nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒03‒20
thirteen papers chosen by

  1. Accounting for Cross-Location Technological Heterogeneity in the Measurement of Operations Efficiency and Productivity By Emir Malikov; Jingfang Zhang; Shunan Zhao; Subal C. Kumbhakar
  2. Allocative efficiency, plant dynamics and regional productivity: Evidence from Germany By Bruhn, Simon; Grebel, Thomas
  3. Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis By Stephen Ayerst; Loren Brandt; Diego Restuccia
  4. Separating innovation short-run and long-run technical efficiencies: Evidence from the Economic Community of West African States (ECOWAS) By Dorgyles C.M. Kouakou
  5. Returns to scale with a Cobb-Douglas production function for four small Northern Italian firms By Osti, Davide
  6. Detecting Learning by Exporting and from Exporters By Jingfang Zhang; Emir Malikov
  7. Advanced Digital Technologies and Investment in Employee Training: Complements or Substitutes? By Brunello, Giorgio; Rückert, Désirée; Weiss, Christoph T.; Wruuck, Patricia
  8. Opening the Black Box: Task and Skill Mix and Productivity Dispersion By G. Jacob Blackwood; Cindy Cunningham; Matthew Dey; Lucia Foster; Cheryl Grim; John Haltiwanger; Rachel Nesbit; Sabrina Wulff Pabilonia; Jay Stewart; Cody Tuttle; Zoltan Wolf
  9. Weak sectors and weak ties? Labour dependence and asymmetric positioning in GVCs By Lorenzo Cresti; Maria Enrica Virgillito
  10. Sensitivity Analysis for Profit Maximization with Respect to Per Unit Cost of Subsidiary Raw Materials By Mohajan, Devajit; Mohajan, Haradhan
  11. Does energy efficiency affect commercial real estate rents? An empirical study of UK office buildings By Qiulin Ke; Michael White
  12. Energy efficiency in institutional investment strategies – Large sample evidence from Germany and the UK By Marcelo Cajias; Anett Wins
  13. Predicting Firm Exits with Machine Learning: Implications for Selection into COVID-19 Support and Productivity Growth By Lily Davies; Mark Kattenberg; Benedikt Vogt

  1. By: Emir Malikov; Jingfang Zhang; Shunan Zhao; Subal C. Kumbhakar
    Abstract: Motivated by the long-standing interest in understanding the role of location for firm performance, this paper provides a semiparametric methodology to accommodate locational heterogeneity in production analysis. Our approach is novel in that we explicitly model spatial variation in parameters in the production-function estimation. We accomplish this by allowing both the input-elasticity and productivity parameters to be unknown functions of the firm's geographic location and estimate them via local kernel methods. This allows the production technology to vary across space, thereby accommodating neighborhood influences on firm production. In doing so, we are also able to examine the role of cross-location differences in explaining the variation in operational productivity among firms. Our model is superior to the alternative spatial production-function formulations because it (i) explicitly estimates the cross-locational variation in production functions, (ii) is readily reconcilable with the conventional production axioms and, more importantly, (iii) can be identified from the data by building on the popular proxy-variable methods, which we extend to incorporate locational heterogeneity. Using our methodology, we study China's chemicals manufacturing industry and find that differences in technology (as opposed to in idiosyncratic firm heterogeneity) are the main source of the cross-location differential in total productivity in this industry.
    Date: 2023–02
  2. By: Bruhn, Simon; Grebel, Thomas
    Abstract: This paper argues that regional variation in the efficiency of labor allocation among German manufacturing plants plays a critical role in explaining regional disparities in productivity. In fact, we show that over 50% of the East-West productivity gap is associated with a less efficient labor allocation in former East Germany. Yet, we also demonstrate that the mere focus on East-West comparisons hides partially large differences between the German federal states. These results suggest that regional productivity differences could be substantially narrowed by a more efficient labor allocation among plants. With respect to the underlying causes, we find evidence that the regional differences in allocative efficiency are significantly correlated with differences in export intensity, market concentration and plant size.
    Keywords: Regional productivity gap, productivity decomposition, allocative efficiency, labor allocation
    JEL: E24 J24 L11 L25 O47
    Date: 2023
  3. By: Stephen Ayerst; Loren Brandt; Diego Restuccia
    Abstract: The expansion in farm size is an important contributor to agricultural productivity in developed countries, but the reallocation process is hindered in less developed economies. How do distortions to factor reallocation affect farm dynamics and agricultural productivity? We develop a model of heterogeneous farms making cropping choices and investing in productivity improvements. We calibrate the model using detailed farm-level panel data from Vietnam, exploiting regional differences in agricultural institutions and outcomes. We focus on south Vietnam and quantify the effect of higher measured distortions in the North on farm choices and agricultural productivity. We find that the higher distortions in north Vietnam reduce agricultural productivity by 46%, accounting for around 70% of the observed 2.5-fold difference between regions. Moreover, two-thirds of the productivity loss is driven by farms' choice of lower productivity crops and reductions in productivity-enhancing investment, which more than doubles the productivity loss from factor misallocation.
    JEL: O11 O14 O4 Q12 Q15 Q16
    Date: 2023–02
  4. By: Dorgyles C.M. Kouakou (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)
    Abstract: A stream of literature has been developed on the measurement of the efficient production of innovation, that is, innovation technical efficiency. However, the efficiency measured is quite fuzzy as no distinction is made between innovation short-run and long-run efficiencies. Also, African economies have been heavily neglected, despite the need to explore ways to improve the poor levels of innovation they usually exhibit. In this paper, we measure innovation technical efficiency by separating short-run and long-run efficiencies. Overall technical efficiency, that is, efficiency both in the short and long run is also assessed. The empirical evidence makes use of data from countries from the Economic Community of West African States, one of the most important economic areas in Africa. To obtain efficiency scores, we carry out a stochastic frontier analysis. Results show that research and development, market sophistication and human capital significantly influence innovation output. No country is found to be efficient following one of the types of efficiency. The long-run and average short-run efficiencies over the study period are not similar, which shows the need to separate the types of efficiency. Domestic credit to private sector and governance are highlighted as determinants of innovation efficiency. Some policies are suggested based on these findings.
    Keywords: Innovation technical efficiency, Short-run efficiency, Long-run efficiency, Determinant factors, West Africa
    Date: 2022–09–01
  5. By: Osti, Davide
    Abstract: With this piece of evidence, I try to shed light upon the effects of fixed and variable costs on revenues for four firms operating in the sectors of lathing and milling, packaging machine construction, mechanical component production and shoe parts building, all four in the vicinity of Bologna, Italy, through the estimation of a linear bivariate simultaneous equation model where variable and fixed costs explain revenues; with a sample of eleven/twelve years of annual data for each firm, and find that a marginal increase in variable costs lead to more than proportional increases in revenues; similarly for fixed costs; I consider both contemporaneous regressions and distributed lags ones. I further estimate a Cobb-Douglas production function, in order to find out whether the returns to scale are increasing, constant or decreasing comparing various estimation methods: OLS, instrumental variable method, dynamic panel methods, as well as the Levinsohn and Petrin 2003 method, first separately for each single firm and then pooling the individual firms' samples in a panel; I find support for the hypothesis of slightly increasing returns to scale with the baseline Cobb-Douglas transformed in logarithms with capital, labour and materials as inputs.
    Keywords: production functions, returns to scale, cobb - douglas, stochastic frontier model, non linear least squares, production sets
    JEL: C13 C33 C36 C51 D22
    Date: 2022–02
  6. By: Jingfang Zhang; Emir Malikov
    Abstract: Existing literature at the nexus of firm productivity and export behavior mostly focuses on "learning by exporting, " whereby firms can improve their performance by engaging in exports. Whereas, the secondary channel of learning via cross-firm spillovers from exporting peers, or "learning from exporters, " has largely been neglected. Omitting this important mechanism, which can benefit both exporters and non-exporters, may provide an incomplete assessment of the total productivity benefits of exporting. In this paper, we develop a unified empirical framework for productivity measurement that explicitly accommodates both channels. To do this, we formalize the evolution of firm productivity as an export-controlled process, allowing future productivity to be affected by both the firm's own export behavior as well as export behavior of spatially proximate, same-industry peers. This facilitates a simultaneous, "internally consistent" identification of firm productivity and the corresponding effects of exporting. We apply our methodology to a panel of manufacturing plants in Chile in 1995-2007 and find significant evidence in support of both direct and spillover effects of exporting that substantially boost the productivity of domestic firms.
    Date: 2023–02
  7. By: Brunello, Giorgio (University of Padova); Rückert, Désirée (European Investment Bank); Weiss, Christoph T. (European Investment Bank); Wruuck, Patricia (European Investment Bank)
    Abstract: Using firm-level data covering the 27 EU countries, the UK and the US, we show that employers tend to reduce investment in training per employee after adopting advanced digital technologies (ADT). We estimate with a control function approach firm-level production functions augmented with two factors, the training stock per employee and digital technology use. We show that ADT use and employee training are substitutes in production, implying that an increase in the former negatively affects the marginal productivity of the latter, and that a decline in the cost of introducing ADT reduces employers' investment in training per employee. These findings point to challenges in realizing high levels of firm-sponsored training for employees in increasingly digital economies.
    Keywords: digitization, automation, training, productivity
    JEL: D24 J24
    Date: 2023–02
  8. By: G. Jacob Blackwood; Cindy Cunningham; Matthew Dey; Lucia Foster; Cheryl Grim; John Haltiwanger; Rachel Nesbit; Sabrina Wulff Pabilonia; Jay Stewart; Cody Tuttle; Zoltan Wolf
    Abstract: /2022/ec220130.htm
    Date: 2022
  9. By: Lorenzo Cresti; Maria Enrica Virgillito
    Abstract: Focusing on labour requirements incorporated into GVCs, in the following, we develop a novel, non conventional measure of learning capabilities, represented by knowledge embodied along the division of labour within global production networks. In order to capture the division of labour, and the ensuing division of embodied knowledge, we move from monetary flows of production, or value-added embodied, to labour embodied in the I-O linkages. We focus on mature economies as offshoring has been particularly in place there. After constructing a new indicator of Bilateral Net Labour Dependence, we estimate its relationship with a measure of performance of industries, namely, labour productivity, seeking to challenge the established findings generally reporting a positive effect of GVCs participation for sector-level productivity. Our conjecture is that being in a weak position in terms of (net) labour provision results in an overall weakening of the capabilities of the loosing productive structure. We corroborate the conjecture with a panel analysis of OECD countries and industries for the time period 2000-2014.
    Keywords: Input-output; global value chains; international division of labour; dependency theory.
    Date: 2023–02–24
  10. By: Mohajan, Devajit; Mohajan, Haradhan
    Abstract: In this article the sensitivity analysis of an economic model is provided with detail mathematical analysis. To achieve maximum profit through sustainable way in the competitive global economy; an organization must scrutinize sensitivity analysis efficiently. In the study Cobb-Douglas production function is operated. Method of Lagrange multiplier is applied here when sensitivity analysis is investigated to obtain accurate results. The paper also uses the bordered Hessian and Jacobian to propel mathematical methods appropriately.
    Keywords: Lagrange multiplier, economic inputs, profit maximization, sensitivity analysis
    JEL: C32 C51 C52 C61 C67 C68 I25
    Date: 2023–01–07
  11. By: Qiulin Ke; Michael White
    Abstract: With buildings accounting for 40% of the UK carbon footprint, environmental issues are becoming a significant focus for the commercial property industry. Since 2007 almost all units marketed for sale or lease have been required to exhibit an Energy Performance Certificate providing a rating of the energy efficiency of the unit from A (very efficient) to G (least efficient) as assessed by a specialist surveyor. However, there has been no consensus in the academic literature that energy efficiency is associated with higher transaction values and rents. But whether the behaviour of investors and tenants have changed due to the pressure of climate change. In this study, using a unique data set of existing office property rents and energy efficiency rating across the UK in 2021, we did not find that a better rating automatically gives rise to a higher rent. Other factors obviously come in to play too - for example, how recently the building may have been refurbished, other services the building provides such as a food service, bicycle shed, etc. The data also revealed that buildings with lower ratings commanded a higher rent than those with a superior EPC rating.
    Keywords: Energy Performance Certificate (EPC); Office Building; Office Rent; UK
    JEL: R3
    Date: 2022–01–01
  12. By: Marcelo Cajias; Anett Wins
    Abstract: Whilst there is a broad consensus that energy efficiency as measured by the environmental performance certificates leads to higher asking rents, there is little evidence about investment strategies that consider energy efficiency as an optimisation factor. This paper focusses on identifying the conditions that lead to the highest increase in the willingness to pay for energy-conscious refurbishment. By making use of more than 1.5 m observations in Germany and the UK we disaggregate the expected willingness to pay to spatial, socioeconomic, and hedonic characteristics via Generalized Additive Models (GAMs). In a simulation study, we show that an investment strategy in residential real estate can be optimised via intelligent asset selection considering energy efficiency as an optimisation factor.
    Keywords: Energy Performance Certificate; housing; Machine Learning; Non linear effects
    JEL: R3
    Date: 2022–01–01
  13. By: Lily Davies (CPB Netherlands Bureau for Economic Policy Analysis); Mark Kattenberg (CPB Netherlands Bureau for Economic Policy Analysis); Benedikt Vogt (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Evaluations of support measures for companies often require a good assessment of the viability of firms or the probability that a firm will exit the market. On March 17, 2020, a lockdown and associated social-restriction measures were announced, which hit specific in the economy severely. To compensate companies and the self-employed for the loss of income, an extensive package of support measures has been designed. These support measures had hardly any restrictions, because they had to be paid out quickly. This raises the question whether unhealthy companies have made disproportionate use of support and to what extent these support measures have kept viable or non-viable companies afloat. In this paper, we use machine learning techniques to predict whether a company would have left the market in a world without corona. These predictions show that unhealthy companies applied for support less often than healthy companies. But we also show that the COVID-19 support has prevented most exits among unhealthy companies. This indicates that the corona support measures have had a negative impact on productivity growth.
    JEL: C18 E61 E65 G33
    Date: 2023–03

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