nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒05‒22
thirteen papers chosen by

  1. Disentangling trade reform impacts on firm market and production decisions By Maria Bas; Caroline Paunov
  2. Potential output and the neutral rate in Canada: 2023 assessment By Julien Champagne; Christopher Hajzler; Dmitry Matveev; Harlee Melinchuk; Antoine Poulin-Moore; Kemal Ozhan; Youngmin Park; Temel Taskin
  3. Assessing global potential output growth and the US neutral rate: April 2023 By Salma Ahmed; Aviel Avshalumov; Tania Chaar; Eshini Ekanayake; Helen Lao; Louis Poirier; Jenna Rolland-Mills; Argyn Toktamyssov; Lin Xiang
  4. Rising energy prices and productivity: short-run pain, long-term gain? By Christophe André; Hélia Costa; Lilas Demmou; Guido Franco
  5. Layoffs and Productivity at a Bangladeshi Sweater Factory By Robert Akerlof; Anik Ashraf; Rocco Macchiavello; Atonu Rabbani
  6. Farm size and exposure to extreme heat: evidence from subsistence farms in Sub-Saharan Africa By Fernando Aragon; Juan Pablo Rud
  7. Management and Human Capital Employment: an overlooked Relationship By Marcelo Serra Santos; Susana Garrido Azevedo; Tiago Miguel Guterres Neves Sequeira
  8. The impact of public support for innovation on SME performance and efficiency By Raphaël CHIAPPINI; Sophie POMET
  9. Industrial dynamics throughout the ICT innovation cycle: The rise and decline of business dynamism in Portugal during 1986-2018 By Ernesto Nieto-Carrillo; Carlos Carreira; Paulino Teixeira
  10. Impact of Managerial Entrenchment on Firm Performance By Waseem, Fareeha
  11. The Unintended Consequences of Censoring Digital Technology - Evidence from Italy's ChatGPT Ban By Kreitmeir, David; Raschky, Paul Anton
  12. How 'one-size-fits-all' public works contract does it better? An assessment of infrastructure provision in Italy By Massimo Finocchiaro Castroa; Calogero Guccio; Ilde Rizzo
  13. Accumulation of capital, production functions and models of economic growth By João Ferreira do Amaral

  1. By: Maria Bas (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Caroline Paunov (OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)
    Abstract: This paper disentangles the impacts of trade liberalization on firm market and production decisions. Using firm-product data for Ecuador, we exploit exogenous tariff changes at entry to the World Trade Organization and find positive effects of trade liberalization on revenue total factor productivity (TFP-R). Input-trade liberalization improves firm efficiency, measured by quantity total factor productivity (TFP-Q) and leads firms to raise their markups and to introduce new products following an increase in imported input quality. Output-trade liberalization also improves firm efficiency and raises marginal costs as firms increase input quality and improve the quality of their core products. Firms' markups and product scope decrease. Chinese imports also contributed positively to productivity while the exchange rate's volatility prior to dollarization had reverse effects. We find positive welfare effects as consumers were offered better and cheaper products. Trade liberalization also benefited the more productive firms introduce new or better products while less productive firms were more likely to exit.
    Keywords: Gains from trade, Input and output tariff reduction, Revenue and physical quantity total factor productivity (TFP-R, TFP-Q), Markups, Output and input prices, Firm-product-level data, Ecuador
    Date: 2021–06
  2. By: Julien Champagne; Christopher Hajzler; Dmitry Matveev; Harlee Melinchuk; Antoine Poulin-Moore; Kemal Ozhan; Youngmin Park; Temel Taskin
    Abstract: We expect that potential output growth will rebound from 1.4% in 2022 to 2.2% on average between 2023 and 2026. We revised down our estimates of growth over 2022–25 relative to the April 2022 assessment. The Canadian nominal neutral rate remains unchanged—in the range of 2% to 3%.
    Keywords: Economic models; Interest rates; Labour markets; Monetary policy; Potential output; Productivity.
    JEL: E E2 E3 E4 E5
    Date: 2023–05
  3. By: Salma Ahmed; Aviel Avshalumov; Tania Chaar; Eshini Ekanayake; Helen Lao; Louis Poirier; Jenna Rolland-Mills; Argyn Toktamyssov; Lin Xiang
    Abstract: We expect global potential output growth to increase from 2.5% in 2022 to 2.8% by 2026. Compared with the April 2022 staff assessment, global potential output growth is marginally slower. The current range for the US neutral rate is 2% to 3%, unchanged from the last annual assessment.
    Keywords: Interest rates; Monetary policy; Potential output; Productivity
    JEL: E1 E2 E4 E5 F0 O4
    Date: 2023–05
  4. By: Christophe André; Hélia Costa; Lilas Demmou; Guido Franco
    Abstract: Soaring energy prices have raised concerns about the risks energy price shocks pose for firms’ performance and the green transition. This paper estimates the impacts of energy price changes on firms’ productivity as well as their dynamics, distinguishing between the short and medium-to-long term, using historical data. The analysis shows that following an energy price shock, firms adjust down their capacity utilisation, and their productivity declines. The estimates suggest that a 5% increase in energy prices reduces productivity by approximately 0.4% one year later. However, firms may display positive productivity gains in the medium term. Specifically, a shock corresponding to a 10% increase in energy prices is associated with an increase in productivity growth of around 0.9 p.p four years after the shock. These gains are more likely in less energy-intensive sectors, but tend not to materialise for larger shocks. There is some evidence that investment may be the channel behind productivity gains, the latter being larger for firms that had made investments in capital just before the shock.
    Keywords: Energy prices, environmental policy, firm performance, productivity
    JEL: D22 D24 Q40 Q48 Q52
    Date: 2023–05–11
  5. By: Robert Akerlof (University of Warwick); Anik Ashraf (LMU Munich); Rocco Macchiavello (London School of Economics and Political Science); Atonu Rabbani (University of Dhaka)
    Abstract: Conflicts between management and workers are common and can have significant impacts on productivity. Combining ethnographic, survey and administrative records from a large Bangladeshi sweater factory, we study how workers responded to management’s decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers likely had social connections - friends - that matters. Additional evidence on defect rates suggests a deliberate shading of performance by workers in order to punish the factory’s management.
    Keywords: layoffs; productivity; morale; relational contracts;
    JEL: J50 M50 O12
    Date: 2023–05–07
  6. By: Fernando Aragon (Simon Fraser University); Juan Pablo Rud (Royal Holloway, University of London)
    Abstract: This paper pools panel data from Uganda, Tanzania, Ethiopia, and Malawi to examine the heterogeneous impact of extreme heat on subsistence farmers. Despite significant differences in agricultural practices and performance between smaller and larger farms, we find that high temperatures have a negative impact on agricultural productivity, output, and food security regardless of farm size. Farms of different size seem to respond differently to extreme temperatures: small farms increase their land use while larger farms use more pesticides. While all farms also increase off-farm work, these responses do not fully mitigate the effects on output and food insecurity.
    Date: 2023–02
  7. By: Marcelo Serra Santos (CeBER); Susana Garrido Azevedo (Univ of Coimbra, CeBER, Faculty of Economics); Tiago Miguel Guterres Neves Sequeira (University of Coimbra, Centre for Business and Economics, CeBER and Faculty of Economics)
    Abstract: We look at data for Management and Skills demand of firms in existing databases and we highlight the strong positive relationship between both variables. We devise a model that explains this relationship and calibrate it in order to present quantitative results and compare those results with the estimated ones. We discover that a simple model with Management as Technology can replicate well the estimated influence of Management in the skills demand of firms. We also present evidence of the influence of the subitems of Management on skills’ demand and discovered that aside from the talent component of Management, target and performance components greatly influence the demand for skills.
    Keywords: management practices, productivity, human capital
    Date: 2023–01
  8. By: Raphaël CHIAPPINI; Sophie POMET
    Abstract: This article examines the impact of two types of financial support for innovation granted by French public institutions to French SMEs on a set of firm performance measures. Using an original database that provides information on repayable advances and subsidies obtained by 5, 448 French SMEs over the period 2010-2016, we evaluate the effectiveness of such financial support using a quasi-experimental design. Our findings indicate that both repayable advances and subsidies significantly improve targeted SMEs’ turnover, level of intangible assets and total employment at one year and three years after support is granted. The impact on firm-level TFP is only positive and significant after three years, while being negative in the very short run. Our results also provide evidence that the combination of both instruments for a given innovation project within a year does not entail significantly higher effects. A heterogeneous analysis reveals that the impact of financial support instruments for innovation is significantly higher for young, micro and small firms. Furthermore, our analysis shows that innovation support benefits more to firms located in the Paris region than in other regions and this tends to exacerbate regional inequalities. Finally, our findings indicate that the transformation of Oséo into Bpifrance in December 2012 has led to an increase in the effectiveness of the innovation policy.
    Keywords: Innovation policy, firm performance, policy evaluation, Mahalanobis distance matching, difference-in-difference.
    JEL: O33 O38 C14 C21
    Date: 2023
  9. By: Ernesto Nieto-Carrillo (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics); Carlos Carreira (Univ of Coimbra, CeBER, Faculty of Economics); Paulino Teixeira (niversity of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics)
    Abstract: Increasing evidence shows that business dynamism has weakened in most developed economies. However, except for the US literature, most previous research has only portrayed the new century’s changes in firm dynamics. Instead, we focus on a longer period, 1986-2018, assembling an extensive longitudinal database with a time-consistent industry classification covering the population of Portuguese firmsin the manufacturing and service sectors. The BaiPerron estimate for unknown break dates in time series indicates two structural changes in industrial dynamics, one in its ascending wave (1993) and another in the declining phase (2003). Accordingly, our (HP) estimated trends show that, after an initial period of intense creative destruction, firm dynamics have become less turbulent since 2003, with lower entry, declined job reallocation, and decreased growth rates. Furthermore, survival and counterfactual firm-level regressions suggest that an otherwise-equal post-2003 start-up faced a significantly higher exit hazard than its pre-1993 counterpart (i.e., without any structural change). As a result, new and young companies have seen their share in aggregate employment and net job creation decline, notwithstanding the increasingly higher performance of young, high-growth firms. Lower labour and firm turnover suggest a weakened contribution of reallocation to productivity growth. On the other hand, decreased entry and the higher exit hazard have likely undermined the disruptive potential of transformative entrepreneurship
    Keywords: Firm dynamics; Entry; High-growth firms; Resource reallocation; Survival.
    Date: 2023–04
  10. By: Waseem, Fareeha
    Abstract: This research attempts to analyze the impact of managerial entrenchment on firm performance in the context of KSE-100 index companies in Pakistan. The given study engages the CEO share as the measure of managerial entrenchment and investigate its impact on financial performance of companies. In pertinent to this, regression analysis has been utilized by employing the top performing corporations listed on KSE-100 index. For measurement of firm performance, this study employs the two variables used to quantify firm performance as “return on assets (ROA)” and “Tobin's Q”. This study comprises 318 observations, from 53 non-financial companies of Pakistan Stock Exchange (PSX), over 6 years period (2015-2020) from annual reports. The results of this study indicate that there is a significant negative relationship between the managerial entrenchment measured through CEO share and financial performance measured through ROA and Tobin’s Q. The study has some limitations. The future researchers can add other parameters of managerial entrenchment such as board independence, board compensation, tenure and management duality to get more insights on this association. The research findings are giving implications for managers, investors and shareholders. Managers may adopt techniques that allow them to strengthen their position thus gaining investors’ confidence. This research extends the literature by comprehensively employing the impact of managerial entrenchment on financial performance of companies in KSE-100 index companies that was predominately neglected by the previous researchers in context of Pakistan.
    Date: 2023–03–30
  11. By: Kreitmeir, David; Raschky, Paul Anton (Monash University)
    Abstract: We analyse the effects of the ban of ChatGPT, a generative pre-trained transformer chatbot, on individual productivity. We first compile data on the hourly coding output of over 8, 000 professional GitHub users in Italy and other European countries to analyse the impact of the ban on individual productivity. Combining the high-frequency data with the sudden announcement of the ban in a difference-in-differences framework, we find that the output of Italian developers decreased by around 50\% in the first two business days after the ban and recovered after that. Applying a synthetic control approach to daily Google search and Tor usage data shows that the ban led to a significant increase in the use of censorship bypassing tools. Our findings show that users swiftly implement strategies to bypass Internet restrictions but this adaptation activity creates short-term disruptions and hampers productivity.
    Date: 2023–04–18
  12. By: Massimo Finocchiaro Castroa; Calogero Guccio; Ilde Rizzo
    Abstract: Public infrastructure procurement is crucial as a prerequisite for public and private investments and for economic and social capital growth. However, low performance in execution severely hinders infrastructure provision and benefits delivery. One of the most sensitive phases in public infrastructure procurement is the design because of the strategic relationship that it potentially creates between procurers and contractors in the execution stage, affecting the costs and the duration of the contract. In this paper, using recent developments in non-parametric frontiers and propensity score matching, we evaluate the performance in the execution of public works in Italy. The analysis provides robust evidence of significant improvement of performance where procurers opt for a design and build contracts, which lead to lower transaction costs, allowing contractors to better accommodate the project in the execution. Our findings bear considerable policy implications.
    Date: 2023–04
  13. By: João Ferreira do Amaral
    Abstract: This paper is about the possible interdependence of the assumptions related to the properties of the process of accumulation of capital and the properties of the production function as they are used in models of economic growth. The case of a semi-bounded substitution production function exemplifies this kind of interdependence and the consequent restrictions that may condition economic growth.
    Keywords: economic growth; technological change; innovation; production function.
    JEL: E10 E11 E22 N10 O30
    Date: 2023–04

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