nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒10‒24
twelve papers chosen by
Angelo Zago
Università degli Studi di Verona

  1. The Impact of COVID on Productivity and Potential Output By John G. Fernald; Huiyu Li
  2. Climate Change and Agricultural Productivity in West Africa By Chimere O. Iheonu; Simplice A. Asongu; Ekene T. Emeka; Ebuka C. Orjiakor
  3. Joining and exiting the value chain of Multinationals and the performance of suppliers: evidence from inter-firm transaction data By Jaan Masso; Priit Vahter
  4. Let's Switch to the Cloud: Cloud Adoption and Its Effect on IT Investment and Productivity By Tomaso Duso; Alexander Schiersch
  5. Permanent Scars:The Effects of Wages on Productivity By Claudia Fontanari; Antonella Palumbo
  6. Environmental Efficiency of European Industries across Sectors and Countries By Stergiou, Eirini
  7. Green growth and net zero policy in the UK: some conceptual and measurement issues. By Ajayi, V.; Pollitt, M .G.
  8. Rising Markups or Changing Technology? By Lucia S. Foster; John C. Haltiwanger; Cody Tuttle
  9. Business Dynamism, Sectoral Reallocation and Productivity in a Pandemic By Guido Ascari; Andrea Colciago; Riccardo Silvestrini
  10. Energy Efficiency as a Driver of More and Better Goods and Services By Philippe Benoit; Silvia Zinetti; Joerie De Wit; Aditya Lukas
  11. Productivity in the Time of COVID-19 By Francesca De Nicola; Aaditya Mattoo; Jonathan Timmis; Trang Thu Tran
  12. Economies of scale versus the costs of bundling in the procurement of highway pavement replacement By Ridderstedt, Ivan; Nilsson, Jan-Eric

  1. By: John G. Fernald; Huiyu Li
    Abstract: The U.S. economy came into the pandemic, and looks likely to leave it, on a slow-growth path. The near- term level of potential output has fallen because of shortfalls in labor that should reverse over time. Labor productivity, to a surprising degree, has followed an accelerated version of its Great Recession path with initially strong growth followed by weak growth. But, as of mid-2022, it appears that the overall level of labor and total factor productivity are only modestly affected. The sign of the effect depends on whether we use the strong income-side measures of pandemic output growth or the much weaker expenditure-side measures. There is considerable heterogeneity across industries. We can explain some but not all of the heterogeneity through industry differences in cyclical utilization and off-the-clock hours worked. After accounting for these factors, industries where it is easy to work from home have grown somewhat faster than they did pre-pandemic. In contrast, industries where it is hard to work from home have performed extremely poorly.
    Keywords: growth accounting; productivity; potential output
    JEL: E01 E23 E24 O47
    Date: 2022–09–15
  2. 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
  3. By: Jaan Masso (Tartu University); Priit Vahter (Tartu University)
    Abstract: This paper investigates the productivity effects for domestic suppliers from joining and exiting the value chains of multinational enterprises (MNEs). The vast majority of prior literature has relied on sector-level input-output tables in estimating the effects of vertical linkages of FDI. Instead, our econometric analysis of the creation and destruction of backward linkages of MNEs is based on information on firm-to-firm transactions recorded in the valued added tax declarations data. Treatment analysis based on propensity score matching and panel data from Estonia suggests that starting to supply multinationals initially boosts the value added per employee of domestic firms, including effects on the scale of production and the capitallabour ratio. These first linkages to MNEs do not affect the total factor productivity (TFP) of domestic firms, suggesting that TFP effects take time to materialise. We further find that there are limits to the wider diffusion of the effects of linkages to MNEs. We find no significant positive effects on the second-tier suppliers: the positive effects are limited to the first-tier suppliers with direct links to MNEs. One novel result is the evidence that the productivity of suppliers does not fall, on average, after decreasing or ending supplier relationships with MNE customers
    Keywords: FDI, supplier upgrading, global value chains, vertical spillovers, backward linkages
    JEL: F14 F23 F61
    Date: 2022–03
  4. 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
  5. By: Claudia Fontanari (Roma Tre University); Antonella Palumbo (Roma Tre University)
    Abstract: This paper explores how stagnating real wages may have contributed to the slowdown of US productivity. Through shift-share analysis, we find that after a sharp change in distribution against wages, some historically high-productivity sectors (like manufacturing) switched towards slower productivity growth. This supports our hypothesis that the anemic growth of productivity may be partly due to the trend toward massive use of cheap labor. Our estimation of Sylos Labini's productivity equation confirms the existence of two direct effects of wages, one acting through the incentive to mechanization and the other through the incentive to reorganize labor use. We also show that labor 'weakness' may exert a further negative effect on labor productivity. On the whole, we find that a persistent regime of low wages may determine very negative long-term consequences on the economy.
    Keywords: Labor Productivity, Wages, Shift-Share Analysis, Paolo Sylos-Labini, Classical-Keynesian approach
    JEL: E24 O47 L16
    Date: 2022–07–01
  6. By: Stergiou, Eirini
    Abstract: Green growth is recognized as the fundamental development strategy in Europe due to the immense pressure of environmental pollution, economic growth and energy usage. In this study, a non-radial directional distance function is used to measure environmental efficiency (ENE) of 54 industries from 28 European countries across the three sectors of an economy over the 2000-2014 period. The complexity of heterogeneity is examined by incorporating the metafrontier approach under distinct group frontiers. The results reveal that industries present higher levels of environmental efficiency within their sectors while manufacturing industries achieved the lowest progress in environmental efficiency. Thus, it is critical to introduce and implement sector-oriented policies rather than common guidelines for all European countries.
    Keywords: Environmental efficiency, Directional distance function, Metafrontier, Heterogeneity, European industries
    JEL: C44 D29 L23 Q01 Q53 Q56 Q57
    Date: 2022–09–20
  7. By: Ajayi, V.; Pollitt, M .G.
    Abstract: This paper discusses some of the fundamental issues related to the future growth of productivity under net zero climate change policies. The aim of the paper is to discuss just how challenging it will be for an advanced economy with a net zero target to grow total factor productivity. The paper proceeds as follows. We begin by discussing the concept of green growth and a green industrial revolution. The focus of economic development here is on growth with minimal environmental impact. We then relate the green economy to the circular economy. The circular economy emphasises reduced material consumption and increased material recycling. We then discuss GDP measurement and how this relates to productivity growth under climate policies. Finally, we use a worked example of the projected growth under net zero of the electricity sector in Great Britain to show just how challenging raising even maintaining the level of TFP will be in that sector in the years out to 2050.
    Keywords: Green growth, net zero, circular economy, future energy scenarios, productivity.
    JEL: D24 O44 Q53 Q54
    Date: 2022–10–05
  8. By: Lucia S. Foster; John C. Haltiwanger; Cody Tuttle
    Abstract: Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor’s output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups’ patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing), and we find patterns in support of changing technology as the driver of those differences.
    JEL: L11 O14
    Date: 2022–09
  9. By: Guido Ascari; Andrea Colciago; Riccardo Silvestrini
    Abstract: Asymmetric effects across sectors are the distinctive features of the Covid-19 shock. Business Formation Statistics in the United States show a reallocation of entry and exit opportunities across sectors in the initial phase of the pandemic. To explain these facts, we propose an Epidemiological-Industry Dynamic model with heterogeneous firms and endogenous firms dynamics. Our analysis suggests that the cleansing effect on business dynamism of the Covid-19 crisis, which typically characterizes recessions, is sector-specific. The framework can rationalize the dynamics of aggregate productivity during the crisis. Monetary policy and sticky wages are central ingredients to capture reallocation effects. Social distancing, by smoothing out cleansing in the social sector, slows down the reallocation process and prolongs the recession, but saves lives.
    Keywords: Covid-19; Productivity; Entry; Reallocation
    JEL: E3 L16 I3
    Date: 2021–09
  10. By: Philippe Benoit; Silvia Zinetti; Joerie De Wit; Aditya Lukas
    Keywords: Energy - Electric Power Energy - Energy Conservation & Efficiency Energy - Energy Consumption Energy - Energy and Environment Water Supply and Sanitation - Town Water Supply and Sanitation Water Supply and Sanitation - Water Supply and Sanitation Economics
    Date: 2021–04
  11. By: Francesca De Nicola; Aaditya Mattoo; Jonathan Timmis; Trang Thu Tran
    Keywords: Health, Nutrition and Population - Disease Control & Prevention Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Private Sector Development - Private Sector Economics Public Sector Development - Public Sector Expenditure Policy Private Sector Development - Business Environment
    Date: 2021–04
  12. By: Ridderstedt, Ivan (Swedish National Road & Transport Research Institute (VTI)); Nilsson, Jan-Eric (Swedish National Road & Transport Research Institute (VTI))
    Abstract: Although most public procurements involve decisions concerning bundling there is only a limited body of empirical research guiding policy on this matter. In this paper, we examine the cost effects of pure bundling in the competitive tendering of highway pavement replacement with hot-mix asphalt. For this we use linear regression on data from a comprehensive sample of such contracts procured by the Swedish infrastructure manager (IM) during the period 2012–2015. We find that bundling affects the procurer’s cost in multiple and partly counteracting ways. Our results show that economies of scale are strong but diminishing and counteracted by costs of bundling and bundling related factors. Overall, the findings support Swedish IM’s current design of bundles but also suggest that most of the contracts are still inefficiently small. Whilst not perfectly generalizable to other markets, the findings provide some support the increased promotion and use of bundling of small-scaled road rehabilitation projects in the US. Two main implications of the results are that bundling policy should emphasize proximity and similarity rather than whether work is small-scale and that the scope for efficient bundling should be accounted for when optimizing the timing of pavement replacement.
    Keywords: Public procurement; Efficiency; Bundling; Grouping; Highway; Road work
    JEL: H57 R42 R48
    Date: 2022–10–07

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