nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒09‒18
nine papers chosen by

  1. New wine in old bottle: Exploring the Corruption-inefficiency nexus using endogenous stochastic frontier approach By Finocchiaro Castro , Massimo; Guccio, Calogero
  2. Productivity Analysis: Roots, Foundations, Trends and Perspectives By Valentin Zelenyuk
  3. Productivity Variation and Input Misallocation: Evidence from Hospitals By Amitabh Chandra; Carrie H. Colla; Jonathan S. Skinner
  4. The Causal Effects of Enclosures on Production and Productivity By Lazuka, Volha; Bengtsson, Tommy; Svensson, Patrick
  5. Digitalization and Firm Performance in The Middle East and North Africa: Case Studies of Jordan, Morocco, and Egypt By Nong Zhu; Xubei Luo
  6. Taxation and Profitability of Banks in Jordan: Investigating the influence of taxation policies on the financial performance and profitability of banks operating in Jordan's unique economic landscape By Abbas, Zafer
  7. How institutions shape the economic returns of public investment in European regions By Inmaculada C. Alvarez; Javier Barbero; Luis Orea; Andrés Rodríguez-Pose
  8. Industry Wage Differentials: A Firm-Based Approach By David Card; Jesse Rothstein; Moises Yi
  9. On the Problem of the Purchasing Power of Money by A. A. Konüs and S. S. Byushgens: Translation and Commentary By Valentin Zelenyuk; Erwin Diewert

  1. By: Finocchiaro Castro , Massimo; Guccio, Calogero
    Abstract: A large body of literature has analyzed the relationship between factors affecting institutional quality at local level and the efficiency of firms with a particular focus on the role of corruption. However, due to reverse causality, the endogeneity problem makes it difficult to identify the real effect of institutional factors at local level on firms’ efficiency. This paper adopts a novel stochastic frontier methodology to examine the relationship between the quality of local institutions and production efficiency, under the arrangement that endogeneity is well addressed. Specifically, we use a panel stochastic frontier analysis that endogenizes production efficiency and allows us to robustly assess the effect of corruption at local level on firms’ technical efficiency. For this purpose, the paper employs a large panel of Italian firms operating in the building sector from 2013 to 2019. The empirical findings reported in the paper indicate that the factor affecting the quality of local institutions affect firms’ performance, with a preeminent role played by the rule of law and the control of corruption. Moreover, when controlling for endogeneity, the magnitude of the effects of institutional quality factors at local level increase significantly. Our findings are robust to alternative IV strategies, alternative specifications of the production function, and inclusion of other factors that may affect firms’ efficiency.
    Keywords: Corruption, Firms, Production efficiency, Stochastic frontier analysis, Endogeneity
    JEL: D24 D73 L25 C23 C26
    Date: 2023
  2. By: Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: The goal of this article is to give a brief overview of productivity analysis, starting with general concepts, its importance and a brief historical excursion and then focusing on various productivity indexes. We also start from very simple productivity indexes to more sophisticated, such as Malmquist Productivity Indexes, which are among the most popular in academic literature these days. A special attention is on the contributions to this literature from Rolf Färe and Shawna Grosskopf (and their many co-authors), and some of the related works they have inspired. A brief discussion of likely perspectives for the area is also provided.
    Keywords: Productivity Analysis; Efficiency, Malmquist; Indexes; Growth Accounting;
    JEL: D24 E22 E23 E24 O47
    Date: 2023–05
  3. By: Amitabh Chandra; Carrie H. Colla; Jonathan S. Skinner
    Abstract: There are widespread differences in total factor productivity across producers in the U.S. and around the world. To help explain these variations, we devise a general test for misallocation in input choices – the underuse of effective inputs and overuse of ineffective ones. Misallocation implies that conditional on total input use, the return to using a particular input is not zero (a positive return implies underuse, and a negative return implies overuse). We measure misallocation across hospitals, where inputs and outputs are better measured than in other industries. Applying our test to a sample of 1.6 million Medicare beneficiaries with heart attacks (of which 436 thousand were admitted by ambulance), we reject the hypothesis of productive efficiency; moving a patient from a 10th percentile to a 90th percentile hospital with respect to misallocation, holding spending constant, is predicted to increase survival by 3.1 percentage points. With misallocation accounting for as much as 25 percent of the variation in hospital productivity, our results suggest that how the money is spent, rather than how much money is spent, is central to understanding productivity differences both in health care, and in the rest of the economy.
    JEL: E23 I1 I10
    Date: 2023–08
  4. By: Lazuka, Volha (Lund University); Bengtsson, Tommy (Lund University); Svensson, Patrick (Swedish University of Agricultural Sciences)
    Abstract: Enclosures enforced private property rights at the onset of industrialization, yet numerous estimations of the enclosures' effects on production and productivity rely on non- experimental designs. We estimate the causal effects of enclosure reforms applying state- of-the-art difference-in-differences and event-study methods to a large panel of farms observed between 1781 and 1865 in Sweden. Our results demonstrate that enclosures led to a 3.4 percent annual growth in land productivity in the first decade and overall production increase reached 82 percent after 30 years. Such results are much larger than previous estimates, suggesting that land enclosures were a prerequisite for modern economic growth.
    Keywords: difference-in-differences, agriculture, production, property rights, enclosures, event-study
    JEL: Q15 Q24 N53
    Date: 2023–08
  5. By: Nong Zhu (Institut National de la Recherche Scientifique); Xubei Luo (The World Bank)
    Abstract: In a digitalizing global economy, countries that successfully harness the potential of e-commerce are better placed to take advantage of the access to regional and international markets for sustainable growth, while those that fail to do so may risk falling behind. For the Middle East and North Africa (MENA) region, digitalization of business activities is key to connect producers with customers, support the integration of regional and global value chains (GVCs), and foster the dynamism of private sector to aid productive job creation and inclusive growth. This study aims to examine the relationships between participation in e-commerce and firm performance (measured by production, productivity, export and/or import, and innovation) in MENA, with case studies in Jordan, Morocco, and Egypt. The analyses are based on an original survey at firm-level, carried out by the Economic Research Forum (ERF) in 2022, and data from the World Bank Enterprise Survey. The main findings are as follows: (i) E-commerce participation is relatively low in the three case study countries compared with regional peers or countries with similar development levels. (ii) E-commerce participation varies widely across firms with different characteristics: large firms, young firms, firms in “information and communication” sector, and firms with more educated workers are more likely to participate in e-commerce. (iii) Production is positively associated with e-commerce participation. However, among the three countries, the positive association between e-commerce participation and productivity is significant only in Jordan where e-commerce is most developed. (iv) Participation in e-commerce is also positively associated with firms’ exports and/or imports and innovation activities. (v) Depending on the level of e-commerce development and the structural characteristics, the role of the difference in the attributes between e-firms and non-efirms and the difference in the returns to these attributes in firm performance may vary. (vi) Firms involved in e-commerce are performing better than other firms during the COVID-19 pandemic. Overall, our study finds that e-commerce is positively associated with the viability of enterprises and their ability to maintain the level of sales.
    Date: 2023–04–20
  6. By: Abbas, Zafer
    Abstract: Taxation and Profitability of Banks in Jordan: Investigating the influence of taxation policies on the financial performance and profitability of banks operating in Jordan's unique economic landscape
    Date: 2023–08–10
  7. By: Inmaculada C. Alvarez (Universidad Autonoma de Madrid); Javier Barbero (Universidad Autonoma de Madrid); Luis Orea (Universidad de Oviedo); Andrés Rodríguez-Pose (London School of Economics)
    Abstract: In this paper, we examine the impact of institutional quality on the returns on key drivers of economic growth in 230 European Union (EU) NUTS-2 regions from 2009 to 2017. To estimate region-specific elasticities, we employ a latent class modelling approach, considering the quality of government and the degree of authority in each region as mediators. Our findings reveal significant variation in the returns to education, physical capital investment, and innovation across regions. Moreover, we observe that changes in government quality and regional authority influence the ability of EU regions to leverage different types of investment effectively. These results emphasize the importance of considering the government quality in regions where investments are made in order to maximize the returns on European Cohesion investment.
    Keywords: Institutional quality, European funds, public investment, regional development
    JEL: O43 E61 H54 R11
    Date: 2023–08
  8. By: David Card; Jesse Rothstein; Moises Yi
    Abstract: We revisit the estimation of industry wage differentials using linked employer-employee data from the U.S. LEHD program. Building on recent advances in the measurement of employer wage premiums, we define the industry wage effect as the employment-weighted average workplace premium in that industry. We show that cross-sectional estimates of industry differentials overstate the pay premiums due to unmeasured worker heterogeneity. Conversely, estimates based on industry movers understate the true premiums, due to unmeasured heterogeneity in pay premiums within industries. Industry movers who switch to higher-premium industries tend to leave firms in the origin sector that pay above-average premiums and move to firms in the destination sector with below-average premiums (and vice versa), attenuating the measured industry effects. Our preferred estimates reveal substantial heterogeneity in narrowly-defined industry premiums, with a standard deviation of 12%. On average, workers in higher-paying industries have higher observed and unobserved skills, widening between-industry wage inequality. There are also small but systematic differences in industry premiums across cities, with a wider distribution of pay premiums and more worker sorting in cities with more high-premium firms and high-skilled workers.
    JEL: J31 J62
    Date: 2023–08
  9. By: Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia); Erwin Diewert (University of British Columbia & University of New South Wales)
    Abstract: In 1939, Econometrica published an English translation of Konüs (1924). Since then, Konüs (1924 [1939]) has become a classic work on the theory of the cost of living index, inspiring many other studies in the field. On the other hand, very few scholars have had the opportunity to read another, equally important, work by Konüs (co-authored with Byushgens) published in 1926 by the same Institute. This other paper of Konüs also pioneered several fundamental concepts and results in economics (including duality theory, the theory of inverse demand functions and the theory of exact index numbers), yet somehow it appears that it has never been translated into English (or any other language). We bridge this gap by offering a translation and a commentary on this important paper.
    Keywords: Price Index, Inflation measurement, Purchasing Power of Money
    JEL: C43 E30
    Date: 2023–01

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