nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒02‒13
twelve papers chosen by

  1. The Strange and Awful Path of Productivity in the U.S. Construction Sector By Austan Goolsbee; Chad Syverson
  2. Management and misallocation in Mexico By Bloom, Nicholas; Iacovone, Leonardo; Pereira-López, Mariana; Van Reenen, John
  3. How Regulation Might Fail to Reduce Energy Consumption While Still Stimulating Total Factor Productivity Growth By Sangeeta Bansal; Massimo Filippini; Suchita Srinivasan
  4. Regional Passenger Rail Efficiency: Measurement and Explanation in the case of France By Christian Desmaris; Guillaume Monchambert
  5. Accounting for the role of investment frictions in recessions By del Río, Fernando; Lores, Francisco-Xavier
  6. Acquisitions, management and efficiency in Rwanda's coffee industry By Macchiavello, Rocco; Morjaria, Ameet
  7. Foreign ownership and robot adoption By Leone, Fabrizio
  8. Financial Constraints, Productivity, and Investment: Evidence from Lithuania By Ms. Yu Shi; Karim Foda; Maryam Vaziri
  9. Supply Chain Management and Firm Performance By Kim, Soo-Dong
  10. Smart Factory Policies and SMEs’Productivity in Korea By Ju, Hyeon
  11. Quantifying Consumer Taste in Trade: Evidence from the Food Industry By Bee Yan Aw; Yi Lee; Hylke Vandenbussche
  12. Environmentally-Extended Input-Output analyses efficiently sketch large-scale environmental transition plans -- illustration by Canada's road industry By Anne de Bortoli; Maxime Agez

  1. By: Austan Goolsbee; Chad Syverson
    Abstract: Aggregate data show a large and decades-long decline in construction sector productivity. This decline in such a large sector has had a material effect on secular productivity growth for the economy as a whole. Prior work has focused on the role of potential measurement problems in construction, particularly output deflators in the measurement of productivity. This paper brings some new evidence to bear on the industry’s measured productivity problems and suggests that measurement error is probably not the sole source of the stagnation. First, using measures of physical productivity in housing construction, productivity is falling or, at best, stagnant over multiple decades. Second, there has been a noticeable decline over time in the efficiency with which construction firms translate materials inputs into output, and a corresponding shift toward more value-added-intensive production. Third, using state-level data, we do not find evidence of patterns of within-industry reallocation that might be expected of efficiently operating input and output markets. States with more productive construction sectors do not see growth in their shares of total U.S. construction activity; if anything, their shares fall. This may point to frictions in these markets that slow or stop what is in many other markets an important channel for productivity growth.
    JEL: D2 E23 L7
    Date: 2023–01
  2. By: Bloom, Nicholas; Iacovone, Leonardo; Pereira-López, Mariana; Van Reenen, John
    Abstract: We argue that greater misallocation is a key driver of the worse management practices in Mexico compared to the US. These management practices are strongly associated with higher productivity, growth, trade, and innovation. One indicator of greater misallocation in Mexico is the weaker size-management relationship compared to the US, particularly in the highly distorted Mexican service sector. Second, the size-management relationship is weaker in smaller markets, measured by distance to the US for manufacturing firms and population density for service firms. Third, municipalities with weaker institutions, measured by contract enforcement, crime, and corruption, have a weaker size-management relation. These results are consistent with frictions lowering aggregate management quality and productivity.
    Keywords: misallocation; management; performance; services; manufacturing; Mexico
    JEL: E22 F14 L25 O33 D24
    Date: 2022–01–25
  3. By: Sangeeta Bansal (Centre for International Trade and Development, School of International Studies, Jawaharlal Nehru University, New Delhi, India); Massimo Filippini (Center of Economic Research (CER-ETH), ETH Zürich, Università della Svizzera italiana, Switzerland); Suchita Srinivasan (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)
    Abstract: This paper evaluates the impact of a policy that was implemented to reduce the energy intensity of firms in some manufacturing sectors in India, on the total factor productivity (TFP) growth of firms and on its components, scale efficiency and technical change. Using plant-level panel data on the cement industry from 2007-2015 and a difference-in-difference methodology, we find that treated plants had higher rates of TFP growth, compared to control plants. This is largely driven by the fact that they expanded their production compared to control plants, even though they experienced lower rates of technical change compared to control plants. To explain this finding, we verify that treated plants attempted to meet the energy-intensity mandate not by reducing their energy consumption, but instead by increasing their output. Our results suggest that energy intensity regulations may not reduce energy consumption, because firms may find other ways to fulfil targets. The policy implications of this study are related to the design of energy-efficiency regulations, particularly in developing countries where firms in some industries may find it difficult to reduce their energy consumption through investment in new energy-efficient technologies or processes.
    Keywords: Total factor productivity; Climate change mitigation; Environmental Regulation; Cement Industry; Energy Intensity; India
    JEL: D1 D8 Q4 Q5
    Date: 2023–01
  4. By: Christian Desmaris (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique, IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon); Guillaume Monchambert (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper investigates the productive efficiency of French regional rail operators. Benefiting from unique databases (2012-2016), we use a panel stochastic frontier model to measure and explain the productive efficiency. We consider the regional monopoly nature of these operators by introducing specific contract-related variables into the model. The technical efficiency level of regional operators ranges from 59 to 98 per cent, revealing a high degree of heterogeneity in productive performance between regional operators. Factors related to the societal environment (density and delinquency rate), the characteristics of the rail system (network length and number of stations) and contractual design are significantly correlated with the technical efficiency. The policy implications of these results are substantial for both public authorities and rail operators.
    Keywords: Productive efficiency, Rail regulation, Regional rail passenger market, Stochastic frontiers, France, TER, Working Papers du LAET
    Date: 2023
  5. By: del Río, Fernando; Lores, Francisco-Xavier
    Abstract: We conduct Business Cycle Accounting analyses for both the Euro Area and the United States. If the observed changes in the factor income shares reflect the frictionless competitive adjustment of productive factors, then we find that the capital-efficiency wedge was the main force driving the output growth slowdown during the U.S. Great Recession, with the labour and investment wedges being significant, but secondary forces. The countercyclical evolution of the labour-efficiency wedge helped to mitigate the output growth slowdown. Our results suggest that the investment frictions, which raise the firm's costs of investment, may be the primary cause of the U.S. Great Recession. However, in the U.S. 1982 Recession and the Euro Area Great Recession, the labour-efficiency wedge was the main driving force of the output growth slowdown, with the labour wedge being a significant, but secondary force and the investment wedge being negligible.
    Keywords: Business Cycle Accounting, Capital-Efficiency Wedge, Labour-Efficiency Wedge, Labour Wedge, Investment Wedge, Resource Constraint Wedge, Productivity, Labour Share, Hours Worked, Great Recession.
    JEL: E13 E32 O40
    Date: 2023–01–17
  6. By: Macchiavello, Rocco; Morjaria, Ameet
    Abstract: Well-functioning markets allocate assets to owners that improve firms' management and performance. We study the effects of ownership changes on coffee mills in Rwanda - an industry in which managing relationships with farmers and seasonal workers is important and that has seen many ownership changes in recent years. We combine administrative data, a survey panel of mills and an original survey of acquirers that allows us to construct acquirer-specific and target-specific control groups. A difference-in-differences design reveals that ownership changes do not improve performance unless the mill is acquired by a foreign firm. Our preferred interpretation - supported by detailed survey evidence that considers alternative hypotheses - is that foreign firms successfully implement management changes in key operational areas. Upon acquisition, both domestic and foreign owned mills attempt to implement similar changes, but domestic firms face resistance from workers and farmers. Domestic owners have relationships with their local communities, which can create opportunities to establish new mills and acquire existing ones. However, these same relationships create pressure to maintain status-quo relational arrangements, which makes it harder to implement managerial changes.
    Keywords: management; performance; market reforms; coffee; Rwanda
    JEL: D24 O12 O16 G32 G34 L25 N57
    Date: 2022–07–21
  7. By: Leone, Fabrizio
    Abstract: This paper shows that multinational enterprises (MNEs) spur the adoption of industrial robots. First, I document a positive and robust correlation between multinational production and robot adoption using a new cross-country industry-level panel. Second, using detailed data about Spanish manufacturing, I combine a difference-in-differences approach with a propensity score reweighing estimator and provide evidence that firms switching from domestic to foreign ownership become about 10% more likely to employ robots. The ability of expanding into foreign markets via the parental network is the key driver of the adoption choice. An empirical model of firm investment reveals that MNEs generate significant industry-level productivity gains but decreases the labor share by boosting robot adoption. However, the first effect is one order of magnitude larger than the second. These results provide new evidence about the efficiency versus equity trade-off that policymakers face when attracting MNEs.
    Keywords: foreign ownership; industrial robots; total factor productivity; factor-biased productivity; labor share
    JEL: F23 O33
    Date: 2022–06–08
  8. By: Ms. Yu Shi; Karim Foda; Maryam Vaziri
    Abstract: This paper studies the relation between firms' access to finance, labor productivity and investment using Lithuanian firm-level data from 2000–2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51 percent and 7.2 percent, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities.
    Keywords: Financial Constraints; Productivity; Investment; SMEs; Transition Economies; financing constraint; firm age; evidence from Lithuania; firm's age distribution; balance sheet information; Labor productivity; Aging; Financial statements; Global
    Date: 2022–12–09
  9. By: Kim, Soo-Dong (Korea Institute for Industrial Economics and Trade)
    Abstract: This study analyzes the impact of changes in supply chain management on corporate performance in Korea. Focusing on four major industries that are closely related to supply chain reorganization, company-level micro data is used to determine the impact of each industry’s supply chain management on corporate performance. Using a empirical model, the work presents explicit results on how variables representing supply chain management affect firm performance. Specifically, it analyzes four main industries to derive the effects caused by the US-China trade conflict. The results of the empirical analysis are compared by dividing the sample into two periods: before and during COVID-19.
    Keywords: supply chains; supply chain management; COVID-19; firm performance; corporate performance; productivity; firm productivity; corporate productivity; Korea; semiconductors; batteries; mining and minerals; pharmaceuticals
    JEL: D24 L25
    Date: 2022–10–01
  10. By: Ju, Hyeon (Korea Institute for Industrial Economics and Trade)
    Abstract: This study focuses on the demand sector of smart factories, especially policies related to the introduction of smart factories by small and medium sized manufacturers. D Discussions focusing on SMEs are important because the gap in capacity and resources between large corporations and SMEs is very large and most large corporations in Korea are already pushing the full utilization of smart factories on their own. This study review Korean policies to support SMEs in introducing smart factories and to improve the industrial ecosystem surrounding smart factories.
    Keywords: smart factories; SMEs; small and medium-sized enterprises; SME policy; smart factory policy; innovation; R&D; Korea; SME ecosystem; industrial ecosystem; industrial policy; industrial strategy; productivity; manufacturing; competitiveness; competition policy; productivity growth; digital transition; digital transformation
    JEL: D21 D23 D24 D25 E23 G31 G38 H23 J22 J24 L11 L23 L52 L60 O31 O32 O33 O38
    Date: 2022–06–16
  11. By: Bee Yan Aw; Yi Lee; Hylke Vandenbussche
    Abstract: This paper develops an empirical model of consumer taste in twenty-nine Belgium food industries for the period from 1998-2005 to generate a “taste distance” measure of over 1, 800 firm-product exports to 53 country destinations. We estimate consumer taste using a control function approach and perform a decomposition of export revenues of firm-products to establish the importance of representative consumer taste relative to quality and marginal cost in export success. We find substantial taste heterogeneity in food exports across destination countries. Overall, in the large majority of food exports, consumer taste is an important and separate demand determinant to explain export revenues. Depending on the product, taste for a product explains between 4-30% of export revenues. Thus, any taste shock due to events such as pandemics or climate change, may induce substantial changes in export profitability of firms.
    Keywords: Consumer taste, quality, productivity, exports, firm-product, food
    JEL: F12 F14
    Date: 2023
  12. By: Anne de Bortoli; Maxime Agez
    Abstract: Industries struggle to build robust environmental transition plans as they lack the tools to quantify their ecological responsibility over their value chain. Companies mostly turn to sole greenhouse gas (GHG) emissions reporting or time-intensive Life Cycle Assessment (LCA), while Environmentally-Extended Input-Output (EEIO) analysis is more efficient on a wider scale. We illustrate EEIO analysis usefulness to sketch transition plans on the example of Canada s road industry - estimation of national environmental contributions, most important environmental issues, main potential transition levers of the sector, and metrics prioritization for green purchase plans). To do so, openIO-Canada, a new Canadian EEIO database, coupled with IMPACT World plus v1.30-1.48 characterization method, provides a multicriteria environmental diagnosis of Canada s economy. The road industry generates a limited impact (0.5-1.8 percent) but must reduce the environmental burden from material purchases - mainly concrete and asphalt products - through green purchase plans and eco-design and invest in new machinery powered with cleaner energies such as low-carbon electricity or bioenergies. EEIO analysis also captures impacts often neglected in process-based pavement LCAs - amortization of capital goods, staff consumptions, and services - and shows some substantial impacts advocating for enlarging system boundaries in standard LCA. Yet, pavement construction and maintenance only explain 5 percent of the life cycle carbon footprint of Canada s road network, against 95 percent for the roads usage. Thereby, a carbon-neutral pathway for the road industry must first focus on reducing vehicle consumption and wear through better design and maintenance of roads (...)
    Date: 2023–01

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