nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒10‒17
eleven papers chosen by

  2. Changing times: Incentive regulation, corporate reorganisations, and productivity in the Great Britain’s gas networks. By Ajayi, V.; Pollitt, M.
  3. The Impact of Firm-level Covid Rescue Policies on Productivity Growth and Reallocation By Jozef Konings; Glenn Magerman; Dieter Van Esbroeck
  4. Radical technologies, recombinant novelty and productivity growth: a cliometric approach By Marianna Epicoco; Magali Jaoul-Grammare; Anne Plunket
  5. Climate Change and Agricultural Productivity in West Africa By Chimere O. Iheonu; Simplice A. Asongu; Ekene T. Emeka; Ebuka C. Orjiakor
  6. Let's Switch to the Cloud: Cloud Adaption and Its Effect on IT Investment and Productivity By Tomaso Duso; Alexander Schiersch
  7. Determinants and Effects of Foreign Direct Investment in Austria: Spillovers to Novel Innovative Environmental Technologies By Mahdi Ghodsi; Branimir Jovanović
  8. Robots at work: recent evidence with new data By Derick Almeida; Tiago Miguel Guterres Neves Sequeira
  9. Moral Hazard on Productivity Among Work-From-Home Workers Amid the COVID-19 Pandemic By Jieun Lee
  10. Green Technologies, Environmental Policy and Regional Growth By Philip Kerner; Torben Klarl; Tobias Wendler
  11. A Framework for Economic Growth with Capital-Embodied Technical Change By Benjamin F. Jones; Xiaojie Liu

  1. By: Concetta Castiglione (Department of Economics, Statistics and Finance 'Giovanni Anania', University of Calabria, Rende (Italy)); Davide Infante (Department of Economics, Statistics and Finance 'Giovanni Anania', University of Calabria, Rende (Italy)); Marta Zieba (Department of Economics, University of Limerick, Ireland)
    Abstract: This paper investigates the importance of public cultural expenditure for the efficiency and productivity of the performing arts (PA) firms. To this aim, we estimate a translog production function using the stochastic frontier approach (SFA), and we obtain the estimates of both technical efficiency and its determinants for the PA firms in EU-11 countries over the period 2009-2017. The large panel data set enables the application of robust true random-effects SFA techniques, which control for noise, unobserved firms’ heterogeneity and endogeneity of the inputs. Moreover, by estimating a production function, the characteristics of the production technology in the PA sector is also derived. The empirical results demonstrate that PA firms are technically inefficient, implying that the investigated firms could increase their artistic output between 32 and 42 percent and that decreasing returns to scale are prevalent, due to the presence of too many micro and large-scale firms in the European PA sectors. In contrast to the seminal Baumol and Bowen’s (1965) paper, we also demonstrate that the total factor productivity (TFP) increased in the EU PA firms over the examined period. Technical efficiency, although relatively low, was the main driver of this productivity growth, as opposed to scale efficiency or technological changes which display very small or no increases. We also find that, contrary to the common wisdom on its negative effects on firm efficiency, public spending on culture increases the efficiency of PA firms. Within this context some policy implications are discussed.
    Keywords: Cultural public expenditure, SFA production function, performing arts, technical efficiency, TFP change
    JEL: D24 L82 L88 O52 Z10 Z18
    Date: 2022–10
  2. By: Ajayi, V.; Pollitt, M.
    Abstract: The gas industry in Great Britain has witnessed periodic regulatory reviews and large corporate changes over the last few decades. We undertake two separate analyses for the total factor productivity (TFP) of the gas networks using a non-parametric data envelopment analysis (DEA) approach to assess how these changes are impacting on productivity growth. First, we set out different models for the TFP analysis, each for gas transmission and distribution network, to examine how changes in incentive mechanism have influenced the measured TFP using quality of service and environmental targets. Quality standards from regulators warrant some adjustment to explore industry productivity growth. Second, we construct a combined single series for distribution and transmission using financial data to uncover how corporate reorganisations have impacted measured productivity to get a new perspective in the years before and after restructuring, when the industry went from being a single integrated transmission and distribution network to the disintegrated networks of today. We find a negative TFP growth of -1.6% p.a. for gas transmission over the sample period (2006/07-2018/19). Although, this is reversed to a positive growth once quality is included. For gas distribution, we actually find that productivity regress at -6.2% p.a. over the sample period (2006/07-2018/19), with the negative TFP trend observed across all the models, despite the inclusion of quality variables. However, we find a slightly higher TFP growth of 1% using corporate accounts over the 25 years from 1995/1996-2020/2021. The period before restructuring has a more positive productivity compared to the post-restructuring era with negative productivity growth.
    Keywords: Total factor productivity, incentive regulation, corporate reorganisations, gas networks, data envelopment analysis.
    JEL: C23 D24 L51 L94
    Date: 2022–10–03
  3. By: Jozef Konings (Nazarbayev University, Graduate School of Business, KU Leuven and CEPR); Glenn Magerman (ECARES, ULB and CEPR); Dieter Van Esbroeck (KU Leuven)
    Abstract: We analyze the impact of Covid-19 rescue policies on both firm-level and aggregate productivity growth and reallocation. Using administrative data on the universe of firms' subsidies in Flanders, we estimate the causal impact of these subsidies on firm-level outcomes. Firms that received subsidies saw a 7% increase in productivity, compared to firms that applied for, but did not obtain subsidies. Furthermore, the propensity to exit the market was 43% lower for treated firms. Aggregate productivity growth, a share-weighted sum of firms' productivity evolutions, amounted to 6% in 2020. While within-firm productivity growth was similar for both subsidized and non-subsidized firms, there is a reallocation of market shares from subsidized firms to non-subsidized firms. These results suggest that Covid rescue policies helped firms to sustain and preserve productivity, while not obstructing allocative efficiency gains to non-subsidized firms.
    Keywords: Productivity, productivity growth, aggregate productivity, allocative efficiency
    JEL: D22 D24 O4
    Date: 2022–06
  4. By: Marianna Epicoco (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Magali Jaoul-Grammare (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Anne Plunket (RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay)
    Abstract: Using inventions with a high degree of recombinant novelty as proxy for radical technologies, this work provides a long-run quantitative analysis of the relationship between radical technologies and productivity growth. The empirical analysis is based on a cliometric approach and relies on Granger's causality to test the sign and direction of causality between the flow of radical technologies and productivity levels, in the USA between 1920 and 2000. At the aggregate level, results show that radical technologies cause a temporary acceleration of productivity growth and explain a considerable part of productivity variations. At technology-field level, the analysis indicates that productivity growth is driven by a few technological fields, mainly concentrated in science based sectors and in the sectors of specialized suppliers of capital equipment. Finally, with respect to the controversial issue of the endogeneity of radical technologies, at the aggregate level we find no causal relationship running from productivity to radical technologies, suggesting that these are exogenous. However, at technology-field level, we find a few endogenous technologies. Most of these are "demand-driven" as their flow increases when productivity grows, but they have no impact on productivity. Only in one technological field, the flow of radical technologies increases when productivity decreases and, at the same time, has a positive impact on productivity. This latter case may explain why technological revolutions and the whole process of longrun economic development are partly endogenous.
    Keywords: Radical technologies,Recombinant novelty,Productivity growth,Cliometrics,Granger's causality,Technological revolutions,Long-run economic development.
    Date: 2022
  5. By: Chimere O. Iheonu (Research Analyst, Kwakol, Abuja, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Ekene T. Emeka (University of Nigeria, Nsukka, Nigeria); Ebuka C. Orjiakor (University of Nigeria, Nsukka, Nigeria)
    Abstract: Agriculture remains one of the major sources of livelihood in West Africa. The sector accounts for a significant share of output and employment in the sub-region. However, extreme weather events have been signaled to affect the sector’s productivity in recent times. In this study, we investigate the heterogeneous long-run relationship between climate change and agricultural productivity in West Africa from 1990 to 2020. Using the Augmented Mean Group (AMG) and the Common Correlated Effect Mean Group (CCEMG) estimators, we show that rising temperatures significantly reduce agricultural productivity in Gambia, Mali, Niger, and Togo. However, after accounting for endogeneity, we find that the negative relationship between temperature and agricultural productivity becomes insignificant for Niger while the positive relationship between rising temperature and agricultural productivity becomes significant for Ghana. Also, the results show that temperature Granger cause agricultural productivity in West Africa. We discussed some policy implications based on these findings.
    Keywords: Climate Change, Temperature, Agricultural Productivity, West Africa, Augmented Mean Group, Common Correlated Effect Mean Group
    Date: 2022–01
  6. By: Tomaso Duso; Alexander Schiersch
    Abstract: The advent of cloud computing promises to improve the way firms utilize IT solutions. Firms are expected to replace large and inflexible fixed-cost investments in IT with more targeted variable spending in cloud solutions. In addition, cloud usage is expected to increase the productivity of firms, as it allows them to quickly customize the IT they require to their specific needs. We assess these assertions using data on a representative sample of firms provided by the German statistical offices for the years 2014 and 2016, which allows to observe who are the cloud users. Our analysis explicitly accounts for the self-selection into cloud adoption within an endogenous treatment regression framework. Broadband availability at the municipality level is used as an exogenous shifter for cloud usage. We show that, while cloud adoption does not impact IT investment in any sectors, it does significantly improve labor productivity for firms in manufacturing and in information and communication services.
    Keywords: Cloud computing, investment, productivity, IT, substitution, firm performance
    JEL: D24 D25 L60 L80 O14 O33
    Date: 2022
  7. By: Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This study investigates the determinants of FDI in Austria, as well as their spillovers to innovating technologies, productivity, and employment, using firm-level data, for the period 2008-2018. The findings point out that a decrease in the costs of trade increases investment in foreign-owned subsidiaries in Austria, and that FDI is pre-dominantly carried out in industries characterised by greater capital-intensity, higher wages, more agglomeration and regional concentration. Furthermore, FDI is higher in regions with a larger GDP and with a larger share of the population with upper secondary and post-secondary non-tertiary education. The study also finds that there are positive spillovers of FDI to the domestic economy, which are strongest and most positive for innovative activities in environmental technologies. In other words, FDI helps Austrian firms to become more innovative in major environmental technologies. Such innovative efforts are best supported at the firm-level by supporting the total assets and investment of domestic firms, and at the regional level by increasing the share of the population with higher levels of education and employing more R&D personnel. The active presence of innovative foreign MNEs that enjoy extensive technological capacities, high-skilled labour, experienced management, and large-scale resources are also conducive to innovative activities.
    Keywords: FDI, Austria, spillovers, innovation, environmental technologies
    JEL: F21 F23 O30 Q55
    Date: 2022–10
  8. By: Derick Almeida (Ph.D. Student at Faculty of Economics, University of Coimbra); Tiago Miguel Guterres Neves Sequeira (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics)
    Abstract: We reassess the relationship between robotization and the growth in productivity in the light of new data and methods. We discover that the effect of robot density in the growth productivity substantially decreased in the post- 2008 crisis period. Moreover, in this more recent period, the less strong positive effect of robot density in the growth of productivity is mostly derived from negative effect of hours worked in productivity, showing that robots lost part of their capacity to increase productivity through value-added. By means of quantile regression, we also learn that the effect of robots on labor productivity is stronger for low productivity sectors and that in the most recent period, the effect of robotization in all sectors, felt significantly throughout the distribution, with special emphasis in the most productive sectors. This highlights one of the possible sources of the secular stagnation in the era of robotization and artificial intelligence technologies.
    Keywords: Robots, Robotization, Labor Productivity, Productivity Growth, Stagnation.
    JEL: E23 J23
    Date: 2022–07
  9. By: Jieun Lee
    Abstract: After the outbreak of COVID 19, firms appear to monitor Work From Home (WFH) workers more than ever out of anxiety that workers may shirk at home or implement moral hazard at home. Using the Survey of Working Arrangements and Attitudes (SWAA, Barrero et al., 2021), the evidence of WFH workers' ex post moral hazard as well as its specific aspects are examined. The results show that the ex post moral hazard among the WFH workers is generally found. Interestingly, however, the moral hazard on specific type of productivity, efficiency, is not detected for the workers at firms with WFH friendly policy for long term. Moreover, the advantages & challenges for the WFH culture report that workers with health or disability issues improve their productivity, whereas certain conditions specific to the WFH environment must be met.
    Date: 2022–09
  10. By: Philip Kerner; Torben Klarl; Tobias Wendler
    Abstract: Green technologies are at the very core of endeavors to combine economic and environmental targets to achieve sustainable growth. In this article, we aim to determine the impact of green technology development on total factor productivity of European regions. Our paper contributes to the literature on technological change and regional growth in various ways. i) Our paper is, to the best of our knowledge, the first to assess the specific role of green technologies for regional growth on a broad empirical base. ii) We advance methodologically on the pertinent literature by explicitly accounting for cross-sectional dependence in our empirical approach. iii) By providing a simple theoretical framework, we directly link our results to implications of environmental policies for capital accumulation and composition dynamics, contributing to the ongoing debate revolving around the strong version of the Porter hypothesis. Our results, based on a sample of 270 European NUTS-2 regions over 25 years, imply that general technology development is mostly associated with positive economic returns, but our data is not supportive of positive economic returns to green technologies.
    Keywords: Regional Growth, Green Technologies, Environmental Policy, Cross-Sectional Dependence
    JEL: C23 O0 O33
    Date: 2021–06
  11. By: Benjamin F. Jones; Xiaojie Liu
    Abstract: Technological advance is often embodied in capital inputs. This paper develops a model where capital innovations occur on two margins: (1) vertically, where a capital input becomes more productive at a given task; and (2) horizontally, where a capital input replaces labor at a given task. These two forms of technological advance engage in a macroeconomic “tug of war” when capital and labor have less than a unitary elasticity of substitution, and the resulting framework can meet numerous macroeconomic regularities. First, it can produce a balanced growth path and satisfy the Uzawa Growth Theorem—even though all technological progress occurs in capital inputs. Second, it can produce intuitive macroeconomic dynamics, adding perspectives on the apparent productivity slowdown and declining labor share of income. Third, it can produce rich industry dynamics and inform structural change, including declining GDP shares of agriculture and manufacturing, sectoral bottlenecks, the role of general purpose technologies, and the limited macroeconomic impacts of computing. Overall, this tractable framework can help resolve puzzling tensions between micro-level observations of technological advance and macroeconomic features of economic growth.
    JEL: O1 O4
    Date: 2022–09

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