nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒01‒02
fifteen papers chosen by

  1. Productivity drivers of infrastructure companies: network industries to maximize economies of scale in the digital era By Nakatani, Ryota
  2. Are South African Medical Schemes Efficient? A Longitudinal Analysis By Ndlovu, Thabang
  3. Energy productivity and greenhouse gas emission intensity in Dutch dairy farms: A Hicks–Moorsteen by‐production approach under non‐convexity and convexity with equivalence results By Frederic Ang; Kristiaan Kerstens; Jafar Sadeghi
  4. Wages and productivity in Argentinian manufacturing. A structuralist and distributional firm-level analysis By Maria Celeste Gomez; Maria Enrica Virgillito
  5. The impact of air pollution on labour productivity in France By Clara Kögel
  6. Covid-19 pandemic, state aid and firm productivity By Bighelli, Tommaso; Lalinsky, Tibor; Vanhala, Juuso
  7. A Tale of Government Spending Efficiency and Trust in the State By António Afonso; João Tovar Jalles; Ana Venâncio
  8. COVID-19 and the Health of Banking Sector in Japan and South Korea: A Comparative Study By Barai, Munim Kumar
  9. Quantifying Reduced-Form Evidence on Collateral Constraints By Sylvain Catherine; Thomas Chaney; Zongbo Huang; David Sraer; David Thesmar
  10. Market Structure, Efficiency and Performance: Empirical evidence from South Africa’s Healthcare Insurer Market. By Ndlovu, Thabang
  12. Identifying and characterising AI adopters: A novel approach based on big data By Flavio Calvino; Lea Samek; Mariagrazia Squicciarini; Cody Morris
  13. Improved tests for Granger noncausality in panel data By Arturas Juodis; Yiannis Karavias; Vasilis Sarafidis; Jan Ditzen; Jiaqi Xiao
  14. Energy efficiency targets and tracking savings: Measurement issues in developing economies By Manisha Jain
  15. Internal Adjustment Costs of Firm-Specific Factors and the Neoclassical Theory of the Firm By V.K. Chetty; James J. Heckman

  1. By: Nakatani, Ryota
    Abstract: What drives the productivity dynamics of infrastructure companies? Using a panel of firms in fourteen countries, we study total factor productivity (TFP) enhancers of utility and network services companies. We find that the catching up of TFP with the technological frontier drives productivity growth at higher speeds in Asian countries than in European countries. We also find that financial leverage exerts a positive effect on TFP growth for larger infrastructure firms, and more financially developed countries utilize economies of scale through better use of financial resources. Large utility and transportation companies display a higher rate of TFP growth, indicating that a competition policy to encourage M&As would be prudent for the utility/transportation sectors to maximize economies of scale. In contrast, we find diseconomies of scale for energy companies in some countries. Moreover, young network firms improve TFP growth faster than their peers in countries with fewer product market regulations. Therefore, the policies should remove entry barriers while facilitating the exit of old and low-productivity firms from the network markets. Finally, policymakers should offer well-targeted fiscal incentives for intangible investments to boost TFP because the accumulation of intangible assets such as digital technology promotes more scale economies through network effects.
    Keywords: total factor productivity; utility and network services; infrastructure companies; energy industry; transportation industry; (dis)economies of scale; financial leverage; intangible assets
    JEL: D24 E22 G38 L25 L87 L9 O34
    Date: 2022–12–03
  2. By: Ndlovu, Thabang
    Abstract: This study assessed the efficiencies of South African private medical schemes for the period 2011 to 2017. There are two types of medical schemes in the private medical scheme sector. First, there are open medical schemes which are legally required to accept any individual who would want to join. Second, there are restricted medical schemes which are attached to a specific group such as an employer, industry or union and these schemes are open only to the members of the association. The study estimated efficiency scores using first, the Data Envelope Analysis (DEA) technique which is a non-parametric procedure that uses linear programming in order to formulate efficient frontiers which envelop all input-output combinations of firms within a sample. Second, the study employed the Stochastic Frontier Analysis (SFA) technique which is an econometric technique which postulates a functional relationship amongst outputs and inputs and thus employs statistical procedures in order to determine parameters for the function. The empirical findings of both the DEA and SFA approaches suggest that open medical schemes tend to be more efficient than restricted medical schemes in terms of technical, scale and pure technical efficiency over the sample period.
    Keywords: Healthcare Insurance, DEA, SFA, Efficiency, Technical Efficiency, Pure Technical Efficiency, Scale Efficiency, South Africa
    JEL: L00 L11 L22
    Date: 2022–11–30
  3. By: Frederic Ang (WUR - Wageningen University and Research [Wageningen]); 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 (UWO - University of Western Ontario)
    Abstract: The agricultural sector is currently confronted with the challenge to reduce greenhouse gas (GHG) emissions, whilst maintaining or increasing production. Energy-saving technologies are often proposed as a partial solution, but the evidence on their ability to reduce GHG emissions remains mixed. Production economics provides methodological tools to analyse the nexus of agricultural production, energy use and GHG emissions. Convexity is predominantly maintained in agricultural production economics, despite various theoretical and empirical reasons to question it. Employing non-convex and convex frontier frameworks, this contribution evaluates energy productivity change (the ratio of aggregate output change to energy use change) and GHG emission intensity change (the ratio of GHG emission change to polluting input change) using Hicks-Moorsteen productivity formulations. We consider GHG emissions as by-products of the production process by using a multi-equation model. Given our empirical specification, non-convex and convex Hicks-Moorsteen indices can coincide under certain circumstances, which leads to a series of theoretical equivalence results. The empirical application focuses on 1,510 observations of Dutch dairy farms for the period of 2010–2019. The results show a positive association between energy productivity change and GHG emission intensity change, which calls into question the potential of on-farm, energy-efficiency-increasing measures to reduce GHG emission intensity
    Keywords: productivity analysis,energy,greenhouse gas emissions,dairy,nonconvexity
    Date: 2022
  4. By: Maria Celeste Gomez; Maria Enrica Virgillito
    Abstract: Wages and productivity represent two of the most relevant variables to consider in economic development. Given the low productivity levels that emerging countries reveal, the accumulation of productive capabilities and a narrower dispersion across sectors would enable emerging countries to overcome the middle-income trap. Yet, this positive trend in productivity should translate into higher wages. Thus, we pose the following questions applied to a middle-income trapped country: is there a link between labour productivity and wages in the Argentine manufacturing sector? Does it differ across techno-productive classes or wage levels? Which factors affect this nexus, considering premature deindustrialisation? Using a firm-level dataset from 2010 to 2016, we perform quantile regression estimates to evaluate the link between productivity and wages across the conditional wage distribution among manufacturing firms. Based on a structural analysis, we identify the differences in these elasticities at 2-ISIC code levels and across Pavitt taxonomies. Our results confirm a positive, but extremely low, pass-through between productivity and wages in the Argentinian manufacturing firms, different across sectors according to their techno-productive capabilities, robust under different empirical strategies.
    Keywords: Gains from productivity; Development; Asymmetries.
    Date: 2022–12–11
  5. By: Clara Kögel (Université Paris 1 Panthéon Sorbonne – Centre d'Économie de la Sorbonne, Organisation de Coopération et de Développement Économiques (OCDE) – Directorate for Science, Technology and Industry (STI))
    Abstract: This paper investigates the effect of air pollution on labour productivity in French establishments in both manufacturing and non-financial market services sectors from 2001 to 2018. An instrumental variable approach based on planetary boundary layer height and wind speed allows identifying the causal effect of air pollution on labour productivity. The finding shows that a 10% increase in fine particulate matter leads, on average, to a 1.5% decrease in labour productivity, controlling for firm-specific characteristics and other confounding factors. The analysis also considers different dimensions of heterogeneity driving this adverse effect. The negative impact of pollution is mainly driven by service-intensive firms and sectors with a high share of highly skilled workers. This finding is in line with the expectation that air pollution affects cognitive skills, concentration, headache, and fatigue in non-routine cognitive tasks. Compared to the marginal abatement cost of PM 2.5 reductions by the Air Quality Directive 2008/50/EC, the estimated gains only from the labour productivity channel could largely offset the abatement cost. All in all, these estimates suggest that the negative impact of air pollution is much larger than previously documented in the literature.
    Keywords: Air pollution, Labour productivity, Planetary boundary layer height,
    JEL: J24 O13 Q53 Q51 Q52
    Date: 2022–12
  6. By: Bighelli, Tommaso; Lalinsky, Tibor; Vanhala, Juuso
    Abstract: We study the consequences of the COVID-19 pandemic on productivity by matching firm performance outcomes with corresponding firm-level information on government support. Our cross-country evidence for five EU countries shows that the pandemic led to a significant short-term decline in productivity predominantly driven by the within-firm growth component. A thorough comparative analysis of the distribution of employment and overall direct subsidies, considering separately also relative firm-level support and the probability of being supported, reveals several common characteristics. In general, the pandemic support was distributed rather efficiently, i.e. towards "deserving" firms and only marginally towards "zombie" and non-viable firms. However, government subsidies appear to have had a limited effect on aggregate productivity developments.
    Keywords: Covid-19,productivity,firm-level data,government support,employment subsidies,cross-country analysis
    JEL: D22 H25 J38 L29
    Date: 2022
  7. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public sector efficiency on citizens trust on national governments. The sample covers 36 OECD countries between 2007 and 2019. We find that the more efficient countries in terms of government spending are Australia, Chile, Ireland, New Zealand, South Korea, Switzerland. Secondly, our main finding is that better public sector spending efficiency is positively associated with citizens’ higher trust in governments. In general, political economy variables and the existence of fiscal rules do not seem to significantly affect our measure of trust. Results were held using alternative proxies for public sector efficiency, specifications with different control variables and instrumental variables approaches.
    Keywords: government spending efficiency, DEA, panel data analysis, confidence effects, ideology, fiscal rules
    JEL: C14 C23 E44 G15 H11 H50
    Date: 2022
  8. By: Barai, Munim Kumar (Ritsumeikan Asia Pacific University)
    Abstract: 1. The economies of Japan and South Korea are dominated by banks. 2. This study aims to identify and assess the health of domestic banks in Japan and South Korea for the Covid-19 ex-ante and interim periods. 3. Japanese banks are divided into four clusters, i.e., City Banks, Regional Banks I, Regional Banks II, and Trust Banks. 4. Throughout the timeframe of our investigation, the BOJ and BOK de-ployed monetary policy measures to influence bank conditions. 5. Figures show that the total assets of Japanese banks increased continu-ously, albeit at varied rates, from 2010 to 2019, never falling below 2 per-cent. The increase in bank loan amounts, from ¥8 trillion in 2012 to ¥543.9 trillion in 2021, explains some of the banks’ asset expansion. 6. Japanese banks had relatively low net earnings against their assets in terms of productivity, resulting in a poor return on assets (ROA). 7. Japanese banks’ ordinary profits peaked at 7.39 percent in 2014 and have steadily declined. However, the operational profit data from 2015 to 2020 has formed a U-shaped curve, indicating recent improvement. At the same time, banks' net incomes were significantly lower than their op-erating profits. 8. The efficiency of Japanese banks has remained low for a long time. From 2011 to 2021, none of the Japanese bank clusters met even the less strict efficiency standard of 60%. Even though Covid-19 might the-oretically cut operational expenses, Japanese banks’ overall efficiency ra-tio in 2021 was 83.9 percent. We are constrained by the Korean banks’ operational efficiency data. However, available data for 2020, the year of the COVID-19 outbreak, shows that most of them maintained an effi-ciency ratio of 60% or less. 9. Since 2012, Japanese banks have reduced the percentage of non-performing loans to total loans. Between 2012 and 2020, however, the ratio fell from 2.4 to 1.1 percent. Due to Covid-19, the NPL ratio went marginally up to 1.2 percent in 2021. At the same time, Korean banks had significantly lower NPL ratios than Japanese banks. All banks’ total NPL was 0.25 percent of their loans in 2020. 10. Despite their differences, the study revealed that Korean domestic banks could sustain better health indicators than their Japanese counterparts for much of the study period. Banks in Japan are trying to maintain bet-ter financial health with the ultra-low interest rates imposed by the QE-2 monetary policy. During Covid-19, the profitability and efficiency of the sector have been adversely affected.
    Keywords: Banks; Japan; South Korea; portfolio; productivity; operating efficiency; Covid-19
    JEL: E44 E58 G21 G28
    Date: 2022–12–06
  9. By: Sylvain Catherine (University of Pennsylvania [Philadelphia]); Thomas Chaney (USC - University of Southern California, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Zongbo Huang (The Chinese University of Hong Kong [Hong Kong], Shenzhen University [Shenzhen]); David Sraer (University of California [Berkeley] - University of California, CEPR - Center for Economic Policy Research - CEPR, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); David Thesmar (MIT - Massachusetts Institute of Technology, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: This paper quantifies the aggregate effects of financing constraints. We start from a standard dynamic investment model with collateral constraints. In contrast to the existing quantitative literature, our estimation does not target the mean leverage ratio to identify the scope of financing frictions. Instead, we use a reduced-form coefficient from the recent corporate finance literature that connects exogenous debt capacity shocks to corporate investment. Relative to a frictionless benchmark, collateral constraints induce losses of 7.1% for output and 1.4% for total factor productivity (TFP) (misallocation). We show these estimated losses tend to be more robust to misspecification than estimates obtained by targeting leverage.
    Date: 2022–08
  10. By: Ndlovu, Thabang
    Abstract: This study assessed the relationship between market structure, conduct and performance in the South African healthcare insurer market for the period 2011 to 2017 using data obtained from the Council of Medical Schemes. Three hypotheses were tested: the structure-conduct-performance (SCP) paradigm, the relative market power (RMP) paradigm and the efficient structure (ES) hypothesis. The empirical evidence reveals that both the SCP and ES hypotheses can be rejected in relation to South African medical schemes. The empirical evidence reveals support for differing hypotheses for open and restricted medical schemes. Moreover, the empirical results suggest that the market for restricted medical schemes is highly concentrated and operating under a reduced efficiency level which produces less than desirable outcomes. In regard to open medical schemes, the empirical results reveal strong support for the RMP hypothesis which suggests that open medical schemes with more differentiated product and/or service offerings will achieve higher market share, be in a position to exercise market power and thus able to set higher prices and earn higher profit.
    Keywords: Healthcare Insurance, DEA, Competition, Market Structure, Market Conduct, Market Performance, South Africa
    JEL: L00 L11 L22
    Date: 2022–11–30
  11. By: Igho Fayomi
    Abstract: The study determined the factor influencing the performance of CREM in listed organisation in Nigeria with a view to providing information that could enhance the productivity of the listed organisation. Quantitative and qualitative data was used for the study and was sourced from the listed business organisation in the Nigeria Stock Exchange Market which comprises of 171 companies in the Financial, Industrial, Oil and gas, Consumer, Technology, Basic Material, and Health sectors respectively. Total enumeration was done on the 171 companies through questionnaire administration and for the qualitative data, seven (7) organizations purposively selected was interviewed, representing one organization from each of the seven sectors. Both Factor and Content analysis were used in analysing the responses gotten from the survey. The study revealed that the five major factors influencing the performance of CREM in the listed organisations were Economic/Organisational, Strategic Planning/Management, CRE unit efficiency, User's Satisfaction and Political/Institutional Factors; which altogether explained 64.89% of the variance determining the CREM performance. The study therefore established that the most important factor influencing the performance of CREM in the sectors were the Economic/Organisational Factors. The findings of this study will therefore aid the organisations listed in the Nigeria Stock Exchange market to obtain information that could be used to improve the level of CREM performance in order to enhance productivity.
    Keywords: Corporate real estate; Corporate Real Estate Management; Factors Influencing Corporate Real Estate Management
    JEL: R3
    Date: 2022–01–01
  12. By: Flavio Calvino; Lea Samek; Mariagrazia Squicciarini; Cody Morris
    Abstract: This work employs a novel approach to identify and characterise firms adopting Artificial Intelligence (AI), using different sources of large microdata. Focusing on the United Kingdom, the analysis combines data on Intellectual Property Rights, website information, online job postings, and firm-level financials for the first time. It shows that a significant share of AI adopters is active in Information and Communication Technologies and professional services, and is located in the South of the United Kingdom, particularly around London. Adopters tend to be highly productive and larger than other firms, while young adopters tend to hire AI workers more intensively. Human capital appears to play an important role, not only for AI adoption but also for firms’ productivity returns. Significant differences in the characteristics of AI adopters emerge when distinguishing between firms carrying out AI innovation, those with an AI core business, and those searching for AI talent.
    Keywords: artificial intelligence, productivity, technology adoption
    Date: 2022–12–19
  13. By: Arturas Juodis (University of Amsterdam); Yiannis Karavias (University of Birmingham); Vasilis Sarafidis (BI Norwegian Business School); Jan Ditzen (Free University of Bozen-Bolzano); Jiaqi Xiao (University of Birmingham)
    Abstract: Granger causality is an important aspect of applied panel (longitudinal) data analysis because it can be used to determine whether one variable is useful in forecasting another. This presentation describes xtgranger, a community-contributed Stata command, which implements the panel Granger noncausality test of Juodis, Karavias, and Sarafidis (2021). This test offers superior size and power performance to existing tests, which stems from the use of a pooled estimator that has a faster convergence rate. The test has several other useful properties; it can be used in multivariate systems, it has power against both homogeneous as well as heterogeneous alternatives, and it allows for cross-section dependence and cross-section heteroskedasticity. The command is used to examine the type of temporal relation between profitability, cost efficiency, and asset quality in the U.S. banking industry.
    Date: 2022–11–30
  14. By: Manisha Jain (Indira Gandhi Institute of Development Research)
    Abstract: Energy efficiency plays a central role in climate change mitigation policies, but their impact on economy-wide energy consumption is uncertain. Improved methods to measure energy efficiency savings are adopted mainly in countries with mandatory energy efficiency targets. These countries combine bottom-up and top-down methods to enhance reliability. India has implemented various energy efficiency measures, and their impact is estimated using the simplified deemed savings bottom-up approach. Index Decomposition Analysis is a simple top-down approach, but its use in India is limited due to data gaps. Using India's energy balances from International Energy Agency, I estimate the energy efficiency savings in India during 2011-19. I find that the IDA estimates are lower than the government's deemed savings estimates. The underlying assumption in the simplified deemed savings approach and data gaps in index decomposition analysis limits the usability of the estimates. National level targets on energy efficiency can push improvements in energy savings measurement techniques used in India. The targets can also address a few barriers in the energy efficiency markets.
    Keywords: energy efficiency savings, energy efficiency targets, energy intensity, decomposition analysis, manufacturing energy intensity, energy balances
    JEL: Q4 K3 O13
    Date: 2022–10
  15. By: V.K. Chetty; James J. Heckman
    Abstract: This paper considers the consequences of a two-sector vertically-integrated model of firms producing output using firm-specific capital with a second sector producing firm-specific capital by adapting raw capital purchased in the market. Analysts rarely observe each sector separately. Aggregating over both sectors produces short-run and long-run factor demand functions that appear to be perverse, but when disaggregated obey standard neoclassical properties. Adjustment costs create the appearance of static inefficiency in the presence of dynamic efficiency.
    JEL: D21 E13 L11
    Date: 2022–11

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