nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒10‒02
fifteen papers chosen by

  1. Measurement of Efficiency and its Drivers in the Chilean Banking Industry By Adriana Cobas; Alexandros Maziotis; Andrés Villegas
  2. Patterns and Drivers of Financial Sector Growth in the Digital Age: Insights from a Study of Industrialized Economies By Khuong Vu; Simplice Asongu
  3. Occupational Choice, Human Capital, and Financial Constraints By Rui Castro; Pavel Sevcik
  4. The Effect of Bank Recapitalization Policy on Credit Allocation, Investment, and Productivity: Evidence from a Banking Crisis in Japan By Hiroyuki Kasahara; Yasuyuki Sawada; Michio Suzuki
  5. Efficiency Performance of Latin American vis-à-vis North American Countries between 1980 and 2019 By Mario Seffino; German Gonzalez
  6. Diversify or Not? – The Link between Global Sourcing of ICT Goods and Firm Performance By Alexander Schiersch; Irene Bertschek; Thomas Niebel
  7. A new approach to estimating private returns to R&D By Ådne Cappelen; Pierre Mohnen; Arvid Raknerud; Marina Rybalka
  8. Committing to grow: Privatizations and firm dynamics in East Germany By Akcigit, Ufuk; Alp, Harun; Diegmann, André; Serrano-Velarde, Nicolas
  9. A Comment on "The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation" by Rossi (2022) By Campos-Rodríguez, Santiago; Chung, John
  10. Impact of privatization on firm performance in Vietnam: A Staggered Difference-in-Differences analysis with heterogeneous treatment effects By Quang Minh Nguyen
  11. Italy's National Recovery and Resilient Plan: Will it Narrow the North-South Productivity Gap? By L. Mauro; F. Pigliaru
  12. Anatomy of Firms’ Margins of Adjustment: Evidence from the COVID Pandemic By Elías Albagli; Andrés Fernández; Juan Guerra-Salas; Federico Huneeus; Pablo Muñoz
  13. The energy efficiency issue in the European Union: perspectives, objectives and challenges By ANDREI, Dalina-Maria
  14. Do Teachers' Labor Contracts Matter? By Aparicio Fenoll, Ainoa; Quaranta, Roberto
  15. Independent-School Competition and Sweden's Performance in TIMSS By Heller-Sahlgren, Gabriel

  1. By: Adriana Cobas; Alexandros Maziotis; Andrés Villegas
    Abstract: This paper estimates efficiency measures for the banking system in Chile during 2000-2019. Distinct from previous studies, we use input distance functions, introduce the non-parametric slack-based model, and choose the intermediates approach in the determination of inputs and outputs. Our findings suggest that the Chilean system achieved relatively high efficiency levels although with no significant variations during the sample period. Ownership (state, foreign and public trading) and size had a positive impact on efficiency. Merger and acquisitions processes, on average, seem to have targeted highly efficient banks to improve overall efficiency of the controller institution in the short term. At input level, deposits, operative expenses and capital stand out for reaching the frontier level although with diverging trends. We did not find categorical results in the effects of efficiency on bank variables, such as return or dividend policy. Regarding model selection, we find that it affects efficiency averages, scores and rankings although it did not affect the conclusions on inference tests.
    Date: 2023–07
  2. By: Khuong Vu (National University of Singapore, Singapore); Simplice Asongu (Johannesburg, South Africa)
    Abstract: The financial sector in advanced economies has undergone significant evolution driven by restructuring, globalization, and the digital revolution, which have profoundly shaped its developmental dynamics. This study investigates the forces behind the growth and convergence of the financial sector across 13 advanced economies from 2000 to 2015, focusing on the effects of digital transformation. The investigation unveils several noteworthy findings concerning the financial sector. First, most nations experienced substantial growth in value-added, coupled with a significant decrease in employment and robust advancements in labor productivity. Next, the primary drivers of labor productivity growth and convergence across many economies were driven by total factor productivity, labor quality, and digital transformation. Lastly, digital transformation not only directly contributed to the augmentation of labor productivity, as quantified through growth accounting estimation, but also wielded a considerable impact on the expansion of total factor productivity and the streamlining of the workforce.
    Keywords: financial sector; productivity; digital transformation; innovation; catchup; industrialized economies
    JEL: O16 O30 O40 O57
    Date: 2023–01
  3. By: Rui Castro (McGill University); Pavel Sevcik (University of Quebec in Montreal)
    Abstract: We study the aggregate productivity effects of firm-level financial frictions. Credit constraints affect not only production decisions, but also household level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling early in life. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. Firm level productivities are also lower due to schooling distortions. These effects combined account for between 36 and 68 percent of the U.S.-India aggregate productivity difference. Schooling distortions are the major source of aggregate productivity differences.
    Keywords: Aggregate Productivity, Financial Frictions, Entrepreneurship, Human Capital, Misallocation
    JEL: E24 I25 J24 O11 O15 O16 O47
    Date: 2023–08
  4. By: Hiroyuki Kasahara; Yasuyuki Sawada; Michio Suzuki
    Abstract: This paper examines the ramification of government capital injections into financially distressed banks during the 1997 Japanese banking crisis. By leveraging a unique dataset merging firm-level financial statements and bank balance sheets, the study aims to examine whether the capital injections primarily benefited high-productivity firms or were misallocated to struggling “zombie” firms. The empirical results suggest that banks, post-injection, increased lending to both high-productivity non-zombie firms and low-productivity zombie firms. While the former is in line with conventional theories that prioritize high-productivity firms for investment and productivity enhancement, the latter suggests credit misallocation towards struggling firms mainly for debt servicing. Intriguingly, the study finds no evidence that these injections promoted investments among firms, irrespective of their productivity or financial health status. In particular, we provide suggestive evidence that zombie firms even reduced investments, especially in infrastructure, while high-productivity non-zombie firms did not exhibit a significant investment boost despite receiving more loans. However, these high-productivity firms displayed positive growth in labor productivity and total factor productivity, potentially driven by sales growth and increased advertisement expenses rather than employment and wage adjustments.
    Keywords: capital injection, bank regulation, banking crisis, total factor productivity, Zombie
    JEL: E22 G21 G28
    Date: 2023
  5. By: Mario Seffino (CEA/UNCPBA); German Gonzalez (IIESS/UNS-CONICET)
    Abstract: This article compares the behavior of total factor productivity between 16 Latin American countries and the United States and Canada for the period 1980-2019 using an order-m nonparametric estimator together with the Malmqüist index. The results showed a setback in terms of productivity in Latin America when comparing a period of 40 years from end to end. Consequently, the gap between the Latin American economies and the benchmark has widened. However, a good performance in terms of technical change can be observed between 2010 and 2019 in Latin American countries.
    Date: 2023–09
  6. By: Alexander Schiersch; Irene Bertschek; Thomas Niebel
    Abstract: Our paper contributes to the discussion about Europe’s digital sovereignty. We analyze the relationship between firm performance and the diversification of sourcing countries for imported ICT goods. The analysis is based on administrative data for 3888 German manufacturing firms that imported ICT goods in the years 2010 and 2014. We find that firms that diversify the sourcing of ICT goods across multiple countries perform better than similar firms with a less diversified sourcing structure. This result holds for value added as well as for gross operational surplus as performance measures and for two different indicators of diversification.
    Keywords: ICT goods imports, global sourcing, digital sovereignty, firm performance
    JEL: F14 F23 L14 L23 D24
    Date: 2023
  7. By: Ådne Cappelen; Pierre Mohnen; Arvid Raknerud; Marina Rybalka (Statistics Norway)
    Abstract: This paper revisits the estimation of private returns to R&D. In an extension of the standard approach, we allow for endogeneity of production decisions, heterogeneity of R&D elasticities, and asymmetric treatment of intramural and extramural R&D. Our empirical analyses are based on an extended Cobb-Douglas production function that allows for firms with zero R&D capital, which is especially useful for studying firms’ transition from being R&D-non—active to becoming R&D-active. Using a large panel of Norwegian firms observed in the period 2001-2018, we estimate the average private net return to be in the range 0-5 percent across a variety of model specifications if we treat intra- and extramural R&D symmetrically. If in compliance with the Frascati manual, we treat intramural R&D as investment and extramural R&D as intermediate input, the estimated net return increases to 5-10 percent.
    Keywords: Returns to R&D; Intramural R&D; Extramural R&D; Capitalization of R&D; Dynamic panel data models; GMM
    JEL: C33 C52 D24 O38
    Date: 2023–08
  8. By: Akcigit, Ufuk; Alp, Harun; Diegmann, André; Serrano-Velarde, Nicolas
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    Keywords: industrial policy, privatizations, productivity, size-dependent regulations
    JEL: D22 D24 J08 L25
    Date: 2023
  9. By: Campos-Rodríguez, Santiago; Chung, John
    Abstract: Rossi (2022) examines the relative efficiency of skilled workers across countries. He finds the elasticity of skill efficiency with respect to GDP per worker is 1.4 and that the relative human capital accounts for only about 9 percent. We reproduce the paper's main findings and test the sensitivity of the results to (1) alternative samples and (2) additional controls for determining wages. We find the results remain robust to these alternative specifications, and the estimated values of the key elasticities remain nearly unchanged.
    Date: 2023
  10. By: Quang Minh Nguyen (Universitat de Valencia)
    Abstract: This study contributes to the empirical literature on the effects of privatization on the financial and operating performance of former state-owned enterprises (SOEs) and offers evidence on the heterogeneity of these effects across multiple dimensions. Utilizing a sample comprising 770 privatized SOEs and 2, 154 non-privatized SOEs in Vietnam from 2006 to 2010, I conduct a staggered diff-in-diff estimation to identify the causal impact of privatization on firm's performance. The results reveal that, on average, privatizaion led to an increase of 5% in sales per worker, a 23-27% increase in profitability measures, and 8% decrease in debt ratio, and a 5% decline in total employment. However, little changes in post-privatization performance are observed for large SOEs, strategic SOEs, and service SOEs.
    Keywords: Privatization, firm performance, staggered difference-in-differences, heterogeneous treatment effects
    JEL: N25 G34 L33 P31
    Date: 2023–09
  11. By: L. Mauro; F. Pigliaru
    Abstract: We develop an endogenous growth model to simulate the long-term impact of Italy s National Recovery and Resilience Plan (NRRP) on the persistent North-South productivity gap. Our model underscores public investment as a catalyst for sustained economic growth and highlights the reliance of local government quality on the surrounding social capital. In regions with low social capital, local investment management diminishes efficiency due to prevalent misappropriation. In contrast, centralized management enhances the effectiveness of public action in these situations. The NRRP s overall effect therefore relies on the government level to which investment management is assigned. Our quantitative exercises show that compared to centralization, decentralization weakens the NRRP s impact on the relative position of the South. However, even under our our best scenario — centralized management — the NRRP only slightly reduces the North-South productivity gap from 75% to 76.4%. Finally, our research highlights the pivotal role of a reform aimed at maintaining central control over Southern public investments well beyond 2026, when the NRRP s actions and governance are due to stop. This type of reform can potentially yield more substantial, positive, and lasting impacts on the region.
    Keywords: social capital;regional convergence;economic growth;decentralization
    Date: 2023
  12. By: Elías Albagli; Andrés Fernández; Juan Guerra-Salas; Federico Huneeus; Pablo Muñoz
    Abstract: As a response to shocks, firms can adjust through several margins. But typically these margins are studied separately. In this paper, we jointly study firms’ margins of adjustments in output, capital, labor, input markets and productivity by leveraging a rich administrative dataset from Chile. We apply the analysis to the pandemic in the wake of the shock and throughout the economy’s recovery path. Importantly, we also study firms’ access to public policies aimed at supporting credit and protecting employment relations. We document considerable heterogeneity in the adjustment to the pandemic across firm size and industry. We also document widespread and heterogeneous access to the aforementioned policies. A corollary of credit policies is a considerable increase in firms’ leverage.
    Date: 2023–06
  13. By: ANDREI, Dalina-Maria
    Abstract: This paper discusses the energy issue in the European Union and the EU’s progress on energy efficiency since the Energy Efficiency related Directive of 2012 (EED): (i) The energy consumption dynamic (primary and final energy consumption), (ii) Directives and other regulations adopted by the EU’s institutions between 2012-2022, for energy consumption and efficiency targets established for both the Union, on aggregate, and for its individual member states, (iii) The National Energy and Climate Plans (NECPs) face to corresponding 2020 accomplishments and to 2030 projections, (iv) The same 2030 forecasts in the long-term context of climate neutrality to be ensured up to 2050. All these will be approached below in our argumentation. Effective energy consumption data are retrieved from Eurostat and International Energy Agency (IEA). Optimism comes up for the 2030 perspective, since the 2020 specific performances was done, partly despite the recent COVID-19 pandemic related circumstances of 2020. A list of possible responses to some questions will conclude this paper: ‘How receptive will the member states be in the future for transposing the EU's energy efficiency ambitions into their own strategies?’ and ‘Will the European policies be rigorous enough, but also flexible to achieve long-term objectives?’.
    Keywords: energy efficiency, primary energy consumption, final energy consumption, energy targets, Green Deal.
    JEL: Q40 Q43 Q48
    Date: 2023–05–29
  14. By: Aparicio Fenoll, Ainoa (University of Turin); Quaranta, Roberto (Collegio Carlo Alberto)
    Abstract: Previous literature on the effect of tenured and tenure-track vs. non-tenure-track professors on students' performance at university finds contrasting results. Our paper is the first to test whether tenured/tenure-track and non-tenure-track teachers differently affect students' performance at school. We use data on standardized test scores of a representative sample of primary and secondary school students in Italy and information on their Italian and mathematics teachers' labor contracts. Controlling for class- and subject-fixed effects, we find that non-tenure-track teachers decrease students' performance by 0.21 standard deviation. This detrimental effect is fully explained because non-tenure-track teachers are less experienced. In line with previous findings on the adverse effects of teachers' absences, non-tenure-track teachers are also associated with 0.1 standard deviation worse student performance when their contracts last less than a year.
    Keywords: teachers, labor contracts, students' performance, standardized tests
    JEL: J41 H52
    Date: 2023–08
  15. By: Heller-Sahlgren, Gabriel (Research Institute of Industrial Economics (IFN))
    Abstract: This paper analyses the effects of independent-school competition on Sweden’s performance in TIMSS, an international low-stakes test in mathematics and science among students in year 8. Exploiting variation in independent-school enrolment shares across counties over time, it finds that increasing competition has improved TIMSS scores, an impact that appears only after 2003 and is driven by for-profit schools. The results suggest that competition both slowed down Sweden’s performance decline between 1995 and 2011 as well as contributed to its improving scores between 2011 and 2019. A simulation based on the estimates indicates that Sweden’s average score in TIMSS 2019 would have been 20 points, or 0.24 standard deviations, lower without the expansion of the independent-school sector.
    Keywords: Independent-school competition; Student performance; TIMSS
    JEL: I20 L33
    Date: 2023–09–05

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