nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2022‒12‒05
fifteen papers chosen by

  1. Malmquist productivity indices and plant capacity utilisation: new proposals and empirical application By Kristiaan Kerstens; Jafar Sadeghi; Ignace van de Woestyne; Linjia Zhang
  2. Productivity Slowdown and Tax Havens: Where Is Measured Value Creation? By Jean-Charles Bricongne; Samuel Delpeuch; Margarita Lopez Forero
  3. Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity By Jose-Maria Da-Rocha; Diego Restuccia; Marina M. Tavares
  4. Why Is Trading So Important in Cap and Trade? The Role of Economies of Scale and Productivity By Ho, Phuong
  5. The Role of Nonemployers in Business Dynamism and Aggregate Productivity By Pedro Bento; Diego Restuccia
  6. Economic and Environmental Decomposition of Luenberger-Hicks-Moorsteen Total Factor Productivity Indicator: Empirical Analysis of Chinese Textile Firms With a Focus on Reporting Infeasibilities and Questioning Convexity By Tomas Balezentis; Kristiaan Kerstens; Zhiyang Shen
  7. The human capital effect on productivity and agricultural frontier expansion in Brazil By Henrique Batista de Barros, Pedro; Henrique Leite de Castro , Gustavo; Menezes-Filho, Naercio
  8. Social fragmentation and productivity in colonial India By Mukherjee, Anirban; Sen, Shankhajit
  9. The Deforestation Effects of Trade and Agricultural Productivity in Brazil By Carreira, Igor; Costa, Francisco J M; Pessoa, Joao Paulo
  10. Government spending efficiency in Latin America By António Afonso; Gabriela Baquero Fraga
  11. Multi-Time and Multi-Moment Nonparametric Frontier-Based Fund Rating: Proposal and Buy-and-Hold Backtesting Strategy By Kristiaan Kerstens; Paolo Mazza; Tiantian Ren; Ignace van de Woestyne
  12. Characteristics of the Board of Directors and corporate financial performance – An empirical evidence By Nguyen, V.C.; Thuan, Huynh
  13. Can Value Chain Integration Explain the Diverging Economic Performance within the EU? By Agnes Kügler; Andreas Reinstaller; Klaus Friesenbichler
  14. Management and Performance in the Public Sector: Evidence from German Municipalities By Englmaier, Florian; Muehlheusser, Gerd; Roider, Andreas; Wallmeier, Niklas
  15. The Synergic Entropy : an efficient frontier output derived from merged input units boosted by synergy and constrained by critical input By Videira, Henrique de Carvalho

  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 (IÉSEG School Of Management [Puteaux], Ivey School of Business - UWO - University of Western Ontario); Ignace van de Woestyne (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven); Linjia Zhang (Xi'an Jiaotong-Liverpool University [Suzhou])
    Abstract: The purpose of this contribution is to compute the popular Malmquist productivity index while adding a component representing plant capacity utilisation. In particular, this is—to the best of our knowledge—the first empirical application estimating both input- and output-oriented Malmquist productivity indices in conjunction with the corresponding input- and output-oriented plant capacity utilisation measures. Our empirical application focuses on a provincial data set of tourism activities in China over the period 2008–2016. The results contain the output- and input-oriented Malmquist productivity indices, some Spearman rank correlations between both, a t-test whether these indices differ from unity, and some bootstrapping analysis.
    Keywords: Plant Capacity,Data Envelopment Analysis,Free Disposal Hull,Malmquist Productivity Index,Decomposition
    Date: 2022
  2. By: Jean-Charles Bricongne (Centre de recherche de la Banque de France - Banque de France); Samuel Delpeuch (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Margarita Lopez Forero (Université Paris-Saclay)
    Abstract: Based on French firm-level data over 15 years we evaluate the contribution of the microlevel profit-shifting-through tax haven foreign direct investments to the aggregate productivity slowdown measured in France. We show that firm measured productivity in France declines over the immediate years following the establishment in a tax haven, with an average estimated around 3.5% in labor apparent productivity. To isolate the contribution of multinationals' tax optimization to this decline of apparent productivity, we then exploit the 2006 Cadbury-Schweppes decision of the European Court of Justice limiting the extent to which member States can counter European MNEs' tax planning strategies. We find that multinational groups benefiting from that loosening of the legal constraints do exhibit lower apparent productivity in France following that ruling. Our results moreover suggest that this bias is bigger when firms rely more intensively on intangible capital. Finally, given these firms' weight in the economy, our results imply an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.
    Keywords: Profit-shifting FDI,Productivity slowdown,Productivity mismeasurement,Intangible capital,Tax Havens
    Date: 2022–04–15
  3. By: Jose-Maria Da-Rocha; Diego Restuccia; Marina M. Tavares
    Abstract: What accounts for income per capita and total factor productivity (TFP) differences across countries? We study resource misallocation across heterogeneous production units in a general equilibrium model where establishment productivity and size are affected by policy distortions. We solve the model in closed form and show that the effect of policy distortions on aggregate productivity is substantially magnified when the distribution of (relative) establishment sizes is constant across economies as supported by some empirical evidence. In this case, more distorted economies feature higher establishment lifespan, amplifying the negative effect of distortions on establishment productivity growth. Policy distortions in this environment substantially reduce aggregate productivity, an effect that is 2.8-fold larger than the model with unrestricted relative size distribution.
    Keywords: distortions, misallocation, investment, productivity, establishment size.
    JEL: O11 O3 O41 O43 O5 E0 E13 C02 C61
    Date: 2022–10–28
  4. By: Ho, Phuong
    Abstract: Economists have long established the cost effectiveness of cap and trade (CAT) owing to the cost heterogeneity between firms. I offer a new value of CAT: cost reduction within firms owing to productivity improvement and economies of scale. Overcoming the unobserved-cost challenge, I extend the literature on production function and introduce a method to estimate economies of scale using data on output and input quantity. I combine this method with the difference-in-difference strategy to exploit the policy transition from non-tradable cap to cap and trade in Norwegian cod fishery to identify the causal impacts of trading fishing quotas. I find trading increased vessels' productivity and facilitated the realization of existing economies of scale: vessels acquired quotas, expanded their operation, and moved toward the minimum average cost levels. Vessels realized economies of scale by upgrading their sizes and going fishing more often. I decompose the output-based value of traded quotas and find economies of scale played a main role in the first few years after a big vessel acquired quotas. These results highlight (i) flexibility through tradability in environmental regulations can reduce production costs of a firm, (ii) cost reduction is gained by both boosting existing production factors and advancements beyond scale economies, and (iii) consolidation can be a sign of cost efficiency owing to economies of scale rather than market power abuse.
    Date: 2021–09–24
  5. By: Pedro Bento; Diego Restuccia
    Abstract: The well-documented decline in business dynamism, measured by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We assess the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Including nonemployers, the total number of firms has instead increased since the early 1980s, which in the context of a standard model of firm dynamics implies an annualized growth of measured aggregate productivity of 0.22%, one-quarter of the productivity growth in the data. Further accounting for time changes in the share of nonemployer firms and in the distribution of employment across firms, we find that productivity growth is even higher (0.47% per year). The productivity growth slowdown is not due to changes in net firm entry.
    Keywords: nonemployers, employer firms, business dynamism, productivity, TFP.
    JEL: O4 O51 E1
    Date: 2022–10–28
  6. By: Tomas Balezentis; 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); Zhiyang Shen (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)
    Date: 2022–08–02
  7. By: Henrique Batista de Barros, Pedro (Departamento de Economia, Universidade de São Paulo); Henrique Leite de Castro , Gustavo (Departamento de Economia, Universidade de São Paulo); Menezes-Filho, Naercio (Departamento de Economia, Universidade de São Paulo)
    Abstract: Agricultural production expansion is an important strategy to encourage structural changes and lead to economic development. However, the increase in the agricultural production can occur in two different ways: through productivity - intensive margin - and through area expansion - extensive margin. Human capital can enhance production both ways, but its effects remain little explored in the literature. This paper aims to investigate the effect of human capital on the increase in agricultural productivity and on the expansion of the agricultural frontiers in Brazil. The results indicate that human capital has a positive effect on these albeit with varying intensities and significant heterogeneities. Human capital affects agricultural productivity more in agricultural frontier regions where there is often a shortage of skilled labor. However, human capital does not affect the expansion of agricultural area in consolidated agricultural regions of the country.
    Keywords: Agricultural Productivity; Frontier Expansion; Human Capital; Education
    JEL: E24 O13 O15 Q10 Q12
    Date: 2022–10–27
  8. By: Mukherjee, Anirban (University of Calcutta); Sen, Shankhajit
    Abstract: In this paper, we examine the role of social environment on firm productivity using the case of textile mills in twentieth century India. During the twentieth century, Indian textile mills were known for lower productivity than the contemporary British, American, or Japanese mills. While most of the existing studies offered explanations by directly making cross-country comparisons, we seek to explain productivity differences across Indian firms. We argue that low productivity of textile mills in colonial India was a result of a failure to generate tacit knowledge which was critical for technology adoption. The process of tacit knowledge creation depended on exchange of knowledge and ideas at the social level and therefore, is a function of demographic factors and ethnic composition of the society. In our paper, we combine input-output data from colonial textile firms with city level demographic characteristics in colonial India and estimate the effect of age structure, religious composition, and caste fragmentation on productivity. We find that the city level Muslim-Hindu ratio and inter-religion conflict negatively affected textile productivity in colonial India. The textile mills in the twentieth century India used a combination of American (ring frame) and British (mule frame) technology. We also find that cities with higher caste fragmentation were more likely to adopt American technology which required less coordination.
    Date: 2022–08–25
  9. By: Carreira, Igor; Costa, Francisco J M (FGV EPGE Brazilian School of Economics and Finance); Pessoa, Joao Paulo
    Abstract: This paper quantifies the relative footprint of trade and agricultural productivity on deforestation in Brazil between 2000 and 2017. Using remote-sensing data, we find that these two phenomena have distinct effects on land use. Greater exposure to new genetically engineered soy seeds is associated with faster deforestation through the expansion of cropland. We find no association between exposure to demand from China and deforestation – although, trade induces conversion of cropland to pastureland. Our results suggest that, when taken together, agriculture productivity gains, and not trade, were the main driver of deforestation and the expansion of the agriculture sector.
    Date: 2022–06–27
  10. By: António Afonso; Gabriela Baquero Fraga
    Abstract: We assess the public spending efficiency of 20 Latin American countries over the period of 2000-2019, computing Data Envelopment Analysis efficiency scores. For the Public Sector Performance composite indicator, we use the annual data of socio-economic indicators, and for the input measure we consider Total Public Spending as a percentage of GDP, by spending category. The results show that public spending during the period under study increased, but that overall governments were not efficient, as on average they could have used 27% less spending to achieve the same levels of performance. On the other hand, governments could have increased their performance by 18% whilst maintaining the same level of spending. The most-efficient countries were Chile, Guatemala, Panama, and Paraguay, with the least efficient being Bolivia, Venezuela, Nicaragua, Suriname, and Brazil.
    Keywords: government efficiency; Data Envelopment Analysis; government spending; Latin America
    JEL: H11 C13 C14 H50
    Date: 2022–11
  11. 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); Paolo Mazza (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); Tiantian Ren (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); Ignace van de Woestyne (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven)
    Abstract: This contribution introduces new frontier models to rate mutual funds that can simultaneously handle multiple moments and multiple times. These new models are empirically applied to hedge fund data, since this category of funds is known to be subject to non-normal return distributions. We define a simple buy-and-hold backtesting strategy to test for the impact of multiple moments and multiple times separately and jointly. The empirical results demonstrate that the proposed frontier models perform better than most financial performance measures and existing frontier models in selecting promising funds.
    Keywords: Data Envelopment Analysis,Shortage function,Frontier,Fund rating
    Date: 2022
  12. By: Nguyen, V.C.; Thuan, Huynh
    Abstract: The objectives of the research are to investigate the characteristics of the board of directors on the financial performance of the enterprise. Using a sample data from 52 construction and real estate enterprises listed on Vietnam stock exchange in the period 2006-2020. Using typical regression methods such as pooled OLS, FEM, REM and assessing the defects of the research model, the FGLS method is selected. At the same time, due to the existence of endogenous phenomena and the nature of interdependence among enterprises in Vietnam, research using the instrumental variables two-step generalized method of moments (IV-GMM) in order to correct for cross-sectional dependence, autocorrelation, endogeneity, and heteroskedasticity in the analysis. Research results suggest that board size, female board members, meeting frequency, and board members' education have a positive influence on financial performance. Moreover, the independence of the Board of Directors increases, the business efficiency decreases. The research also found a positive relationship of tangible fixed assets, and a negative relationship between capital structure choice, firm size and corporate financial performance.
    Date: 2022–10–05
  13. By: Agnes Kügler; Andreas Reinstaller; Klaus Friesenbichler
    Abstract: This paper studies the interplay of integration into EU value chains and industrial development measured by labour productivity. Our integration indicator measures value chain trade within the Single Market relative to global value chain networks. Using a simultaneous equation model, we find an overall positive effect of integration on labour productivity, which is driven by upstream integration. Highly productive industries rather seek global value chain trade than regional integration, though. Better domestic institutions facilitate EU integration, although they favour industries with less complex product portfolios and lower levels of knowledge cumulativeness.
    Keywords: EU integration, Value chains, Productivity, Institutions, Industrial development, Product complexity
    Date: 2022–11–16
  14. By: Englmaier, Florian (University of Munich); Muehlheusser, Gerd (University of Hamburg); Roider, Andreas (University of Regensburg); Wallmeier, Niklas (University of Hamburg)
    Abstract: We study management practices and performance of public sector organizations in Germany. For a representative sample of municipalities, we provide survey evidence for substantial heterogeneity in the use of structured management practices. This heterogeneity is not driven by differences across states, regional types, or population size. Moreover, we document a systematic positive relationship between the degree of structured management and a diverse set of performance measures capturing municipalities' attractiveness for citizens and firms. Topic modelling (LDA) of survey responses suggests that management styles differ indeed in the extent of structured management, with many municipalities displaying relatively little of it.
    Keywords: management practices, public sector organizations, local government, municipal performance, World Management Survey (WMS)
    JEL: D20 D73 H11 H73 R50
    Date: 2022–10
  15. By: Videira, Henrique de Carvalho
    Abstract: The novel approach equates the maximum output deviations caused by combined inputs with affinity-synergy in the same system. The inputs can be assets of a company, companies in a sector or other physical variable that is merged over time. The outputs can be any flow variable that depends on the merged inputs, which symmetric values are the efficient and the inefficient frontiers outputs. Rather than being purely stochastic, the frontiers in the output function are estimated by the parameters named synergy and critical input. Synergy is conceived as a novel parameter for risk and efficiency under the constraint given by scarce resources (critical input). The output acceleration derived from the mergers among inputs, boosted by synergy, is the main foundation of the theory, which special case gives Shannon and Boltzmann-Gibbs equations. Tests are done in the 11 USA Sectors over their quarterly financial statements, proving that synergy is significant for financial statements, whereas typical betas only present significance in stock market data. A practical application is a novel discount rate for valuation using synergy, whose results for each sector are stable and coherent with perceived risk. Systems that rely on causal relations between output and multiple inputs can be regressed under novel parameters, rather than reckoning exclusively in optimization procedures.
    Date: 2022–10–18

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