nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒02‒27
nine papers chosen by

  1. Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China By Chihiro Shimizu; Erwin Diewert; Koji Nomura
  2. Nothing new in the East? New evidence on productivity effects of inventions in the GDR By Ann Hipp; Björn Jindra; Kehinde Medase
  3. A New Measure of Utilization-adjusted TFP Growth for Europe and the United States By Diego Comin; Javier Quintana; Tom Schmitz; Antonella Trigari
  4. Bayesian Artificial Neural Networks for Frontier Efficiency Analysis By Mike Tsionas; Christopher F. Parmeter; Valentin Zelenyuk
  5. Failing to level up? Industrial policy and productivity in interwar Northern Ireland By Jordan, David
  6. Globalization and Firm Performance By Catão, Luis A. V.; de Faria, Pedro; Martins, António; Portela, Miguel
  7. Do Accrual-based Financial Statements Improve Local Public Sector Efficiency? Evidence from Japan By Kondoh, Haruo; Ogawa, Akinobu
  8. Unemployment and Labor Productivity Co-movement: the Role of Firm Exit By Miroslav Gabrovski; Mario Rafael Silva
  9. Exploring the cost-effectiveness of energy efficiency implementation measures in the residential sector By Fateh Belaïd; Zeinab Ranjbar; Camille Massié

  1. By: Chihiro Shimizu; Erwin Diewert; Koji Nomura
    Abstract: The paper defines and computes alternative measures of output, input and Total Factor Productivity (TFP) for the production sector of the Chinese economy. The current System of National Accounts (SNA) input measure that corresponds to Gross Domestic Product (GDP) does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that addresses these problems with the existing SNA gross income measure and implements a net income measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970-2020. Real gross and real net income generated by the Chinese production sector is decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.
    Date: 2023–02
  2. By: Ann Hipp; Björn Jindra; Kehinde Medase
    Abstract: Former socialist systems were considered inferior to Western market economies in terms of innovation and productivity. We provide new evidence on the productivity effects of inventorship in the Soviet-type economy of the German Democratic Republic (GDR). We investigate three types of inventorship: knowledge generation, accumulation and diffusion. By applying a Cobb-Douglas production function using original primary and harmonized productivity data and manually cleaned patent data of the GDR between 1970 and 1989, we show that inventorship contributed to productivity in the industry sectors. This holds for knowledge generation, accumulation and diffusion in general, while in the presence of sufficient local interactive capabilities, international knowledge diffusion did not result in productivity gains. We contribute to empirical evidence on the productivity effects from an alternative system of patenting and innovation.
    Keywords: Soviet-type economy, productivity, inventorship, knowledge
    JEL: P23 L60 O14
    Date: 2023–01
  3. By: Diego Comin; Javier Quintana; Tom Schmitz; Antonella Trigari
    Abstract: We compute new estimates for Total Factor Productivity (TFP) growth in the United States and in five European countries. Departing from standard methods, we account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact, especially in Europe, where our estimated TFP growth series are less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of utilization-adjusted quarterly TFP growth in Europe.
    Date: 2022
  4. By: Mike Tsionas (Montpellier Business School Université de Montpellier, Montpellier Research in Management and Lancaster University Management School); Christopher F. Parmeter (Miami Herbert Business School, University of Miami, Miami FL); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: Artificial neural networks have offered their share of econometric insights, given their power to model complex relationships. One area where they have not been readily deployed is the estimation of frontiers. The literature on frontier estimation has seen its share of research comparing and contrasting data envelopment analysis (DEA) and stochastic frontier analysis (SFA), the two workhorse estimators. These studies rely on both Monte Carlo experiments and actual data sets to examine a range of performance issues which can be used to elucidate insights on the benefits or weaknesses of one method over the other. As can be imagined, neither method is universally better than the other. The present paper proposes an alternative approach that is quite exible in terms of functional form and distributional assumptions and it amalgamates the benefits of both DEA and SFA. Specifically, we bridge these two popular approaches via Bayesian artificial neural networks while accounting for possible endogeneity of inputs. We examine the performance of this new machine learning approach using Monte Carlo experiments which is found to be very good, comparable to, or often better than, the current standards in the literature. To illustrate the new techniques, we provide an application of this approach to a data set of large US banks.
    Keywords: Machine Learning; Simulation; Flexible Functional Forms; Bayesian Artificial Neural Networks; Banking; Efficiency Analysis.
    Date: 2023–01
  5. By: Jordan, David
    Abstract: Northern Ireland's productivity performance has persistently been the worst of any UK region. This is despite having the apparent benefit of subnational industrial policy since the 1920s. Can institutions - through the interaction between business and local policymakers - explain this longstanding productivity gap? Existing literature focuses on post-war policy in Northern Ireland, but neglects its interwar origins. Using new comparisons of regional and sectoral industrial productivity, and new archival evidence for Stormont's interwar industrial policy, demonstrates regional institutions created barriers to productivity growth, restricting the development of new industries in Northern Ireland. Further UK devolution will not automatically promote regional convergence: its success will depend upon the institutional incentives faced by subnational policymakers.
    Keywords: productivity, industrial policy, institutions, devolution, interwar manufacturing
    JEL: H20 N64 O43 R50
    Date: 2023
  6. By: Catão, Luis A. V. (Inter-American Development Bank); de Faria, Pedro (University of Groningen); Martins, António (ISEG); Portela, Miguel (University of Minho)
    Abstract: Using a new panel dataset of about 140 thousand Portuguese firms during 2006-2019, we measure the effects of globalization on firm-level performance along four dimensions: ownership of capital, employment of foreign-seasoned managers, and participation in export and import markets. Once at least one of these channels is active, firms are larger, less leveraged, employ better qualified workers, and pay higher hourly wages. We also uncover a pecking order of effects, with export-market participation having generally larger positive effects on productivity and negative effects on unit labor costs. All four channels interact, sometimes complementing, sometimes substituting one another. For instance, foreign ownership boosts exports at the extensive margin while being an importer and/or having a foreign-experienced manager help at the intensive margin; conversely, the marginal productivity gains of foreign-ownership are greatly reduced when the firm is already an exporter. Breaking down the effects of each channel by firm size, we show that smaller firms stand the most to gain from export market participation and foreign-ownership.
    Keywords: foreign direct investment, entrepreneurship, trade, productivity, wages, labor costs, leverage, firm size distribution
    JEL: D22 D24 F23 G34 J3 L20 M10
    Date: 2023–01
  7. By: Kondoh, Haruo; Ogawa, Akinobu
    Abstract: After international organizations such as The Organisation for Economic Co-operation and Development (OECD) advocated for national governments to adopt accrual accounting, the number of countries that switched from traditional cash-based accounting to accrual accounting or amended former cash-based accounting is increasing. This change in the accounting system is referred to as the New Public Management (NPM). One of the core elements of NPM is enhancing budget transparency, efficiency, and accountability of decision making using business-like management tools such as the double-entry bookkeeping method. This study examines the impact of the “local public account revolution” on the efficiency of Japanese local governments using a stochastic frontier approach and panel data. We present evidence that preparing business-like financial statements may increase the efficiency of local governments.
    Keywords: Financial statements, Accrual accounting, Efficiency, Fiscal transparency, New public management (NPM)
    JEL: H1 H7
    Date: 2023–02–01
  8. By: Miroslav Gabrovski (University of Hawaii); Mario Rafael Silva (Hong Kong Baptist University)
    Abstract: The Diamond-Mortensen-Pissarides model implies a nearly perfect correlation between labor productivity and unemployment/vacancies, yet the relationship in the data is mild. We show that incorporating sunk entry costs and vacancy creation in an otherwise standard setup can reconcile the discrepancy. Sunk costs cause vacancies to be a positively valued, predetermined variable. If the destruction shock is infrequent, then most vacancies were created in the past, and hence the number of vacancies in the market correlate more closely with past than current labor productivity. Provided the destruction shock is calibrated to match either micro-level evidence on product destruction and firm exit rates or commonly used values in the growth literature, the model reproduces the empirically observed mild correlation between productivity and unemployment without breaking the strong negative co-movement between unemployment and vacancies.
    Keywords: job destruction, entry costs, unemployment, aggregate fluctuations
    JEL: E24 E32 J63 J64
    Date: 2023–01
  9. By: Fateh Belaïd (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); Zeinab Ranjbar; Camille Massié (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)
    Abstract: This research investigates the cost-effectiveness of energy performance measures in French residential buildings. We develop an empirical approach based on a multivariate statistical approach and Cost-Benefit analysis. The strength of this research relies on the designing of a large cross-sectional database collected in 2013 including rich technical information of about 1, 400 dwellings representative of the French residential sector as well as individual recommendations relative to the energy renovations to be implemented, their investment costs, and energy savings potential. We provide valuable information on the cost-effectiveness of energy renovation measures for the entire housing stock. Results show that low-temperature and condensing boilers, as well as floor insulation, are the most cost-effective energy efficiency measures, which could be inconsistent with actual subsidy policies. We demonstrate that the cost-effectiveness of energy renovation measures is widely dependent on dwelling initial characteristics and the value of the inputs used in the economic indicators such as energy-savings amount, energy price, and the discount rate. Moreover, we provide a classification of French dwellings, which may help policymakers, better identify their target. Finally, we show that the renovation of the entire French residential dwelling stock can lead to a great amount of energy–and CO2–reductions but requires significant financial capacity.
    Keywords: Energy efficiency, Cost-benefit analysis, Energy demand, Multiple correspondence analysis, Monte Carlo simulation, Energy policy
    Date: 2021–03

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