nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒10‒10
nine papers chosen by

  1. Decomposing Aggregate Productivity By N. Aaron Pancost; Chen Yeh
  2. The Impact of the European Carbon Market on Firm Productivity: Evidence from Italian Manufacturing Firms By Filippo Maria D’Arcangelo; Giulia Pavan; Sara Calligaris
  3. A New Malmquist Index Based on a Standard Technology for Measuring Total Factor Productivity Changes By Aparicio, Juan; Santín, Daniel
  4. Internationally Linked Firms and Productivity in Pakistan: A Look at the Top End of the Distribution By Stefania Lovo; Gonzalo Varela
  5. European funds and firm performance: Evidence from a natural experiment By Gabriel, José Mesquita; dos Santos, João Pereira; Tavares, José
  6. The impact of a rise in transportation costs on firm performance and behaviour By Catarina Branco; Dirk C. Dohse; João Pereira Santos; José Tavares
  7. Clarifying Theoretical Intricacies through the Use of Conceptual Visualization: Case of Production Theory in Advanced Microeconomics By Alexandra Naumenko; Seyyed Ali Zeytoon Nejad Moosavian
  8. Beyond the threshold: The implications for pupil achievement of reforming school performance metrics By Simon Burgess
  9. Exploring the performance of responsible companies in G20 during the COVID-19 outbreak By Rim El Khoury; Nohade Nasrallah; Etienne Harb; Khaled Hussainey

  1. By: N. Aaron Pancost; Chen Yeh
    Abstract: In this note, we evaluate the sensitivity of commonly-used decompositions for aggregate productivity. Our analysis spans the universe of U.S. manufacturers from 1977 to 2012 and we find that, even holding the data and form of the production function fixed, results on aggregate productivity are extremely sensitive to how productivity at the firm level is measured. Even qualitative statements about the levels of aggregate productivity and the sign of the covariance between productivity and size are highly dependent on how production function parameters are estimated. Despite these difficulties, we uncover some consistent facts about productivity growth: (1) labor productivity is consistently higher and less error-prone than measures of multi-factor productivity; (2) most productivity growth comes from growth within firms, rather than from reallocation across firms; (3) what growth does come from reallocation appears to be driven by net entry, primarily from the exit of relatively less-productive firms.
    Keywords: aggregate productivity, growth, misallocation, entry, exit
    JEL: D24 E24 L60
    Date: 2022–07
  2. By: Filippo Maria D’Arcangelo (OECD); Giulia Pavan (Compass Lexecon); Sara Calligaris
    Abstract: The European Union Emissions Trading System has raised concerns about possible detrimental effects on firms production through an increase in polluting costs, unless firms change inputs or increase the efficiency in the way they produce. We provide evidence of the causal impact of this policy on firms’ input choices and on total factor productivity on Italian manufacturing firms. Our empirical strategy combines structural estimation of firms’ production function and techniques for policy evaluation. Moreover, we argue that a commonly used strategy in this literature, consisting in using propensity score matching on the productivity obtained from estimating the production function, does not provide valid inference. We rely instead on an innovative structural approach. We find that the policy has a small negative effect on productivity that is heterogeneous across industries. We show that these findings are consistent with firms switching fuels in production, rather than undergoing a substantial process change.
    Keywords: Emission trading, EU ETS, Environmental Policy, Manufacturing, Productivity, Production Function
    JEL: Q58 L23 L26
    Date: 2022–09
  3. By: Aparicio, Juan; Santín, Daniel
    Abstract: The Malmquist productivity index is one of the best known and most widely used measures in the economic literature to quantify and decompose changes in productivity of multi-input multi-output production processes over time. Two main approaches are used to calculate this index: the adjacent Malmquist index and the base period Malmquist index. No base period is required to calculate the adjacent Malmquist index, but it fails to comply with the circularity property. The base period Malmquist index uses the technology of a base period and is circular, but the base period choice is arbitrary. There is, therefore, a trade-off between the choice of one or other version of the Malmquist index. The aim of this paper is to propose a new total factor productivity index that is simultaneously circular and does not need to resort to a base period or ad hoc reference. To this end, as in other sciences, we propose a new multi-input multi-output reference production technology for use as a standard for measuring and decomposing total factor productivity changes. As discussed, the standard production technology is conceptually attractive. Also, its parameterization is versatile and adaptable to the evolution of a set of firms performing any multi-input multi-output production process. Additionally, the new approach can bring about a true total factor productivity index, which can be decomposed into an output change and an input change. Finally, the new index can be used to decompose the traditional technical change component into a global technical change applicable across the industry under study and a locally specific technical change dependent on the assessed firm.
    Keywords: Productivity change, Malmquist index, technical change, efficiency change, standard
    JEL: C43 D24 O47
    Date: 2022–09–07
  4. By: Stefania Lovo; Gonzalo Varela
  5. By: Gabriel, José Mesquita; dos Santos, João Pereira; Tavares, José
    Abstract: Expanding regional eligibility in the access to grants can have important consequences for the performance of firms. We examine a quasi-natural experiment that consisted of a redrawing of administrative areas intended to increase accessibility to European Union (EU) funds using a rich administrative dataset that covers the universe of Portuguese private firms between 2003 and 2010. Our results uncover a positive causal impact of increased eligibility on firms' sales. In contrast, employment and labour productivity do not seem to be significantly impacted by the reform. The effects are heterogeneous: while sales of firms in the services and non-tradable sectors are positively impacted, sales of firms in more competitive sectors are not affected.
    Keywords: Grants,regional policy,private firm,municipalities,Portugal
    JEL: C21 R10
    Date: 2022
  6. By: Catarina Branco; Dirk C. Dohse; João Pereira Santos; José Tavares
    Abstract: This paper uses micro-level data encompassing the universe of Portuguese private firms for the period 2006-2016 to analyse the effect of the introduction of tolls on previously toll-free highways. To establish causality, we rely on a natural experiment which resulted from Portuguese authorities being forced to in- crease these transportation costs in some highways during the sovereign debt crisis. Difference-in-differences results show a 10.7% decrease of turnover in firms located in affected municipalities vis-Ã -vis firms in the remaining areas, on average. Firm profits were also severely hit and reduced by more than 15%. Both sales and purchases to/from the internal market and abroad (especially to/from EU countries) were affected. Furthermore, employment reduced 2% in treated areas. Importantly, our findings do not uncover induced inter-regional firm migration, suggesting that the tolls have induced a substantial net loss to the Portuguese economy.
    Keywords: Road tolls, Turnover, Expenses, Value Added, Exports, Imports, Competitiveness, Portugal
    JEL: R48 L25 R12
    Date: 2022–09
  7. By: Alexandra Naumenko; Seyyed Ali Zeytoon Nejad Moosavian
    Abstract: Production theory, defined as the study of the economic process of transforming inputs into outputs, consists of two simultaneous economic forces: cost minimization and profit maximization. The cost minimization problem involves deriving conditional factor demand functions and the cost function. The profit maximization problem involves deriving the output supply function, the profit function, and unconditional factor demand functions. Nested within the process are Shephard's lemma, Hotelling's lemmas, direct and indirect mathematical relations, and other elements contributing to the dynamics of the process. The intricacies and hidden underlying influences pose difficulties in presenting the material for an instructor, and inhibit learning by students. Simply put, the primary aim of this paper is to facilitate the teaching and learning of the production theory realm of Economics through the use of a conceptual visual model. This paper proposes a pedagogical tool in the form of a detailed graphic illustrating t he relationship between profit maximization and cost minimization under technical constraints, with an emphasis on the similarities and differences between the perfect competition and monopoly cases. The potential that such a visual has to enhance learning when supplementing traditional context is discussed under the context of contemporary learning literature. Embedded in the discussion is an example of how we believe our model could be conceptualized and utilized in a real-world setting to evaluate an industrial project with an economic point of view.
    Date: 2022–09
  8. By: Simon Burgess
    Abstract: We study the effecst of a major change to the school accountability system in England. In 2015, the leading published school performance metric was switched from a threshold measure (essentially the fraction of students above a test score level) to an average score measure. Using 7 years of data on all secondary schools in England, we show that this intervention relatively reduced the test scores of students near the threshold, in favour of groups above the threshold (marginally) and below (substantially). We check the sensitivity of our results to different decisions, and present findings on heterogeneous treatments.
    Date: 2022–09–24
  9. By: Rim El Khoury (NDU - Notre Dame University-Louaize [Lebanon]); Nohade Nasrallah (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université); Etienne Harb (ESSCA - Ecole Supérieure des Sciences Commerciales d'Angers); Khaled Hussainey (University of Portsmouth)
    Abstract: An uphill question of whether Environmental, Social, and Governance (ESG) directly impact firms' financial performance (FP) continues to vacillate between two opponent streams. In the present study, we argue that COVID-19 is an extreme event where the effect of ESG sharply manifests. We rely on cross-sectional data in the context of G20 countries for the year 2020. To avoid biased results due to governments support, we integrate four novel metrics provided by the Oxford Coronavirus Government Response Tracker (OxCGRT). We run sequential regressions (OLS; and quartiles to account for the Ingrained Income Bias (IIB) and ESG scores). We also perform robustness tests and account for the interaction between ESG and cash level. Our models were subsequently replicated for each ESG pillar. Findings indicate that ESG is beneficial during COVID-19, but the reward appears to be closely tied up to specific aspects of ESG, income level, and firm-specific variables. Results contribute to the burgeoning literature on ESG during COVID-19 by reflecting on firms' key attributes and the preponderance of government support.
    Keywords: G20,ESG,ESG pillars,COVID-19,Oxford Coronavirus government response tracker (OxCGRT),ROA,ROE,TR,MB
    Date: 2022

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