
    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: Green credit policy, green finance, total factor productivity, PSM-DID model, China
    JEL: Q48 Q53 Q55 Q58 O13 P28 R11 H23
    Date: 2022–05
  8. By: Martinsson, Elin; Storm, Hugo
    Abstract: In Norwegian dairy farming, the usage of automatic milking systems (AMS) has increased during the last decades. AMS is primarily a productivity increasing and labor reducing technology, but previous research shows that AMS can have other (secondary) effects that could impact the environmental performance of farms. Effects of AMS-adoption found, include increased total production, increased farm size, changes in grazing patterns and feed mix and changes in energy consumption. This paper aims to study the hypothesis that AMS-adoption, through these secondary effects, affect farm-level GHG-emissions. Using a difference-in-difference approach, we provide evidence of the presence of secondary effects and shows that AMS-adoption negatively affects farms’ eco-efficiency, particularly by increasing enteric fermentation. The causal effect is identified by considering adopting farms and non-adopting farms observed at two periods in time. Apart from providing this empirical result, the paper also presents a general procedure of how to go about evaluating farm-level effects of technology adoption.
    Keywords: Livestock Production/Industries, Production Economics, Environmental Economics and Policy
    Date: 2022–04
  9. By: John Fernald (INSEAD, Federal Reserve Bank of San Francisco); Robert Inklaar (University of Groningen)
    Keywords: Productivity Growth, Great Recession, Convergence
    Date: 2022–04
  10. By: Patricia Rice (Department of Economics and St. Anne’s College, University of Oxford); Anthony J.Venables (Alliance Manchester Business School, The University of Manchester and Monash University)
    Keywords: Regional economics, lagging regions, tradability, productivity, disparities
    Date: 2022–06
  11. By: Pietro De Ponti; Valeria Gattai
    Abstract: This paper empirically analyses input procurement using Italian firm-level data. Combining the international economics literature on global sourcing with the family business and international business literature on family firms (FFs)’ internationalization, we build a comprehensive framework in which sourcing is shaped by location (domestic versus foreign sourcing) and ownership (integration versus outsourcing) decisions. Relying on a new firm-level, cross-sectional dataset on a large and stratified sample of Italian manufacturing firms, we address the relationship between global sourcing and firm-level features, such as family presence in ownership and control, productivity, and input specificity. Our probit and multinomial probit estimates suggest that the FF status is negatively related to foreign sourcing, and it plays little role in orienting firms’ ownership decision; moreover, firms’ productivity fosters foreign sourcing, and reliance on specific inputs favours integration. Our study contributes to the International Economics literature on global sourcing by studying factors other than productivity and input specificity that affect input procurement; moreover, it contributes to the Family Business and International Business literature on FFs’ internationalization by taking a supply-side perspective and investigating sourcing through the interplay between location and ownership choices.
    Keywords: productivity, input specificity, family firms, input procurement, sourcing
    JEL: F23 D23 C35 L24
    Date: 2022–06
  12. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper investigates whether the diffusion of tangible IT and CT capital and intangible capital asset types has an impact on labour demand growth and the share of labour income in total income at the industry and country level. The econometric analysis is derived from a Cobb-Douglas production function taking empirical stylized facts into account. The effects of technical progress embodied in the various forms of capital impact along inter-industry and intercountry production linkages, which are considered by using global value chain indicators. The analysis is broken down to examine the influence on different types of labour, including the dimensions of gender, age, and educational attainment. Accumulation of ICT assets have generally insignificant and in some cases small positive effects on labour demand and income shares, though patterns differ across types of labour. Intangible assets show a positive relation with respect to labour demand growth.
    Keywords: capital accumulation, ICT capital, intangibles, labour demand, income distribution
    JEL: J23 J31 O33 O52
    Date: 2022–07
  13. By: Qing Li (Department of Economics and Finance, SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study uses a rich city-level dataset to analyse the relationship between information and communication technology (ICT) and productivity performance in China during 2003-2016. It is shown that ICT positively contributes to Chinese cities’ productivity in conjunction with other growth determinants, such as human capital, foreign direct investment, infrastructure development, financial market development, and research and development investment. An identifiable amplified effect is detected when ICT exceeds certain threshold in Chinese cities. This threshold level is reached in over a half of Chinese cities particularly cities in coastal regions. Finally, ICT is found to substitute human capital in China’s context. Since the average education level in Chinese cities is low, the finding is in line with the argument that ICT only improves productivity of high-skilled workers but worsens that of the low-skilled ones.
    Keywords: ICT, human capital, productivity, China
    JEL: O47 O33 R10
    Date: 2022
  14. By: Panagiotis Ravanos (Department of Economics, University of Macedonia); Giannis Karagiannis (Department of Economics, University of Macedonia)
    Abstract: : Choosing the Most Preferred Solution (MPS), namely a real or artificial Decision Making Unit (DMU) reflecting the decision maker’s preferences over the desirable structure of inputs and outputs, is of particular importance in Value Efficiency Analysis (VEA). In this paper, we review various MPS choices used in the VEA literature and propose some new, which rely respectively on the relative location of frontier DMUs, the most productive scale size (MPSS), the Average Production Unit (APU), and common vectors of weights. The suggested MPS choices reflect overall organizational goals such as the pursuit of scale economies and the maximization of structural efficiency, or the need to assess DMUs against common standards because of limited control over the resources allocated to them or autonomy in setting their own priorities. The potential implications of using different MPSs in VEA are illustrated by providing comparative empirical results using a dataset of 526 Greek cotton farms.
    Keywords: Value Efficiency Analysis, Most Preferred Solution, Interior-Exterior DMUs, Terminal DMUs, Most Productive Scale Size, Average Production Unit, Common Weights, Fully Dimensional Efficient Facet.
    Date: 2022–07
  15. By: Gutiérrez, L. H.; Rodríguez- Lesmes, P.
    Abstract: Although evidence of a productivity gap between formal and informal firms is observed, this 'formality premium' is less explored for microfirms. The informality of microfirms is a central concern in low- and middle-income countries, and a crucial demand is noted for designing policies addressing this issue because they are the bulk of the economic tissue. We fill this void by estimating a productivity premium for the case of Colombia, considering two margins of informality: extensive, referring to business registration, and the intensive, which includes as well labor regulations. We use a unique longitudinal dataset from the Microenterprise Survey by the Colombian Statistics Department, which follows approximately 39,000 micro-establishments with up to 9 employees during 2012–2016. We utilize the transition into and out of formality to estimate the productivity premium (yearly sales per worker) between informal and formal firms, thereby exploring differences concerning initial productivity. We use a fixed-effects quantile regression to explore differential effects along the productivity distribution. We find evidence of a premium for both the extensive (20%) and intensive margins (6%), a gap that is decreasing along with the firm's productivity. The evidence of these premiums is related to two growth strategies of firms: an increase in capital investments for the extensive margin and an increase in human capital quality for the intensive margin. Further, we find the premium is notoriously wider for young firms (less than three years in the business) with a steeper gradient. We do not find systematic differences across sectors, gender of the owners, and motivation. These results are new evidence that supports the existence of a premium and the transition into and out of formality of microfirms in middleincome countries. Moreover, they suggest that microfirms' formalization and growth policies should be oriented toward promoting and enhancing formality's benefits.
    Keywords: Microfirms, firm informality, productivity premium, Colombia
    Date: 2022–07–05
  16. By: Quang Hoan Truong (Institute for Southeast Asian Studies, Vietnam Academy of Social Sciences (VASS)); Van Chung Dong (Institute for Southeast Asian Studies, Vietnam Academy of Social Sciences (VASS))
    Abstract: Our paper investigates the spillover effects generated by foreign and domestic exporting firms on export decisions of local manufacturing firms in Viet Nam – a developing economy – over 2010–18. In the export participation, we find positive spillover effects from foreign and domestic exporting firms on domestic firms’ export participation, while negative spillover effects are detected with the backward channel. Estimation shows the positive forward spillover effects from domestic exporting firms on domestic counterparts’ export participation; on the contrary, the forward spillover effects generated by foreign direct investment exporting firms are negative. In addition, we discover the opposite spillover effects from foreign direct investment and domestic exporting firms on the probability of export exit of domestic firms, with the negative impact under the horizontal channel and the positive one under the backward channel. There are also effects of firms’ characteristics such as labour productivity, wage, firm size, and capital intensity on the export participation and export exit of domestic firms. From empirical evidence, the paper provides policy implications to strengthen linkages between foreign and domestic exporting firms with local firms in Viet Nam.
    Keywords: Spillover Effects; export status; foreign and domestic exporting firms; Viet Nam
    JEL: F15 F23
    Date: 2021–12–15
  17. By: F. Aresu; E. Marrocu; R. Paci
    Abstract: This paper investigates the role played by public capital on the production level of Italian regions by specifically accounting for the quality of institutions. Our analysis, carried out over the period 2000-2019, benefits from the use of a rich dataset on public expenditures which allows us to build the regional series of public capital stock by distinguishing among public institutions in charge of the investments and sectors of intervention. While controlling for several contextual variables (human capital, social capital, technological capital, population density), main results show that public capital has a positive and significant effect on production. Most interestingly, looking at the Mezzogiorno s regions, public capital carried out by local institutions turns out to have a lower impact than in the rest of the Italian regions. On the other hand, central bodies in the South exhibit an impact higher than the average. Moreover, institutions quality exhibits a positive and significant effect on regional economic performance. These results cast serious doubts about the actual capacity of the local Southern administrations to effectively manage the enormous resources of the National Recovery and Resilience Plan and of the new European Union cohesion framework 2021-2027. Our results are also relevant for other European regions that, featuring structural traits similar to Southern Italian regions, are expected to face the same difficulties in managing public funding.
    Keywords: Public capital stock; Productivity; Italian regions; Institutions' Quality
    Date: 2022

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