nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒06‒12
sixteen papers chosen by

  1. A generalization of environmental productivity analysis By Arnaud Abad; Paola Ravelojaona
  2. Disentangling trade reform impacts on firm market and production decisions By Maria Bas; Caroline Paunov
  3. Specialisation precedes diversification: R&D productivity effects By Foreman-Peck, James; Zhou, Peng
  4. Carbon Competitiveness is Shaped in Firms By Kaitila, Ville
  5. A Study on Nonlinear Budget Constraint of a Local Industrial Firm of Bangladesh: A Profit Maximization Investigation By Mohajan, Devajit; Mohajan, Haradhan
  6. Gender Equity in Labor Market Opportunities and Aggregate Technical Efficiency: A Case of Equity Promoting Efficiency By Hazarika, Gautam; Khraiche, Maroula; Kutlu, Levent
  7. Internet use and agricultural productivity: Evidence from rural Vietnam By Thanh-Tung Nguyen; Trung Thanh Nguyen; Ulrike Grote
  8. Schumpeter meets goldilocks: the scarring effects of firm destruction By Beatriz González; Enrique Moral-Benito; Isabel Soler
  9. Labour Productivity and Development of Carbon Competitiveness: Industry-Level Evidence from Europe By Kaitila, Ville
  10. Hybrid Mode of Production, Transaction, and Economic Growth: Implication of Digitalization By Mandal, Biswajit; Roy Chakraborty, Labani; Sanyal, Alapan
  11. The Effects of Climate Change on Public Investment Efficiency in Resource-rich Countries : Evidence from Stochastic Frontier Analysis By Yacouba Coulibaly
  12. It's Not Who You Know—It's Who Knows You: Employee Social Capital and Firm Performance By DuckKi Cho; Lyungmae Choi; Jessie Jiaxu Wang
  13. The potential growth of the spanish economy after the pandemic By Pilar Cuadrado; Mario Izquierdo; José Manuel Montero; Enrique Moral-Benito; Javier Quintana
  14. Government Procurement and Access to Credit: Firm Dynamics and Aggregate Implications By Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benitoz; Josep Pijoan-Mas
  15. Firm-level production networks: what do we (really) know? By Lafond, François; Astudillo-Estévez, Pablo; Bacilieri, Andrea; Borsos, András
  16. Sector-level economic effects of regulatory complexity: evidence from Spain By Juan S. Mora-Sanguinetti; Javier Quintana; Isabel Soler; Rok Spruk

  1. By: Arnaud Abad (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Paola Ravelojaona (UPVD - Université de Perpignan Via Domitia)
    Abstract: This paper aims to analyze environmental Total Factor Productivity (TFP) change. Indeed, innovative environmental TFP measures are introduced through convex and non convex environmental production processes. Hence, the impacts of input and output quality change on environmental productivity variation are underscored. In addition, general decomposition of the new ratio- and difference-based environmental TFP measures is proposed. Finally, an empirical example is provided to illustrate these propositions.
    Keywords: Environmental efficiency, Non Convexity, Pollution-generating Technology, Total Factor Productivity Indices
    Date: 2022–02
  2. 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
  3. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: We model how R&D enters the innovation system in four ways (intramural, extramural, cooperative, and spillover). Despite measuring three different spillovers together, for a very large sample of European enterprises we conclude that the productivity effects of spillovers were at best smaller than intramural R&D productivity effects. We also find that building on the greater skills and experience of enterprises already undertaking R&D (intensity) raised labour productivity more than providing support for those beginning R&D (extensity). Optimal extramural R&D intensity was higher than the actual level; sample firms could boost productivity either by abandoning extramural R&D or by doing much more. There were substantial differences in our sample between enterprises and countries in terms of R&D spillovers. Greater multinational corporation incidence in new EU members accounted for these countries’ high direct R&D intensity productivity, regardless of their generally low overall labour productivity. Absorptive capacity made little difference to the utilisation of spillovers.
    Keywords: R&D; innovation; knowledge spillover
    JEL: L53 L21 H71 H25
    Date: 2023–05
  4. By: Kaitila, Ville
    Abstract: Abstract Greenhouse gas (GHG) emissions are now one factor that affects firms’ broader competitiveness. We analyse the development of emission intensities – GHG emissions relative to value added produced – at the level of industries in 2008–2020 in Europe. Finland’s carbon competitiveness, as measured by relative GHG-emission intensities, is average but varies by industries. Competitiveness is good in most industries, but it falls behind the EU27 average in agriculture, paper industry, construction, and land transportation, and behind Sweden and/or Germany also in basic metals, energy industry, and sewerage and waste management. We find that labour productivity is negatively associated with the level of and changes in GHG-emission intensities in Europe. Furthermore, higher investments, higher carbon prices within the ETS mechanism, and higher environmental taxes are associated with lower emission intensities. Consequently, policies that promote productivity growth and financial incentives to decrease emissions are likely to help reach lower emissions. See also Etla Report no 139 Labour Productivity and Development of Carbon Competitiveness: Industry-Level Evidence from Europe.
    Keywords: Greenhouse gas emissions, GHG-intensity, Carbon competitiveness, Productivity, ETS
    JEL: C23 O44 Q54 Q56
    Date: 2023–05–22
  5. By: Mohajan, Devajit; Mohajan, Haradhan
    Abstract: Every local or global firm expects to achieve maximum profit for its survival in sustainable economic environment. This article considers that a local industrial firm of Bangladesh has achieved maximum profit during its total operation. So that this study directly tries to calculate maximum profit and also Lagrange multiplier for profit maximization investigation by the consideration of nonlinear budget constraint. In this study Cobb-Douglas production function is considered as profit function to operate mathematical procedures. Method of Lagrange multiplier is also applied here to obtain accurate results.
    Keywords: Profit maximization, Lagrange multiplier, nonlinear budget constraint
    JEL: C02 C38 C41 C51 C52 C53 C61 C67 E2 E27 I3 J3
    Date: 2023–03–25
  6. By: Hazarika, Gautam (The University of Texas Rio Grande Valley); Khraiche, Maroula (The University of Texas Rio Grande Valley); Kutlu, Levent (The University of Texas Rio Grande Valley)
    Abstract: This study applies a panel data stochastic frontier analysis to country data towards examining the effect of gender equity in labor market opportunities upon efficiency in the production of GDP. It finds that aggregate technical efficiency is improved by a widening of women's labor market opportunities as indicated by a rise in their share of employment, but that this effect is dampened by patriarchal cultural norms whose strength is measured by the proportion of the population tracing its ancestry to ethnic groups who adopted the plough as an agricultural implement. That aggregate technical efficiency rises in women's share of employment is consistent with improvement in the average quality of the workforce when talented women's entry to it is eased. That this effect is dampened by patriarchal cultural norms is consistent with their promoting a misallocation of employed women. Additionally, aggregate technical efficiency appears improved by democracy, the control of corruption, and trade-openness.
    Keywords: technical efficiency, aggregate productivity, patriarchy, gender equity, stochastic frontier model
    JEL: J16
    Date: 2023–04
  7. By: Thanh-Tung Nguyen; Trung Thanh Nguyen; Ulrike Grote
    Abstract: The use of the internet is growing rapidly and has become an engine for economic development. However, few studies have examined the impact of internet use on agricultural production, and the results are not yet conclusive. Employing a dataset of more than 2, 000 observations in rural Vietnam, our study analyses the impact of internet use on agricultural productivity using the heteroskedasticity-based instrument approach suggested by Lewbel (2012) and examines the heterogeneity and distribution of the impact using quantile regressions. Our results show that internet use has significant and positive effects on agricultural productivity. However, these effects are heterogeneous across population groups. The positive effects of internet use are stronger for households with a lower level of education, with a young and female head, and from ethnic minorities. The benefits are also found to be skewed towards the group of farmers at the bottom of the productivity distribution. Therefore, we propose facilitating the diffusion of the internet, since it not only boosts agricultural productivity, but also reduces productivity inequality. In addition, we recommend promoting rural education, supporting local markets, investing more in irrigation systems, and facilitating farm mechanisation.
    Keywords: Rural household, Instrumental variable, Quantile regression, Vietnam
    JEL: Q11 D63 O30
    Date: 2023–03
  8. By: Beatriz González (Banco de España); Enrique Moral-Benito (Banco de España); Isabel Soler (Banco de España)
    Abstract: The COVID-19 shock impacted firms severely all over the world. Governments were swift to implement policy measures to aid these firms, but these are coming to an end in the midst of a highly uncertain macroeconomic environment as a result of the war in Ukraine and the surge in energy prices. In this context, policymakers are worried about the potential increase in firm destruction after support policies are lifted, and what its macroeconomic consequences could be. Using data for Spain, we uncover an inverted U-shaped relationship between firm destruction and total factor productivity (TFP) growth: at low levels of firm exit, Schumpeterian cleansing effects dominate and the effect of firm destruction on TFP is positive, but when exit rates are very high, this effect turns negative. In order to rationalize this finding, we build on Asturias et al. (2017) and develop a model of firm dynamics with exit spillovers calibrated to match the non-linearity found in the data. This reduced-form spillover captures amplification effects from very high destruction rates that might force viable firms to exit, for example, due to disruptions in the production network and a generalised contraction in credit supply. Armed with the calibrated model, we perform counterfactual scenarios depending on the severity of the shock to firm exit. We find that when the shock is mild and firm destruction rates upon impact are similar to those observed during the Global Financial Crisis (GFC), TFP growth increases, and the recovery is faster. However, when the shock is severe and firm exit is well above that of the GFC, TFP growth decreases, since high efficiency firms are forced out of the market, which makes the recovery much slower. Overall, our results point to the importance of keeping exit rates low to avoid long term scarring effects.
    Keywords: firm exit, productivity
    JEL: E22 G33 M21 O47
    Date: 2022–08
  9. By: Kaitila, Ville
    Abstract: Abstract A drastic decline in global greenhouse gas (GHG) emissions is needed to stop the climate change. This requires a variety of political and market mechanisms. Europe is globally at the forefront among the industrialised countries in reducing its GHG emissions. We analyse the development of emission intensities – GHG emissions relative to value added produced – and use a panel data to further our understanding of their evolution at the level of industries in 2008–2020 in Europe. We find that labour productivity is negatively associated with changes in GHG-emission intensities. Furthermore, higher investments, higher carbon prices within the ETS mechanism, and higher environmental taxes are associated with lower GHG-emission intensities. Consequently, policies that promote productivity growth and financial incentives to decrease emissions lead to lower emissions. Finland’s carbon competitiveness, as measured by relative GHG-emission intensities, varies by industries. See also Etla Brief no 123 Carbon Competitiveness is Shaped in Firms (in Finnish).
    Keywords: Greenhouse gas emissions (GHG), GHG-intensity, Carbon competitiveness, Productivity, ETS
    JEL: C23 O44 Q54 Q56
    Date: 2023–05–22
  10. By: Mandal, Biswajit; Roy Chakraborty, Labani; Sanyal, Alapan
    Abstract: This essay attempts to build a simple theoretical model of optimization to decipher the effect of digitalization of a part of the entire production structure which we call here trading or transaction or marketing. In the basic model we use traditional Cobb - Douglas production function to argue that a shift from offline to online may induce increase in profit and subsequent economic growth. However, the effects are not uniform implying that factor-input ratio or factor-intensity of the trading activity has a role to play in this context. We also find that night time utilization due to digitalization further strengthens our results. We then extend the basic model for a CES production function. And it has been observed there that in CES - case we have similar results but the channels are a little different for that both revenue and cost have similar consequences of digitalization. Nevertheless, the essence of the basic results holds true even in a more generalized case.
    Keywords: Digitalisation, Selling, Output, Profit, Growth
    JEL: D0 D23 D24 D3 O14 O40
    Date: 2023
  11. By: Yacouba Coulibaly (UO - Université d'Orléans, UCA - Université Clermont Auvergne)
    Abstract: Developing countries suffer disproportionately from the negative impacts of climate change and environmental degradation on economic development in terms of financial costs and loss of potential revenues. In this paper, we examine the impact of climate change on the efficiency of public investment in 34 developing countries, with a particular focus on resource-rich countries, over the period 2000-2013. Using stochastic frontier analysis (SFA) to determine efficiency scores, we find that developing countries could increase the capital stock by 29% on average without changing their public investment spending. In particular, resource-rich countries could increase the capital stock by 26% without changing their spending. In the second step, we then use the fractional regression model (FRM) to capture the impact of climate change on the investment efficiency values obtained in the first step. Our results show that climate change has a negative impact on public investment efficiency. However, when the climate change index is disaggregated for the regressions, we find that only precipitation has a negative effect, while a 1°C temperature increase in resource-rich countries leads to a 16.32% improvement in public investment efficiency of GDP. These results are also statistically and economically robust to different controls and specifications. The main findings of this paper suggest that policies to address climate change in general and heavy rainfall shocks in particular should include strong provisions for financing more resilient public investments to adapt to climatic conditions and modernise public infrastructures to mitigate the negative environmental impacts for developing countries, especially resource-rich countries.
    Keywords: H81, C12, Q54, Q01, Climate change, Public investment, Technical efficiency, Weather shocks, Environment, Stochastic frontier analysis O13
    Date: 2023–04–11
  12. By: DuckKi Cho; Lyungmae Choi; Jessie Jiaxu Wang
    Abstract: We show that the social capital embedded in employees' networks contributes to firm performance. Using novel, individual-level network data, we measure a firm's social capital derived from employees' connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms.
    Keywords: Social capital; Social networks; Labor and finance
    JEL: G30 G41 L14
    Date: 2023–04–13
  13. By: Pilar Cuadrado (Banco de España); Mario Izquierdo (Banco de España); José Manuel Montero (Banco de España); Enrique Moral-Benito (Banco de España); Javier Quintana (Banco de España)
    Abstract: Despite the exogenous nature of the COVID-19 health crisis, its intensity and persistence could have a negative impact on long-term economic growth. This article offers a comprehensive discussion of the various channels through which this crisis could affect the potential growth of economies, as well as some scenarios for the Spanish economy over a medium-term horizon. Although the high degree of uncertainty in the current circumstances makes it advisable to interpret these estimates with caution, the results point to a potential growth rate for the Spanish economy very similar to that estimated before the pandemic, of around 1.3%. However, it should be noted that the economic policies adopted have been and will be critical in determining the long-term effects on the economy’s growth capacity. In particular, European funds can be catalysts for a significant boost to both investment and productivity in the long term. Such a boost would result in higher potential growth of the Spanish economy, especially if accompanied by structural reforms that favour synergies between public and private investment, maximising their impact on productivity. According to the estimates presented in this article, the potential growth of the Spanish economy could be in the vicinity of 2% under a scenario in which a good selection of investment projects financed with European funds is accompanied by growth-enhancing structural reforms.
    Keywords: potential growth, productivity, structural reforms, public investment, Spain
    JEL: E23 E22 O40 O47
    Date: 2022–04
  14. By: Julian di Giovanni (FEDERAL RESERVE BANK OF NEW YORK); Manuel García-Santana (Universitat Pompeu Fabra); Priit Jeenas (Universitat Pompeu Fabra); Enrique Moral-Benitoz (Banco de España); Josep Pijoan-Mas (CEMFI)
    Abstract: We provide a framework to study how different public procurement allocation systems affect firm dynamics and long-run macroeconomic outcomes. We build a new panel dataset of administrative data for Spain that merges credit-register loan data, quasi-census firm-level data and public procurement project data. We find evidence consistent with the hypothesis that procurement contracts provide valuable collateral for firms, and that they do so to a greater extent than private-sector contracts. We then build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private-sector firms, and use it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that policies that promote the participation of small firms have sizeable macroeconomic effects, but their net impact on aggregate output is ambiguous. These policies help small firms grow and overcome financial constraints, which increases output in the long run. However, they also reduce saving incentives for large firms, decreasing output. The relative strength of these two forces and hence which of them dominates crucially depends on the type of financial frictions firms face and the specific way the policy is implemented.
    Keywords: government procurement, financial frictions, capital accumulation, aggregate productivity
    JEL: E22 E23 E62 G32
    Date: 2022–08
  15. By: Lafond, François; Astudillo-Estévez, Pablo; Bacilieri, Andrea; Borsos, András
    Abstract: Are standard production network properties similar across all available datasets, and if not, why? We provide benchmark results from two administrative datasets (Ecuador and Hungary), which are exceptional in that there is no reporting threshold. We compare these networks to a leading commercial dataset (FactSet) and published results on national firm-level production networks. Administrative datasets with no reporting thresholds have remarkably similar quantitative properties, while a number of important properties are biased in datasets with missing data.
    Keywords: Production networks, input-output analysis, firm-level data.
    JEL: C80 D57 L14
    Date: 2023–05
  16. By: Juan S. Mora-Sanguinetti (Banco de España); Javier Quintana (Banco de España); Isabel Soler (EUROPEAN UNIVERSITY INSTITUTE (EUI)); Rok Spruk (UNIVERSITY OF LJUBLJANA)
    Abstract: This paper studies for the first time the impact on various measures of economic efficiency of regulatory complexity by sector in Spain. We base our analysis on an innovative database that classifies 206, 777 regulations by economic sector and region, which highlights the growing volume of regulation, as well as its diversity by sector, region and business cycle stage. This analysis first looks at the aggregate impacts of sectoral regulatory complexity on the employment-to-population ratio, total working hours, sectoral GDP shares, labour intensity and capital intensity. Secondly it delves into the heterogeneous impacts observed across firms of different sizes and ages, drawing on the MCVL (Continuous Work History Sample), a rich database at the enterprise level. On the first front, we estimate a set of multiple fixed-effects model specifications across 13 economic sectors, 23 regulatory sectors and 17 Spanish regions over the period 1995-2020. Our results suggest that greater regulatory complexity has a negative impact on the employment rate and on value added. The effect on employment is consistent with previous findings for the United States. In particular, ceteris paribus, each additional increase in the regulatory complexity index is associated with a 0.7 percent drop in the sector-level employment share. Furthermore, our findings suggest that several distortionary sector-level effects of increasing regulatory complexity are taking place. For instance, markedly lower labour intensity and decreased sector-level investment rates, which confirm that greater regulatory complexity entails non-trivial sector-level costs. Distortionary effects of regulatory complexity materialise through compositional differences, mainly in the form of reduced wages and a lower investment rate. On the second front, using data on employment by firms’ characteristics, we show that the negative impact of regulatory complexity is concentrated on smaller and younger firms. This finding supports the hypothesis that greater regulatory complexity imposes a burden that small and less experienced firms are less able to handle. At the sector level, the manufacturing sectors are the most negatively affected. This may be related to the higher investment required by these sectors.
    Keywords: sectoral regulation, regulatory complexity, economic sectors, structural policies, employment
    JEL: K2 R11 J00 E02
    Date: 2023–03

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