nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒05‒15
twenty papers chosen by

  1. Unconditional Convergence in Manufacturing Productivity across U.S. States : What the Long-Run Data Show By Klein, Alexander; Crafts, Nicholas
  2. Digitalization, Innovation and Productivity in South African Micro and Small Enterprises By Cyrielle Gaglio; Erika Kraemer-Mbula; Edward Lorenz
  3. Sensitivity Analysis of Inputs of an Organization: A Profit Maximization Exploration By Mohajan, Devajit; Mohajan, Haradhan
  4. Factor Substitution Possibilities, Labor Share Dynamics, and Inequality in an Age of Intangibles By Adnan Velic
  5. The drivers of labour share and impact on pay inequality: A firm-level investigation By Roya Taherifar; Mark J. Holmes; Gazi M. Hassan
  6. Credit Risk and Financial Performance of Commercial Banks: Evidence from Vietnam By Ha Nguyen
  7. The Impact of the Real Exchange Rate on Non-Traditional Chilean and Peruvian Exports: Evidence using Microdata By Renzo Castellares Añazco
  8. Subsidies to the steel industry: Insights from the OECD data collection By Fabien Mercier; Luciano Giua
  9. The role of localised, recombinant and exogenous technological change in European regions By Mario A. Maggioni; Emanuela Marrocu; Teodora Erika Uberti; Stefano Usai
  10. Reconstructing firm-level input-output networks from partial information By Andrea Bacilieri; Pablo Austudillo-Estevez
  11. A Comparative Study of Inter-Regional Intra-Industry Disparity By Samidh Pal
  12. Exploring the Determinants of Capital Adequacy in Commercial Banks: A Study of Bangladesh's Banking Sector By Md Shah Naoaj
  13. Does teacher subjective well-being influence students’ learning achievement? Evidence from public basic education in Peru By José María Rentería; Dante Solano
  14. What Can Be Expected from Mergers after Deregulation? The Case of the Long-Distance Bus Industry in France By Thierry Blayac; Patrice Bougette
  15. Potential Growth Prospects: Risks, Rewards, and Policies By Kilic Celic, Sinem; Kose, M. Ayhan; Ohnsorge, Franziska
  16. Construction of a production function in the form of series of exponents of a function of a complex variable (on the example of the Czech Republic 2006-2021) By Yekimov, Sergey
  17. Theory and Evidence of Firm-to-firm Transaction Network Dynamics By Takafumi Kawakubo; Takafumi Suzuki
  18. Modern manufacturing capital, labor demand and product market dynamics: Evidence from France By Philippe Aghion; Celine Antonin; Simon Bunel; Xavier Jaravel
  19. The impact of credit substitution between banks on investment By Francesco Bripi
  20. Learning in lockdown: University students’ academic performance during COVID-19 closures By Emma Whitelaw; Nicola Branson; Murray Leibbrandt

  1. By: Klein, Alexander (University of Kent); Crafts, Nicholas (University of Sussex)
    Abstract: This paper examines long-run unconditional convergence of labour productivity in manufacturing across 48 contiguous U.S. states. For that purpose, we construct a detailed panel data set of stateindustry pairs with over 120 industries covering the period 1880-2007. We find that unconditional convergence in manufacturing productivity was pervasive and rapid – 7.6% per year in 1880-2007 – and that manufacturing accounts for most of the unconditional convergence contribution to overall productivity growth over the long run: 61% in 1880-1940 and 91% in 1958-2007. We also examined broad U.S. regions and found that in the South the contribution of unconditional 𝛽-convergence in manufacturing to aggregate productivity growth before World War II was weak not because of a slower convergence rate but a much smaller manufacturing sector.
    Keywords: convergence ; economic growth ; U.S. economic history ; manufacturing belt JEL codes: O47 ; N11 ; N12 ; R11
    Date: 2023
  2. By: Cyrielle Gaglio (University of Helsinki; Sciences Po, OFCE, France); Erika Kraemer-Mbula (University of Johannesburg); Edward Lorenz (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This paper aims to study the links between the use of digital communication technologies, innovation performance and productivity for a sample of micro and small enterprises (MSEs) in a middle-income country, South Africa. Based on the results of an original survey carried out in 2019, we investigate these links for a sample of 711 manufacturing MSEs located in Johannesburg. We estimate the relations sequentially, first estimating the relation between digitalization and innovation, and secondly the relation between innovation and productivity. Our results show that selected digital communication technologies including the use of social media and the use of a business mobile phone for browsing the internet have a positive effect on innovation, and that innovation conditional on the use of these technologies has a positive impact on labor productivity.
    Keywords: Digital communication technologies, Product innovation, Productivity, MSEs, Johannesburg
    JEL: O14 O31 O4
    Date: 2022–06
  3. By: Mohajan, Devajit; Mohajan, Haradhan
    Abstract: This article tries to discuss sensitivity analysis of various inputs of an organization during profit maximization investigations. In this study Cobb-Douglas production function is analyzed with a detail mathematical analysis. The method of Lagrange multiplier is a very useful and powerful technique in multivariate calculus, and it is applied here to obtain higher dimensional unconstrained problem from the lower dimensional constrained one. In the article determinant of the 6×6 bordered Hessian matrix and 6×6 Jacobian are operated for consulting sensitivity analysis efficiently.
    Keywords: Lagrange multiplier, profit maximization, sensitivity analysis
    JEL: B41 C3 C53 C58 C61 C67 C68 H4 J3
    Date: 2023–03–10
  4. By: Adnan Velic (Technological University Dublin)
    Abstract: We examine the economy-wide degree of substitutability between intangible capital and other factor inputs in production using a large sample of advanced countries. In this context, we turn to studying the implications of intangible and tangible capital growth for labor income share dynamics. Compared to tangible capital, we find that intangible capital more strongly complements skilled labor. The analysis further indicates relative fungibility between tangible capital and a composite of intangible capital and skilled labor, in line with the rising prominence of knowledge-intensive tasks and AI-driven online platforms. The intrinsic nature of intangibles and their asymmetric effects across skilled and unskilled labor productivity based on our substitution elasticities suggest that intangible capital growth increases income inequality more aggressively.
    Keywords: factor substitution, skills, laborincomeshares, (in)tangiblecapital, incomeinequality, management, productivity, growth
    JEL: E2 J2 J3 O3 O4
    Date: 2023–04
  5. By: Roya Taherifar (University of Waikato); Mark J. Holmes (University of Waikato); Gazi M. Hassan (University of Waikato)
    Abstract: Income inequality and labour share have followed divergent trends in Australia. Empirical studies have attempted to explain their movement and their relationship using macro data. However, what is lacking is a firm-level study to capture the determinants of labour share specific to the firm’s production technology and market structures with an investigation into the impact on pay inequality inside firms. Hence, we conduct the first Australian firm-level study using a sample of Australian listed firms over the period 2004-2019. First, we examine the impact of technological progress, product market power and labour market power on the labour share. The results show that the decline in Australian labour share is mainly driven by technological progress and increasing product market power. However, labour market power does not have a significant impact on labour share. These findings are robust to an array of sensitivity tests. Second, we examine the impact of labour share on pay inequality within firms. We find robust evidence that declining labour share is a significant driving force in the evolution of pay inequality. Moreover, a 10 per cent decline in labour share rises pay inequality by 4.19 per cent. Additional tests show that technological progress and product market power can moderate the negative impact of labour share on pay inequality.
    Keywords: Income Distribution;Mark-up;Labour Share;Pay Inequality;Total Factor Productivity
    JEL: D33 J31 D42
    Date: 2023–04–17
  6. By: Ha Nguyen
    Abstract: Credit risk is a crucial topic in the field of financial stability, especially at this time given the profound impact of the ongoing pandemic on the world economy. This study provides insight into the impact of credit risk on the financial performance of 26 commercial banks in Vietnam for the period from 2006 to 2016. The financial performance of commercial banks is measured by return on assets (ROA), return on equity (ROE), and Net interest margin (NIM); credit risk is measured by the Non-performing loan ratio (NPLR); control variables are measured by bank-specific characteristics, including bank size (SIZE), loan loss provision ratio (LLPR), and capital adequacy ratio (CAR), and macroeconomic factors such as annual gross domestic product (GDP) growth and annual inflation rate (INF). The assumption tests show that models have autocorrelation, non-constant variance, and endogeneity. Hence, a dynamic Difference Generalized Method of Moments (dynamic Difference GMM) approach is employed to thoroughly address these problems. The empirical results show that the financial performance of commercial banks measured by ROE and NIM persists from one year to the next. Furthermore, SIZE and NPLR variables have a significant negative effect on ROA and ROE but not on NIM. There is no evidence found in support of the LLPR and CAR variables on models. The effect of GDP growth is statistically significant and positive on ROA, ROE, and NIM, whereas the INF is only found to have a significant positive impact on ROA and NIM.
    Date: 2023–04
  7. By: Renzo Castellares Añazco
    Abstract: This study estimates the Bilateral Real Exchange Rate (BRER) impact on Non-Traditional Exports (NTX) of Chilean and Peruvian firms. Different from previous works about Chile and Peru, this paper considers a heterogeneous impact of the BRER on firm’s exports, depending on firm’s productivity. In addition, we estimate the impact of the real exchange rate of countries whose exports compete against Peruvian and Chilean exports in third markets. This variable has been barely used in the literature and its omission causes a downward bias on the estimation of the BRER elasticity on exports. To do this, we use detailed firm-level information of products and destinations of Chilean exports from 2004 to 2011, and Peruvian exports from 2007 to 2014.
    Keywords: Bilateral real exchange rate, productivity, exports, competitors, Peru, Chile
    Date: 2022–12
  8. By: Fabien Mercier; Luciano Giua
    Abstract: This report analyses subsidies provided to steel producers by examining firm-level data from the Organisation for Economic Co-operation and Development (OECD) and conducting desk research. It reveals that subsidy trends persist even in the face of existing overcapacity. Between 2008 and 2020, steel companies in partner economies obtained an average of 10.7 times more subsidies per crude steel production capacity unit than their counterparts in OECD countries. These subsidies took the form of cash grants, cash awards, and cost reimbursements. The report also finds that the national context significantly influences a jurisdiction's inclination to support its steel sector and the transparency of such subsidies. Some jurisdictions have prioritised the growth of their domestic steel industry by establishing firm goals for crude steel production, export, or concentration. Meanwhile, others have engaged in international collaboration to address global challenges related to the decarbonisation of the steel industry.
    Date: 2023–04–26
  9. By: Mario A. Maggioni; Emanuela Marrocu; Teodora Erika Uberti; Stefano Usai
    Abstract: How do regions develop and evolve along their productive and technological path is a central question. Within an evolutionary perspective, a given region is likely to develop new technologies closer to its pre-existing specialization. We adopt the approach of Hidalgo et al. (2007) to map the regional European technology/knowledge space to investigate the pattern and the evolution of regional specialisation in the most innovative EU countries. These dynamics depend on the interaction of three factors: (i) localised technological change, (ii) endogenous processes of knowledge recombination, and (iii) exogenous technological paradigm shifts while accounting for spatial and technological spillovers. Our paper maps the technological trajectories of 198 EU regions over the period 1986-2010 by using data on 121 patent sectors at the NUTS2 level for the 11 most innovative European countries, plus Switzerland and Norway. The results show that regional technological specialization is mainly shaped by localised technological change and exogenous technological paradigm shifts, whereas recombinant innovation contributes to a lower extent and that these effects largely depends on the increasing, decreasing or stable regional dynamics.
    JEL: C23 O14 O31 O33 O52 R11 R12
    Date: 2023
  10. By: Andrea Bacilieri; Pablo Austudillo-Estevez
    Abstract: There is a large consensus on the fundamental role of firm-level supply chain networks in macroeconomics. However, data on supply chains at the fine-grained, firm level are scarce and frequently incomplete. For listed firms, some commercial datasets exist but only contain information about the existence of a trade relationship between two companies, not the value of the monetary transaction. We use a recently developed maximum entropy method to reconstruct the values of the transactions based on information about their existence and aggregate information disclosed by firms in financial statements. We test the method on the administrative dataset of Ecuador and reconstruct a commercial dataset (FactSet). We test the method's performance on the weights, the technical and allocation coefficients (microscale quantities), two measures of firms' systemic importance and GDP volatility. The method reconstructs the distribution of microscale quantities reasonably well but shows diverging results for the measures of firms' systemic importance. Due to the network structure of supply chains and the sampling process of firms and links, quantities relying on the number of customers firms have (out-degrees) are harder to reconstruct. We also reconstruct the input-output table of globally listed firms and merge it with a global input-output table at the sector level (the WIOD). Differences in accounting standards between national accounts and firms' financial statements significantly reduce the quality of the reconstruction.
    Date: 2023–03
  11. By: Samidh Pal
    Abstract: This paper investigates the inter-regional intra-industry disparity within selected Indian manufacturing industries and industrial states. The study uses three measures - the Output-Capital Ratio, the Capital-Labor Ratio, and the Output-Labor Ratio - to critically evaluate the level of disparity in average efficiency of labor and capital, as well as capital intensity. Additionally, the paper compares the rate of disparity of per capita income between six major industrial states. The study finds that underutilization of capacity is driven by an unequal distribution of high-skilled labor supply and upgraded technologies. To address these disparities, the paper suggests that policymakers campaign for labor training and technology promotion schemes throughout all regions of India. By doing so, the study argues, the country can reduce regional inequality and improve economic outcomes for all.
    Date: 2023–04
  12. By: Md Shah Naoaj
    Abstract: This study investigates the factors that influence the capital adequacy of commercial banks in Bangladesh using panel data from 28 banks over the period of 2013-2019. Three analytical methods, including the Fixed Effect model, Random Effect model, and Pooled Ordinary Least Square (POLS) method, are employed to analyze two versions of the capital adequacy ratio, namely the Capital Adequacy Ratio (CAR) and Tier 1 Capital Ratio. The study reveals that capital adequacy is significantly affected by several independent variables, with leverage and liquidity risk having a negative and positive relationship, respectively. Additionally, the study finds a positive correlation between real GDP and net profit and capital adequacy, while inflation has a negative correlation. For the Tier 1 Ratio, the study shows no significant relationship betweenleverage and liquidity risk, but a positive correlation with the number of employees, net profit, and real GDP, while a negative correlation with size and GDP deflator. Pooled OLS analysis reveals a negative correlation with leverage, size, and inflation for both CAR and Tier 1 Capital Ratio, and a positive correlation with liquidity risk, net profit, and real GDP. Based on the Hausman test, the Random Effect model is deemed moresuitable for this dataset. These findings have important implications for policymakers, investors, and bank managers in Bangladesh by providing insights into the factors that impact the capital ratios of commercial banks.
    Date: 2023–03
  13. By: José María Rentería; Dante Solano
    Abstract: We estimate the influence of teacher subjective well-being (TSWB) on the mathematics learning achievement of public-school students in Peru. Using the National Teacher Survey and the Census Student Assessment, after exploratory and confirmatory factor analysis we identify three dimensions of TSWB: i) workplace relationships, ii) working conditions, and iii) living conditions. We estimate instrumental variables and perform quantile regressions to disentangle the relationship between TSWB and students’ learning outcomes. Our results show that TSWB has an inverted U-shaped influence on test scores, suggesting the presence of the “too-much-of-a-good-thing effect”, and therefore the existence of an optimal threshold after which its effect becomes detrimental. Workplace relationships appear to be the most influential TSWB factor on students’ academic achievement.
    Keywords: Teacher subjective well-being, learning achievement
    Date: 2022–12
  14. By: Thierry Blayac (CEE-M, Univ Montpellier, CNRS, INRAE, Institut Agro, Montpellier, France); Patrice Bougette (Université Côte d'Azur; GREDEG, CNRS, France)
    Abstract: This study estimates the competitive effects of horizontal mergers in the French long-distance bus industry. We examine the two mergers that followed the 2015 Deregulation Act (the Macron Law); we use an exclusive and exhaustive dataset that covers eight consecutive quarters. We analyze the merger effects by comparing bus links that were affected by mergers with those that were unaffected; we use difference-in-differences estimations. We find that the two mergers are associated with price increases of about 13.5% immediately that then moderate to 5.3%; and with the frequency decreases from -21.5% to -25.7%; we observe no effects on load factors. These findings show evidence of short-run anticompetitive effects, while the mergers under study were not scrutinized by the French competition agency, as they were below the notification thresholds.
    Keywords: Long-distance bus industry, Mergers and acquisitions, Deregulated industry, Consolidation, Intramodal competition, Difference-in-differences estimation
    JEL: K21 L12 L40 L42
    Date: 2022–09
  15. By: Kilic Celic, Sinem; Kose, M. Ayhan; Ohnsorge, Franziska
    Abstract: Potential output growth around the world slowed over the past two decades. This slowdown is expected to continue in the remainder of the 2020s: global potential growth is projected to average 2.2 percent per year in 2022-30, 0.4 percentage point below its 2011-21 average. Emerging market and developing economies (EMDEs) will face an even steeper slowdown, of about 1.0 percentage point to 4.0 percent per year on average during 2022-30. The slowdown will be widespread, affecting most EMDEs and countries accounting for 70 percent of global GDP. Global potential growth over the remainder of this decade could be even slower than projected in the baseline scenario—by another 0.2-0.9 percentage point a year—if investment growth, improvements in health and education outcomes, or developments in labor markets disappoint, or if adverse events materialize. A menu of policy options is available to help reverse the trend of weakening economic growth, including policies to enhance physical and human capital accumulation; to encourage labor force participation by women and older adults; to improve the efficiency of public spending; and to mitigate and adapt to climate change, including infrastructure investment to facilitate the green transition.
    Keywords: production function; growth expectations; emerging markets; developing economies
    JEL: E30 E32 E37 O20
    Date: 2023–03–27
  16. By: Yekimov, Sergey
    Abstract: Economic and mathematical models allow researchers to find out the causal relationship between various economic indicators and determine internal and external factors of interaction. Production functions allow us to model the dependence of the dynamics of factors of production on the dynamics of economic growth. Interpolation of numerical series by the Dirichlet series makes it possible to achieve good results of approximation of numerical series by analytical functions . Public authorities need accurate and up-to-date information about the state of the economy in order to make effective management decisions. In the opinion of the author, interpolation methods in economic analysis are undeservedly relegated to the background. Therefore, within the framework of this study, the production function of the Czech Republic was constructed on the basis of interpolation of numerical series by series of exponents of a complex variable. Interpolation of numerical series by series of exponents of a multiplex variable allows to achieve an approximation accuracy not inferior to regression analysis
    Keywords: Production function , complex variable function , Dirichlet series , Czech Republic
    JEL: C10 O10
    Date: 2023–04–14
  17. By: Takafumi Kawakubo; Takafumi Suzuki
    Abstract: How are supply chains formed and restructured over time? This paper investigates firm-to-firm transaction network dynamics from theoretical and empirical perspectives, exploiting large-scale firm-level transaction data from Japan. First, we provide basic facts which show substantial churning in supply chains over time, even after excluding the cases where either supplier or customer firms exit from the market. Second, we empirically find that productivity positive assortative matching between firms exists. Firms are more likely to keep trading with more productive firms and instead stop trading with less productive ones. Alternatively, more productive firms start new transactions with more productive business partners. Lastly, we build a theoretical framework to rationalize these findings. Both supplier and customer firms are heterogeneous and choose their trading partners with many-to-many matching setting. We derive the implications for supply chain formation and restructuring in response to productivity shocks.
    Date: 2023–04
  18. By: Philippe Aghion; Celine Antonin; Simon Bunel; Xavier Jaravel
    Abstract: We use comprehensive micro data in the French manufacturing sector between 1995 and 2017 to document the effects of a fall in the cost of investments in modern manufacturing capital, including modern automation technologies, on employment, wages, sales, prices, and business stealing. Causal effects are estimated with event studies and a shift-share IV design leveraging pre-determined supply linkages and productivity shocks across foreign suppliers of manufacturing capital. At all levels of analysis - plant, firm, and industry - the estimated impact of capital investments on employment is positive, even for unskilled industrial workers. Further-more, we find that capital investments lead to higher sales and exports, higher profits, and lower consumer prices, while wages and wage inequality remain unchanged. We estimate a positive industry-level employment response to manufacturing capital investments only in industries that are exposed to import competition, due to business-stealing across countries. Thus, typical investments in modern manufacturing capital lead to an increase in domestic labor demand and promote competitiveness in international markets.
    Keywords: modern manufacturing capital, investments, productivity, France
    Date: 2023–03–29
  19. By: Francesco Bripi (Bank of Italy)
    Abstract: This paper estimates the elasticity of substitution across banks using matched bank-firm data and assuming monopolistic competition in local credit markets. It also quantifies the impact of credit supply shocks on corporate investment as shaped by this elasticity. Credit supply shocks have significant effects on firms’ investments in industries with a lower degree of substitutability. In these industries, where firms find it difficult to acquire funding and obtain better credit conditions from other banks, a 1 per cent increase in credit supply increases firms’ investment rates by 0.2 per cent. The effect of lenders substitutability on investment offsets that of bank specialization, thus highlighting that the risks of excessive bank concentration in specific industries may be alleviated by lenders substitution. Overall, the evidence suggests that considering the demand side, i.e. the heterogeneous effects of the elasticity of substitution in credit markets, is crucial for a better understanding of the bank lending channel.
    Keywords: banks, credit, substitution, investments
    JEL: G21 D22 E22
    Date: 2023–04
  20. By: Emma Whitelaw (Graduate Associate, Southern Africa Labour Development Research Unit (SALDRU), University of Cape Town.); Nicola Branson (Southern Africa Labour Development Research Unit (SALDRU), University of Cape Town); Murray Leibbrandt (Southern Africa Labour Development Research Unit (SALDRU), African Centre of Excellence for Inequality Research (ACEIR), University of Cape Town)
    Abstract: In response to the COVID-19 pandemic, South African higher education institutions closed and rapidly moved to implement remote learning solutions. Many students lacked access to data and learning devices, and structural inequalities shape the household environments to which many students returned – and in which they were expected to learn new academic material. To date, there has been a paucity of research quantifying the effects of the pandemic on learning loss and academic outcomes among South African university students. Therefore, we explore changes in university students’ academic outcomes during the pandemic using longitudinal, administrative data from the University of Cape Town. We estimate a difference-in-differences model in which we allow for the effect of the pandemic on students’ outcomes to differ by their academic performance in previous years as well as their socioeconomic status. Results show that although performance improved on average in 2020, this was driven by performance gains at the bottom end of the grade point average distribution. Furthermore, performance gains made in 2020 are reversed in 2021, suggesting academic performance improvements in 2020 did not reflect true learning gains. Of particular concern, however, is a widening achievement gap between NSFAS-funded students and students not funded by NSFAS in 2021, suggesting household inequalities are playing out in student performance differentials to a greater extent since COVID-19.
    Date: 2022

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