nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒06‒26
fourteen papers chosen by

  1. Regional productivity growth in the EU: An assessment of recent developments By Ilias Kostarakos
  2. Government Spending and Tax Revenue Decentralization and Public Sector Efficiency: Do Natural Disasters Matter? By António Afonso; João Tovar Jalles; Ana Venâncio
  3. Further Improvements of Finite Sample Approximation of Central Limit Theorems for Envelopment Estimators By Simar, Léopold; Zelenyuk, Valentin; Zhao, Shirong
  4. On Value Efficiency Analysis and Cone-Ratio Data Envelopment Analysis models By Giannis Karagiannis; Panagiotis Ravanos
  5. Services Trade Policy and Industry Performance in African Economies By Bernard Hoekman; Matteo Fiorini; Dennis Quinn
  6. Super-efficiency of Listed Banks in China and Determinants Analysis (2006-2021) By Yun Liao; Ruihui Xu
  7. Misallocation in Firm Production: A Nonparametric Analysis Using Procurement Lotteries By Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal
  9. Primary agricultural cooperatives in Malawi: Structure, conduct, and performance By Davis, Kristin; Kazembe, Cynthia; Benson, Todd; De Weerdt, Joachim; Duchoslav, Jan
  10. Managerial Practices and Student Performance: Evidence from Changes in School Principals By Di Liberto, Adriana; Giua, Ludovica; Schivardi, Fabiano; Sideri, Marco; Sulis, Giovanni
  11. Working Remotely? Selection, Treatment, and the Market for Remote Work By Natalia Emanuel; Emma Harrington
  12. Government Demand and Domestic Firms Growth: Evidence from Uganda By Bernard Hoekman; Marco Sanfilippo; Filippo Santi
  13. What is Measured in National Accounts? By Francois de Soyres; Alexandre Gaillard; Henry L. Young
  14. THE POTENTIAL SCARRING EFFECT OF COVID19 ON PRODUCTIVITY AND LABOR MARKET: THE CASE OF INDONESIA By Masagus M. Ridhwan; Jahen F. Rezki; Arief Ramayandi; Aryo Sasongko; Dinda T. Andariesta

  1. By: Ilias Kostarakos (European Commission - JRC)
    Abstract: The level and growth rates of Total Factor Productivity estimates have been extensively used as a means of assessing the level of efficiency in production across regions as well as a source of the observed differences in economic performance. This paper, focusing on a sample of 242 EU NUTS2 regions spanning the 2000-2020 period provides a time series of TFP estimates, based on a new dataset of regional level capital stocks, and documents significant heterogeneity in terms of TFP developments across regions and groups of regions. The evidence suggest that TFP can account for up to 80% of the observed income differences, while it is made evident that during the period covered by the sample convergence in terms of TFP was weakened.
    Keywords: production function; total factor productivity; development accounting; convergence
    JEL: E01 E10 O47
    Date: 2023–05
  2. 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
  3. By: Simar, Léopold (Université catholique de Louvain, LIDAM/ISBA, Belgium); Zelenyuk, Valentin; Zhao, Shirong
    Abstract: A simple yet easy to implement method is proposed to further improve the finite sample approximation of the recently developed central limit theorems for aggregates of envelopment estimators. Focusing on the simple mean efficiency, we propose using the bias-corrected individual efficiency estimate to improve the variance estimator. The extensive Monte-Carlo experiments confirm that, for relatively small sample sizes (≤ 100), with both low dimensions and especially for high dimensions, our new method combined with the data sharpening method generally provides better ‘coverage’ (of the true values by the estimated confidence intervals) than the previously developed approaches.
    Keywords: Efficiency ; Non-parametric Efficiency Estimators ; Data Envelopment Analysis ; Free Disposal Hull
    JEL: C1 C3
    Date: 2023–01–01
  4. By: Giannis Karagiannis (Department of Economics, University of Macedonia); Panagiotis Ravanos (Department of Economics, University of Macedonia)
    Abstract: : In this paper we relate the Value Efficiency Analysis (VEA) efficiency scores with those of three different Cone-Ratio Data Envelopment Analysis (CR-DEA) models, when the chosen model Decision Making Units (DMUs) in CR-DEA jointly comprise the Most Preferred Solution (MPS) in VEA. In particular, we consider the cases where the cone of feasible weight vectors is given respectively by (i) the intersection of the sets containing the weight vectors that are optimal in DEA for each model DMU, (ii) the union of the sets containing the weight vectors that are optimal in DEA for each model DMU, and (iii) only those vectors with strictly positive components, each of which is optimal in DEA for all the model DMUs. In each of these cases we show that the CR-DEA efficiency scores can be obtained or approximated by estimating either a VEA model or a series of VEA models, without the need to a priori identify the cone of feasible weight vectors. We illustrate the usefulness of our results by means of an empirical application using data on Japanese regional banks.
    Keywords: Data Envelopment Analysis, Value Efficiency Analysis, Cone-Ratio DEA, model DMUs, Most Preferred Solution.
    Date: 2023–03
  5. By: Bernard Hoekman; Matteo Fiorini; Dennis Quinn
    Abstract: This paper assesses the potential impacts of services trade liberalization for a sample of African countries. The focus is on the relationship between labour productivity of manufacturing sectors and two types of services trade-related policies – restrictions on foreign direct investment (FDI) in services and restrictions on international payments for invisibles. The analysis takes in account differences across manufacturing sectors in the intensity of use of different services as inputs into production as well as difference in the quality of economic governance across countries. We find that services trade liberalization may have substantial positive impacts on the performance of manufacturing sectors, and increase with services input intensity and the quality of governance.
    Keywords: Services trade policy, services input use, manufacturing productivity, Africa, regional integration
    Date: 2022–12
  6. By: Yun Liao; Ruihui Xu
    Abstract: This study employs the annual unbalanced panel data of 42 listed banks in China from 2006 to 2021, adopts the non-radial and non-oriented super-efficiency Data envelopment analysis (Super-SBM-UND-VRS based DEA) model considering NPL as undesired output. Our results show that the profitability super-efficiency of State-owned banks and Rural/City Commercial Banks is better than that of Joint-stock Banks. In terms of intermediary efficiency(deposit and loan), state-owned banks have advantage on other two type of banks. The determinants analysis shows that all type of banks significantly benefits from the decrease of ownership concentration which support reformation and IPO. Regional commercial banks significantly benefit from the decrease of customer concentration and the increase of reserves. On the other hand, State-owned banks should increase its loan to deposit ratio while joint-stock banks should do the opposite.
    Date: 2023–05
  7. By: Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal
    Abstract: How costly is the misallocation of production that we might expect to result from distortions such as market power, incomplete contracts, taxes, regulations, or corruption? This paper develops new tools for the study of misallocation that place minimal assumptions on firms’ underlying technologies and behavior. We show how features of the distribution of marginal products can be identified from exogenous variation in firms’ input use, and how these features can be used both to test for misallocation and to quantify the welfare losses that it causes. We then consider an application in which thousands of firms experience demand shocks derived from a lottery-based assignment of public procurement contracts for construction services in Ecuador. Using administrative tax data about these firms, we reject the null of efficiency but estimate that the welfare losses resulting from misallocation are only 1.6% relative to the first-best. Standard parametric assumptions applied to the same setting would suggest losses that are at least an order of magnitude larger.
    Keywords: allocative efficiency, misallocation, aggregate productivity
    JEL: D24 D61 H57 L10 O40
    Date: 2023
  8. By: Masagus M. Ridhwan (Bank Indonesia); Rizki Nauli Siregar (University of Mainz); Jahen F. Rezki (University of Indonesia)
    Abstract: Countries currently face two big trends, especially in the manufacturing sector: premature deindustrialization and the prevalence of superstar firms. In this paper, we document and characterize firm heterogeneity in a developing economy context, using Indonesia from 2005 to 2015 as context. We show the importance of large firms in shaping aggregate outcomes in the manufacturing sector. Furthermore, we confirm that productivity growth increases domestic market shares and profit by increasing the power to exert mark-up and reducing labor shares. We also show the importance of international trade engagement by superstar firms. We show new insights on superstar firms that do not necessarily have higher mark-up rates than others. The policy implication from this study is efforts to boost superstar firms in Indonesia will be paramount, especially policies to increase firms’ size and promoting exports.
    Keywords: Manufacture, Superstar Firms, Firm Heterogeneity, Indonesia
    JEL: L11 O11 O33 O43 D42
    Date: 2022
  9. By: Davis, Kristin; Kazembe, Cynthia; Benson, Todd; De Weerdt, Joachim; Duchoslav, Jan
    Abstract: Primary agricultural cooperatives in Malawi, in contrast to other farmer-level organizations, have legal status and can own assets, borrow money for their operations, and sign contracts, making it easier for them to do business for the profit of their members. Conceptually, such cooperatives enable their member-farmers to achieve economies of scale for their commercial activities. By joining together in a cooperative, members can obtain commercial inputs at lower prices closer to wholesale prices than if they purchased the inputs as individuals. In selling their output, by aggregating their crops and other products into larger lots that the cooperative then negotiates to sell on their behalf, buyers can achieve greater efficiency in buying from them and can be expected to offer a premium over the prices that they would offer farmers selling those products individually. Cooperatives can also serve farmers in providing an important channel for obtaining information and advice to increase their productivity and the profitability of their farming. Moreover, by joining together to achieve common objectives in primary agricultural cooperatives, member-farmers can exercise greater influence on local and national policy issues of concern to them, while also building social cohesion, solidarity, and trust within their communities.
    Keywords: MALAWI; SOUTHERN AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; agricultural cooperatives; finance; inputs; prices; information; productivity; farmers; development
    Date: 2023
  10. By: Di Liberto, Adriana (University of Cagliari); Giua, Ludovica (University of Cagliari); Schivardi, Fabiano (LUISS Guido Carli University); Sideri, Marco (University of Cagliari); Sulis, Giovanni (University of Cagliari)
    Abstract: We study how managerial practices of school principals affect student performance and aspirations. We link administrative data on secondary Italian students to the management scores of their school principals in 2011 and 2015 based on the World Management Survey methodology. The frequent turnover of school principals over this period allows us to causally interpret school-fixed-effect estimates. We find that management quality positively and substantially impacts standardized math and language tests and student desire to attend college. The comparison to pooled-OLS suggests that fixed effects correct for the downward bias arising from selection of better school principals into more difficult schools.
    Keywords: management, productivity, school principals, student outcomes
    JEL: L2 I2 M1 O32
    Date: 2023–06
  11. By: Natalia Emanuel; Emma Harrington
    Abstract: How does remote work affect productivity and how productive are workers who choose remote jobs? We estimate both effects in a U.S. Fortune 500 firm’s call centers that employed both remote and on-site workers in the same jobs. Prior to COVID-19, remote workers answered 12 percent fewer calls per hour than on-site workers. When the call centers closed due to COVID-19, the productivity of formerly on-site workers declined by 4 percent relative to already-remote workers, indicating that a third of the initial gap was due to a negative treatment effect of remote work. Yet an 8 percent productivity gap persisted, indicating that the majority of the productivity gap was due to negative worker selection into remote work. Difference-in-differences designs also indicate that remote work degraded call quality— particularly for inexperienced workers—and reduced workers’ promotion rates. In a model of the market provision of remote work, we find that firms were in a prisoner’s dilemma: all firms would have gained from offering comparable remote and on-site jobs, but any individual firm was loathe to attract less productive workers.
    Keywords: remote work; Work-from-home; worker productivity; Selection
    JEL: J24 L23 L84 M54
    Date: 2023–05–01
  12. By: Bernard Hoekman; Marco Sanfilippo; Filippo Santi
    Abstract: Using detailed administrative data, this paper analyzes the relationship between participation in public procurement (selling to government entities) and firm performance in Uganda. We find positive associations with total sales, gross profits, total compensation of employees, number of workers and sales per employee. Overall sales growth associated with selling to government entities is partly at the expense of a reallocation of firm-level supply away from nongovernment buyers, suggesting there may be short-term capacity expansion constraints. The results are substantiated in an event study approach that accounts for potential self-selection of firms into government procurement, as well as the heterogeneity in timing of selection into public procurement. The reduction in sales to private sector is persistent. It is less acute for firms in services, and within services, among firms that use low-skill labor, suggesting capacity constraints may not be only short term.
    Keywords: Public procurement, Industrial policy, Government demand, Firm performance, Economic development, Services
    Date: 2022–07
  13. By: Francois de Soyres; Alexandre Gaillard; Henry L. Young
    Abstract: Most statistical agencies construct sectoral real GDP using double deflation and base period prices. When the base period price used for intermediate inputs is not equal to their marginal revenue product, such as when firms apply a markup, real GDP fluctuations become mechanically linked to variations in intermediate inputs. This is because these inputs generate profits that are incorporated into real value added. Taking this channel into account, we demonstrate that real GDP reported in national accounts substantially diverges from a theory-consistent "physical" value added. This, in turn, has implications for the measurement of productivity. Between 1999 and 2021, "physical" productivity cumulative growth in the Finance sector was 15pp lower compared to the Solow Residual, while it was 15pp higher in the Manufacturing sector.
    Keywords: Economic Measurement; National Accounts; Markups; Productivity
    JEL: E10 E30 O40 O51
    Date: 2023–05–25
  14. By: Masagus M. Ridhwan (Bank Indonesia); Jahen F. Rezki (University of Indonesia); Arief Ramayandi (Economic Research and Regional Cooperation Department); Aryo Sasongko (Bank Indonesia); Dinda T. Andariesta (Bank Indonesia)
    Abstract: This study investigates the potential scarring effect of the pandemic on productivity and the labor market in Indonesia by combining both macro and micro analysis. Using the macro data of the Indonesian economy, we attempt to estimate the potential scarring effect of the COVID-19 pandemic and compare it to the previous two crises, notably the Asian Financial Crisis (AFC) in 1997 and Global Financial Crisis (GFC) in 2008. Our findings indicate that after 40 quarters, permanent supply shocks would increase price and unemployment, whereas output per worker, investment, and output decrease. For the micro analysis, we employ a machine learning approach to empirically test the impact of the pandemic on the labor market, and the result suggests that all crises have negatively correlated with earnings and working hours (except GFC). However, we did not find significant evidence of a historical hysteresis due to the pandemic in Indonesia, and the long-run output fluctuations are mostly driven by supply shocks. We also observe that there are heterogenous impacts of this crisis based on different groups. These findings have important information for policymakers to reduce the potentially long-lasting effects of the pandemic in the future.
    Keywords: Scarring, Labor Market, COVID-19, Indonesia, Output
    JEL: E32 E62 N10 O47
    Date: 2022

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