nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒05‒29
twelve papers chosen by

  1. The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? By John G. Fernald; Robert Inklaar; Dimitrije Ruzic
  2. Digitalisation and productivity: gamechanger or sideshow? By Robert Anderton; Vasco Botelho; Paul Reimers
  3. The impact of Global Value Chains participation on countries' productivity By D. Dessì; R. Paci
  5. Government Spending and Tax Revenue Decentralization and Public Sector Efficiency: Do Natural Disasters matter? By António Afonso; João Tovar Jalles; Ana Venâncio
  6. Managers and Productivity in Retail By Robert D. Metcalfe; Alexandre B. Sollaci; Chad Syverson
  8. Intangible Capital as a Production Factor. Firm-level Evidence from Austrian Microdata By Klaus Friesenbichler; Agnes Kügler; Julia Schieber-Knöbl
  9. Enjoying a quiet life even during a great recession? Evidence from the Greek olive oil industry By Keramidou, Ioanna; Mimis, Angelos
  10. Public Health Efficiency and well-being in Italian province By Rostand Arland Yebetchou Tchounkeu
  11. Does the adoption of Ind AS affect the performance of firms in India? By M N, Nikhil; Chakraborty, Suman; B M, Lithin; Lobo, Lumen Shawn

  1. By: John G. Fernald; Robert Inklaar; Dimitrije Ruzic
    Abstract: This paper reviews advanced-economy productivity developments in recent decades. We focus primarily on the facts about, and explanations for, the mid-2000s labor-productivity slowdown in large European countries and the United States. Slower total factor productivity growth was the proximate cause of the slowdown. This conclusion is robust to measurement challenges including the role of intangible assets, rankings of productivity levels, and data revisions. We contrast two main narratives for the stagnating productivity frontier: The shock of the Global Financial Crisis; and a common slowdown in productivity trends. Distinguishing these two empirically is hard, but the pre-recession timing of the U.S. slowdown suggests an important role for the common-trend explanation. We also discuss the unusual pattern of productivity growth since the start of the Covid-19 pandemic. Although it is early, there is little evidence so far that the large pandemic shock has changed the slow pre-pandemic trajectory of productivity growth.
    Keywords: productivity growth; Great Recession; convergence
    JEL: D24 E23 E44 F45 O47
    Date: 2023–02–26
  2. By: Robert Anderton; Vasco Botelho; Paul Reimers
    Abstract: Is digitalisation a massive gamechanger which will deliver huge gains in productivity, or is it more of a sideshow with only limited impacts? We use a large balance sheet panel dataset comprising more than 19 million European firm-level observations to empirically investigate the impact of digitalisation on productivity growth via various previously unexplored channels and mechanisms. Our results suggest that for two otherwise identical firms, the firm that exhibits on average a higher share of investment in digital technologies will exhibit a faster rate of TFP growth, but not all firms and sectors experience significant productivity gains from digitalisation. Digitalisation does not seem to have relatively stronger impacts on the productivity of frontier firms compared to laggards, nor does it help to turn laggards into frontier firms. Overall, firms should not regard digital investment as a ‘one-size-fits-all’ strategy to improve their productivity. Digital technologies are a gamechanger for some firms. But they seem more like a sideshow for most firms, who attempt to be increasingly digital but are not able to adequately reap its productivity gains.
    Keywords: digital technology/transition; productivity growth; technology adoption; technology diffusion
    Date: 2023
  3. By: D. Dessì; R. Paci
    Abstract: Participation in Global Value Chains (GVC) is widely considered a potential driver for productivity growth due to the advantages gained by the firms through technology transfers, vertical specialization, and access to new markets. However, in the last years, a series of consecutive shocks have led to a reduction in the volume of global trade and this trend is likely to have long-term consequences. Relying on the latest available data, we empirically investigate the relationship between labour productivity and GVC inclusion to assess the potential impact of the global trade slowdown on countries' productivity. The analysis is performed using an augmented production function framework applied to a sample of 76 countries over the period 1995-2019. Our findings add new insights into the ongoing debate on the uneven distribution of GVC participation advantages across different trade partners depending on their development stage. On average, developed countries benefit from a larger production efficiency from both upstream and downstream connections. On the other hand, in developing countries, the influence of the major economies seems to have harmful effects on productivity through forward participation, as domestic production is influenced by foreign demand for low-cost inputs, which can make developing economies stuck in low-value-added activities.
    Keywords: Global Value Chains;global trade;labour productivity;forward linkages;backward linkages
    Date: 2023
  4. By: Jean-Christophe Bureau (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Anton Jesus
    Abstract: Increased productivity and sustainability of the agricultural sector are core policy objectives in OECD and non-OECD countries. This Guide provides an overview of the current state of the art in measuring sustainable productivity of the agricultural sector and analysing sources of growth in a reliable and comparable manner across countries in a way useful for policy makers. It draws on the contributions from members of the OECD Network on Agricultural Total Factor Productivity (TFP) and the Environment that brings together relevant experts from academia and national statistical agencies. Its insights will be key for designing policies necessary to meet the triple challenge of feeding a growing world population and providing incomes to food system actors whilst ensuring environmental sustainability. The Guide presents recommendations in two areas. First, on how to improve the traditional calculation of TFP based on market prices inputs and outputs, proposing harmonised methods on capital measurement, land pricing, output aggregation and quality adjustment. Second, on how to account for environmental outcomes, considering a reduction in pollution or emissions as a productivity gain, but the increased use of natural capital as a productivity loss. A main challenge is the estimation of "shadow prices" for nonmarket inputs and outputs. It is recommended to pursue several complementary avenues: investing in improving TFP methodologies and data; continuing investigating its expansion to include environmental outcomes; and mapping traditional TFP with other indicators of agri-environmental performance.
    Keywords: Agricultural productivity Economic growth Environmental sustainability O11, O13, O41, O47, Q1, Agricultural productivity, Economic growth, Environmental sustainability O11
    Date: 2022–06–01
  5. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: We assess notably how do extreme events affect the public sector efficiency of decentralized governance. Hence, we empirically link the public sector efficiency scores, to tax revenue and spending decentralization. First, we compute government spending efficiency scores via data envelopment analysis. Second, relying on panel data and impulse response approaches, we estimate the effect of decentralization on public sector efficiency and how extreme natural disasters mediate this relationship. The sample covers 36 OECD countries between 2006 and 2019. Our results show that tax revenue decentralization decreases public sector efficiency, while spending decentralization and a regional authority index are positively related to public sector efficiency, both for local projections and panel analysis. For instance, efficiency rises by 10 percent following a spending decentralization shock (reaching over 20 percent after 4 years). Nevertheless, in cases of natural disasters, spending decentralization reduces public sector efficiency. Specifically, in the presence of most extreme natural disasters, the improvement in public sector efficiency after a spending decentralization shock is smaller than in their absence. Moreover, extreme natural disasters also deteriorate the negative effect of tax revenue decentralization on public sector efficiency. These results suggest that sub-national discretionary spending and tax revenue responses might be less fruitful when such extreme events occur.
    Keywords: public sector efficiency; data envelopment analysis; local projections; revenue decentralization; spending decentralization; natural disasters; OECD
    JEL: C14 C23 E62 H11 H50
    Date: 2023–05
  6. By: Robert D. Metcalfe; Alexandre B. Sollaci; Chad Syverson
    Abstract: Across many sectors, research has established that management explains a notable portion of productivity differences across organizations. A remaining question, however, is whether it is managers themselves or firm-wide management practices that matter. We shed light on this question by analyzing store-level data from two multibillion-dollar retail companies. In this setting, managers move between stores but management practices are set by firm policy and largely fixed, allowing us to hone in on managers’ personal roles in determining store performance. We find: (i) managers affect and explain a large share of the variance of store-level productivity; (ii) negative assortative matching between managers and stores, which may reflect both firms’ decisions and a selection-driven bias that we characterize and argue might apply in other settings using movers designs; (iii) managers who move do so on average from less productive to more productive stores; (iv) female managers are less likely to move stores than male managers; (v) manager quality is generally hard to explain with the observables in our data, but is correlated with the ratio of full-time to part-time workers; (vi) managers who obtain high labor productivity also tend to obtain high energy productivity, revealing some breadth in managers’ skills applicability; (vii) high-performing managers in stable growth times are also high-performing during turbulent times; and (viii) exogenous productivity shocks improve the quality of initially low quality managers, suggesting managers can learn. We explain implications of these findings for productivity research.
    JEL: D20 L2 M5
    Date: 2023–04
  7. By: João Alcobia
    Abstract: Using a Balance-of-Payments Constrained Growth model and a Convergence Quadrants Diagram this paper finds evidence of economic divergence of most European Union (EU) peripheral member states and the EU average between 1996 and 2019. In only two cases – Spain and Cyprus – do we find a trend of economic convergence, but which was of an unsustainable nature since it was accompanied by growing external imbalances. Further, using a productivity convergence/divergence model this paper again finds evidence of productivity divergence between peripheral member states and the EU average between 1996 and 2019, though it finds evidence of productivity convergence between 1996 and 2008. In the 2009-2019 period, productivity divergence was driven by a more pronounced reduction in the income elasticity of exports than in the income elasticity of imports and by a reduction in the importance of economies of scale.
    Keywords: Balance-of-Payments Constrained Growth, Convergence Quadrants Diagram, productivity convergence/divergence model, peripheral member states, economies of scale.
    JEL: C22 C23 E12 F15 F45
    Date: 2023–05
  8. By: Klaus Friesenbichler; Agnes Kügler; Julia Schieber-Knöbl (Statistics Austria)
    Abstract: We examine the role of intangible capital as a production factor using Austrian firm-level register data. Descriptive statistics show that intangible investment has increased over time. The intensive and extensive margins of firms' investments are highly skewed. They differ across sectors. A series of sample splits show that the components of intangible capital play different roles as inputs in the production function. Software and especially licenses are important for SMEs and exporters. Research and development play an important role in production in all specifications. For firms that continuously invest in intangible capital, all components of intangible capital gain importance in the production functions. These patterns differ from those found in previous studies and have implications for the strategic orientation of industrial and innovation policy.
    Keywords: Intangible capital, R&D, Firm level productivity, Investment, Production function, Austria
    Date: 2023–05–10
  9. By: Keramidou, Ioanna; Mimis, Angelos
    Abstract: The research investigates the link between market concentration and efficiency by analyzing the Greek olive oil industry data from 2006 to 2014. Unlike previous research on this issue, which focused on the impact of overall company efficiency on market power, we study the association between the three types of firm efficiency (profit, technical, and scale) and market concentration. Our theoretical framework and research assumptions were not predefined but were generated by modelling the data from the Greek oil olive sector through data mining techniques. The predicted causal relationships constructed in the preceding stage were investigated using partial least squares path modeling (PLS-PM) regression. The results show a significant negative relationship between market concentration and technical and profit efficiency. The paucity of completion resulted in prolonged firm inefficiencies, demonstrating that Greek enterprises, even during a severe recession, refrained from rigorous efforts to enhance technical and profit efficiency as they would in a competitive market, preferring instead to live a quiet life (QL). This study has several policy implications for regulators and policymakers, such as extending antitrust rules, which may enhance company efficiency and competitiveness.
    Keywords: Efficiency, industrial concentration, Quiet life hypothesis, Greece, Partial least squares path modeling, Bayesian network
    JEL: L13 L25 L44 L5 L52 L6 L66
    Date: 2023–04–20
  10. By: Rostand Arland Yebetchou Tchounkeu (Department of Economics and Social Sciences, Marche Polytechnic University)
    Abstract: Health is a fundamental human right, and good health is an essential component of well-being; therefore, an ecient public health system is required to achieve well-being in society. This paper analyses the relationship between public health eciency and well-being considering a panel of 102 Italian provinces from 2000 to 2016. The results show that public health eciency enhances well-being in Italian provinces, especially in the North. The ndings could help policymakers adopt measures to strengthen the public health system, encourage private providers, and inspire countries worldwide.
    Keywords: public health eciency index, bootstrap-data envelopment analysis, well-being index, min-max linear transformation, Italian provinces
    JEL: C33 C36 H75 I31 J58
    Date: 2023–05
  11. By: M N, Nikhil; Chakraborty, Suman; B M, Lithin; Lobo, Lumen Shawn
    Abstract: The increasing prevalence of IFRS adoption has resulted in enhanced transparency, accounting quality, and comparability of financial information among firms, especially in emerging markets worldwide, including India. Nonetheless, the question of whether the adoption of IFRS has led to improved firm performance persists. To address this question, this study examines the impact of transitioning from India’s GAAP-based accounting standards to IFRS-converged standards (Ind AS) on non-financial firms’ performance from 2013 to 2022. The empirical findings reveal that the convergence of Indian accounting standards with IFRS significantly improves firm performance, as demonstrated by a positive coefficient of 0.0166 for Ind AS in the fixed-effect model. The study also validates the original empirical findings using the return on equity (ROE) measure of firm performance, which yielded a coefficient of 0.0197, further confirming that the adoption of Ind AS leads to an increase in the performance of Indian firms. These results contribute new insights to the existing IFRS literature and have implications for policymakers and managers.
    Keywords: emerging market, firm profitability, fixed effect model, IFRS convergence, Nifty 500, panel data, return on assets
    JEL: C33 G32 M41 M48
    Date: 2023–03–15
  12. By: Michele Imbruno (Sapienza University of Rome and GEP, Nottingham); Alessia Lo Turco (Department of Economics and Social Sciences, Universita' Politecnica delle Marche (UNIVPM)); Daniela Maggioni (Department of Economics, Catholic University of the Sacred)
    Abstract: We inspect whether multinational supply chains bring energy efficiency gains to domestic firms active in a host country. Our theoretical model suggests that the presence of foreign firms in upstream manufacturing and energy industries expands the availability of high-quality inputs for downstream domestic firms, implying a reduction in their energy intensity. We test these theoretical predictions using data from Turkish manufacturing firms over the period 2010-2015. Our empirical analysis shows that domestic-owned firms in sectors that are more likely to buy manufacturing and energy inputs from foreign-owned suppliers tend to reduce their energy intensity, confirming environmental gains from FDI. When exploring the underlying mechanisms, we provide evidence that the presence of foreign firms in upstream sectors leads to an increase in the quality of available inputs which turns into improvements in downstream domestic firms' energy efficiency.
    Keywords: Energy Efficiency, FDI, MNEs, Turkey
    JEL: F23 D22 L20
    Date: 2023–04

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