nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒10‒16
eleven papers chosen by

  1. Integrated approaches for agricultural sustainability and productivity assessments By Ben Henderson; Jussi Lankoski
  2. Human Capital Misallocation and Output per Worker Differences: Beyond Cobb-Douglas By Trenczek, Jan; Wacker, Konstantin M.
  3. Determinants of public sector efficiency: a panel database from a stochastic frontier analysis By Ablam Estel Apeti; Bao-We-Wal Bambe; Aguima Aime Bernard Lompo
  4. The Effects of Subsidies on Firm Size and Productivity By Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
  5. Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology By Filippo Biondi; Sergio Inferrera; Matthias Mertens; Javier Miranda
  6. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  7. Welfare Accounting By Eduardo Dávila; Andreas Schaab
  8. Impact of the Loan Guarantees Program Reactiva on the Performance of Peruvian Companies By Marcos Ceron; Gerald Cisnero; Rafael Nivin
  9. Inputs, outputs and living standards in rural China during the 1920s and 30s: a quantitative analysis By Wang, Yuton; Guo, Jingyuan; Deng, Kent
  10. The Micro-Aggregated Profit Share By Thomas Hasenzagl; Luis Perez
  11. Immigration and the Labour Market: An Empirical Investigation of Wages, Productivity and Workers’ Substitutability By Valentine Fays

  1. By: Ben Henderson; Jussi Lankoski
    Abstract: Increasing agricultural productivity growth sustainably can help to address the triple challenge of providing sufficient affordable and nutritious food for a growing global population, while supporting sector livelihoods and improving environmental outcomes. However, challenges remain in measuring environmentally sustainable productivity growth. This study uses alternative approaches to address these challenges and provides answers to the following questions: i) has Total Factor Productivity (TFP) growth coincided with improved environmental outcomes?; and ii) has the agricultural productivity and environmental performance of countries improved over time? While there is compelling evidence that TFP growth has helped countries to expand agricultural output and reduce greenhouse gas emissions per unit of output, these emissions increased in absolute terms for about half of the OECD countries assessed and nitrogen surpluses increased for about one-third. While these environmental impacts would have been larger if output had expanded in the absence of productivity growth, there is room to steer innovation in the sector in a more environmentally sustainable direction.
    Keywords: agri-environmental indicators, greenhouse gas emissions, nutrient balances, Total factor productivity
    JEL: D24 Q01 Q10 Q56
    Date: 2023–09–22
  2. By: Trenczek, Jan; Wacker, Konstantin M.
    Abstract: Misallocation of human capital across sectors can have substantial negative implications for aggregate output. So far, the literature examining this type of labor misallocation has assumed a Cobb-Douglas production function. Our paper departs from this assumption and instead considers more exible CES production functions with different labor skill types as individual inputs. Our estimates from sectoral data of 39 countries suggest that physical and human capital are less substitutable than Cobb-Douglas assumes. Our counterfactual results indicate that human capital misallocation can explain approximately 15% of output per worker variation across countries, which is substantially less than under a Cobb-Douglas specification (21%).
    Keywords: Misallocation, Human Capital, Sector level, Production function, Elasticity of substitution, Total factor productivity
    JEL: O41 O47 E24
    Date: 2023
  3. By: Ablam Estel Apeti (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne); Bao-We-Wal Bambe (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne); Aguima Aime Bernard Lompo (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This article provides a large dataset on PSE using a parametric approach, and covering 158 countries of all income levels, over the period 1990–2017. The analysis includes four sectors: education, health, infrastructure, and public administration. We further consider three efficiency indicators regarding the ‘Musgravian' tasks for government: allocation, distribution, and stabilization. After computing the efficiency scores for our sample countries, we examine their determinants using a wide range of economic and institutional factors. Our key findings are that trade globalization, factor productivity, and institutional quality seem to be important determinants of total PSE. The results remain robust to alternative specifications and methods. Finally, we provide additional evidence by exploring the sensitivity of the main determinants to different country groups, considering the level of economic development, geographical regions, and fragile states.
    Date: 2023
  4. By: Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
    Abstract: This paper evaluates the impact of varying subsidy sizes and distinct program objectives on firm size and performance. The magnitude of treatment effects increases with subsidy size, although the marginal effects tend to decrease. We also find that treatment effects differ across subsidy programs due to their distinct objectives. Among these, labor-support measures are most effective at supporting employment, capital, and output while being most harmful to productivity. Contrary to theory, subsidies providing incentives for investments have no impact on capital or productivity. The treatment effects tend to decrease over time and are thus temporary. As recipient firms are more likely to receive additional support in the future, the effects of subsidies accumulate giving rise to permanent differences between subsidized and non-subsidized firms. However, the lack of productivity improvements in such firms questions the benefits of repeated supporting measures.
    Keywords: Subsidies, Firm Growth, Firm Performance, Industrial Policy
    JEL: H25 L25 L52
    Date: 2023–09–06
  5. By: Filippo Biondi (KU Leuven and Research Foundation Flanders (FWO)); Sergio Inferrera (Queen Mary University of London); Matthias Mertens (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet)); Javier Miranda (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet))
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
    Keywords: Business dynamism, productivity, responsiveness of labor demand, market power, European cross-country data, technological change
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023–10–25
  6. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    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
  7. By: Eduardo Dávila; Andreas Schaab
    Abstract: This paper develops a welfare accounting decomposition that identifies and quantifies the ultimate origins of welfare gains and losses in general economies with heterogeneous individuals and disaggregated production. The decomposition---exclusively based on preferences and technologies---first separates efficiency from redistribution considerations. Efficiency comprises individual efficiency, which traces gains and losses to reallocating consumption and factor supply across individuals, and production efficiency, which captures allocative efficiency gains and losses due to adjusting intermediate inputs and factors, as well as technical efficiency gains and losses from primitive changes in technologies and factor endowments. Leveraging the decomposition, we characterize efficiency conditions in disaggregated production economies with heterogeneous individuals, extending classic efficiency results. In competitive economies, prices (and wedges) are directly informative about the welfare-relevant statistics that shape the welfare accounting decomposition, which allows us to characterize a generalized Hulten's theorem. We present several minimal examples and a rich application to monetary policy.
    JEL: D60 E61
    Date: 2023–09
  8. By: Marcos Ceron (Central Reserve Bank of Peru); Gerald Cisnero (Central Reserve Bank of Peru); Rafael Nivin (Central Reserve Bank of Peru)
    Abstract: Amid the global COVID-19 crisis, governments worldwide introduced measures to support private enterprises. This study utilizes a newly curated panel database, encompassing the financial records of firms in Peru, to investigate the impact of a substantial governmentbacked loan guarantee program, known as "Reactiva Peru", on the performance of mediumsized Peruvian firms. To address the non-random allocation of loans, our empirical approach combines matching techniques and difference-in-differences methods, drawing upon previous research (Girma et al., 2007; Heyman, 2007). Our findings reveal that the Reactiva program led to heightened liquidity levels among beneficiary firms, albeit with an associated increase in indebtedness. Regarding profitability, the observed impacts on treated companies were not notably positive, except for a modest uptick in the net profit margin. This study contributes valuable insights into the efficacy of public credit support programs during crises, highlighting both their advantages and potential trade-offs for medium-sized enterprises.
    Keywords: Loan guarantees ; COVID-19 pandemic ; Credit risk ; Bank lending
    JEL: G18 G21 G28 H81
    Date: 2023–10–02
  9. By: Wang, Yuton; Guo, Jingyuan; Deng, Kent
    Abstract: Since Kenneth Pomeranz’s Great Divergence that was published in 2000, the scholarly debate has been focused on when the divergence was likely to begin. But a lack of real data for the Pomeranz framework has been noticeable. For our purpose, real data are imperative. The primary-source data this study uses are from the first large-scale modern survey of the rural economy in China in the 1920s and 30s to establish correlations between inputs, outputs and living standards in China’s rural sector. This study views China’s traditional growth trajectory continuing from the Qing to troubled times of the 1920s and 1930s despite considerable negative externalities from a regime change. The present view is that given that the rural economy managed to hang on during the Republican Period despite many disadvantages Qing China would have performed at least at the 1920s-30s’ level. Our findings indicate that rural population did indeed eat quite well during the politically troubled time, supporting Pomeranz’s pathbreaking comparison of utility functions between China’s Yangzi Delta and Western Europe. Secondly, food consumption proved incentives for improvement in labour productivity. Thirdly, China’s peasants were rational operators to maximise their returns. Fourthly, China’s highyield farming depended on land and labour inputs along a production probability frontier, which explains the root cause of the Great Divergence. Finally, there was a ‘little divergence’ inside China which was dictated by rice production, which justifies the Yangzi Delta as the best scenario.
    Keywords: Great Divergence; little divergence; primary-source data; inputs and outputs; living standards
    JEL: N35 N55 C51
    Date: 2023–09–01
  10. By: Thomas Hasenzagl; Luis Perez
    Abstract: How much has market power increased in the United States in the last fifty years? Using micro-level data from U.S. Compustat, we find that several indicators of market power have steadily increased since 1970. The aggregate markup has gone up from 10% of price over marginal cost in 1970 to 23% in 2020, and aggregate returns to scale have risen from 1.00 to 1.13. We connect these market-power indicators to profitability by showing that the aggregate profit share can be expressed in terms of the aggregate markup, aggregate returns to scale, and a sufficient statistic for production networks that captures double marginalization in the economy. We find that despite the rise in market power, the profit share has been constant at 18% of GDP because the increase in monopoly rents has been completely offset by rising fixed costs. Our empirical results have subtle implications for policymakers: overly aggressive enforcement of antitrust law could decrease firm dynamism and paradoxically lead to lower competition and higher market power.
    Date: 2023–09
  11. By: Valentine Fays
    Abstract: Labour market integration of migrant workers is key to show the integration of migrants in developed countries. Consequently, the literature regarding this topic has expanded during the last decades to better understand their situation. In this context, the main objective of this Ph.D. thesis is to fulfil gaps in the literature by investigating several aspects of the labour market integration of migrants on the Belgian labour market, namely i) the determinants of the origin-based wage gaps, and ii) the impact of migrants on natives’ employment.Chapter 1, based on a paper co-authored with Benoît Mahy, François Rycx and Mélanie Volral, estimates wage discrimination against non-EU15 workers depending on their region of origin, their tenure and the product market competition faced by the firms they work in. Using a merged employer-employee panel dataset of more than 13, 000 firms relative to the Belgian private sector for the 1999–2010 period, results highlight large disparities in wage discrimination against foreign-born migrants depending on their countries of birth (especially against workers born in Asia, Eastern Europe and Africa) and hence confirm the adequacy of dividing non-EU15 workers into subgroups, as they appear to be treated very differently in the Belgian labour market depending on their regions of birth. They also suggest that wage discrimination against migrants vanishes as their firm-specific labour market experience (i.e. tenure) increases and tends to disappear in highly competitive product market situations, these results being in line with statistical and monopsonistic discrimination theories.Next, Chapter 2, based on a paper co-authored with Benoît Mahy and François Rycx, examines the influence of firm’s upstreamness (i.e. the average distance from final use, to be understood as the average number of steps/transactions before firms’ production of goods and/or services meets either domestic or foreign final demand) on wages according to workers’ origin. Based on a unique linked employer-employee cross-sectional dataset regarding the Belgian manufacturing industry covering the 2002-2010 timespan, our estimates show that firms that are further up in the value chain pay higher wages, even after controlling for a large set of worker and firm characteristics, and time fixed effects. However, the wage premium associated with upstreamness is also found to vary substantially depending on workers’ origin along the wage distribution. Unconditional quantile estimates further suggest that those who benefit the most from being employed in more upstream firms are (high-wage) workers born in developed countries, whereas workers born in developing countries, irrespective of their earnings, appear to be unfairly rewarded. Quantile decompositions further show that, while differences in average values of upstreamness according to workers’ origin play a limited role, differences in wage premia associated with upstreamness account for a substantial part of the origin-based wage gap, especially at the top of the wage distribution.Finally, Chapter 3, using detailed Belgian matched employer-employee panel data covering the 1999-2016 period, investigates whether 1st- and 2nd-generation migrants and natives are complements or substitutes in the production function at quite disaggregated micro levels of the labour market, i.e. at the firm and firm-occupation levels. Our estimates show that 2nd-generation migrants have a significant and positive impact on the employment of natives, regardless of the level of aggregation under analysis. Next, our findings suggest a smaller complementarity in the hiring and lay-off of 1st-generation migrants and natives. Moreover, our findings suggest that the complementarity between 1st- and 2nd-generation migrants and native workers is only observed when they have the same level of education, and that their positive relationship is even greater when workers have a higher level of education. For workers with different levels of education, results rather suggest a segmentation of the labour market. Next, the complementarity is stronger when 1st- and 2nd-generation migrants originate from developed countries and when a higher level of skills is required for a particular occupation.
    Keywords: Migration; Salaires; Substituabilité
    Date: 2023–08–30

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