nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2024‒01‒15
eleven papers chosen by

  1. Efficiency of Queensland Public Hospitals via Spatial Panel Stochastic Frontier Models By Bao Hoang Nguyen; Zhichao Wang; Valentin Zelenyuk
  2. Efficiency Assessment on Codified Knowledge Products. An SFA Approach By Ferro Gustavo; Gatti Nicolás
  3. Interdependent Total Factor Productivity in an Input-Output model By Thomas M. Bombarde; Andrew L. Krause
  4. Tax Heterogeneity and Misallocation By Barış Kaymak; Immo Schott
  5. Productivity Effects of Viet Nam's Rice Land Restrictions By Peter Warr; Huy Quynh Nguyen
  6. Impact of TB Epidemic on Worker and Firm Productivity: Regional Perspective from Ukraine By Nizalova, Olena; Shepotylo, Oleksandr
  7. Explaining Wine Scores Through Stochastic Frontier Analysis By Ferro Gustavo; Gatti Nicolás
  8. Closing the Productivity Gap with the US: Causes and Consequences of the Productivity Program in Western Europe By Michela Giorcelli
  9. Adoption of Sustainable Practices for Improving Agricultural Productivity in Viet Nam By Huong-Giang Pham; Tuong-Anh T. Nguyen; Hoang-Nam Vu
  10. R&D Subsidies, Innovation Location, and Productivity Growth By Colin Davis; Ken-ichi Hashimoto
  11. How productive is Generative AI really ? By Jacques Bughin

  1. By: Bao Hoang Nguyen (Centre for the Economics and Business of Health, The University of Queensland, Brisbane, Qld 4072, Australia); Zhichao Wang (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: We adapt a range of mainstream spatial econometric models to the four-component error term panel stochastic frontier framework to estimate the inefficiency of public hospitals in Queensland, Australia, and to investigate different channels of spatial effects in hospital performance. Our results demonstrate a statistically significant presence of the spatial dependence from the autoregressive dependent variable and the autocorrelated error term. Additionally, we observe a positive spillover effect of input factors, as well as some impacts from accounting for the spatial dependence on the inefficiency estimation. Specifically, the resulting inefficiency estimates from the spatial models turned out to be higher than those from the non-spatial model, yet the magnitude of difference is relatively modest, confirming the approximate validity of the non-spatial stochastic frontier approach for this data set.
    Keywords: RStochastic frontier analysis, spatial model, inefficiency, hospital
    JEL: C24 C61 I11 I18
    Date: 2023–12
  2. By: Ferro Gustavo; Gatti Nicolás
    Abstract: Knowledge applied to innovation is increasingly recognized as an explanatory factor of economic growth. Innovation derives from the application of knowledge to generate new products or new processes. National Innovation Systems (NIS) performs as the formal or informal network of people within institutions, interacting to produce and apply knowledge to innovation. NIS can be understood as two subsystems: one based on scientifical and technological work, producing codified products (publications and patents), and the other centered on practical actions to diffuse, apply, and use knowledge. Our objective is to assess cost efficiency in the production of codified knowledge outputs (CKO), being our unit of analysis countries. To attain our goal, we apply a Stochastic Frontier Analysis (SFA) to estimate a cost frontier of CKO. The sample is a panel that includes 1189 observations, for 23 years (1996-2019), and 82 countries. Our main results identify determinants and patterns of efficiency and productivity, tendencies, and specifics of countries and groups of them.
    JEL: O12 O30
    Date: 2022–11
  3. By: Thomas M. Bombarde; Andrew L. Krause
    Abstract: Industries learn productivity improvements from their suppliers. The observed empirical importance of these interactions, often omitted by input-output models, mandates larger attention. This article embeds interdependent total factor productivity (TFP) growth into a general non-parametric input-output model. TFP growth is assumed to be Cobb-Douglas in TFP-stocks of adjacent sectors, where elasticities are the input-output coefficients. Studying how the steady state of the system reacts to changes in research effort bears insight for policy and the input-output literature. First, industries higher in the supply chain see a greater multiplication of their productivity gains. Second, the presence of `laggard' industries can bottleneck the the rest of the economy. By deriving these insights formally, we review a canonical method for aggregating TFP -- Hulten's Theorem -- and show the potential importance of backward linkages.
    Date: 2023–12
  4. By: Barış Kaymak; Immo Schott
    Abstract: Companies face different effective marginal tax rates on their income. This can be detrimental to allocative efficiency unless taxes offset other distortions in the economy. This paper estimates the effect of tax rate heterogeneity on aggregate productivity in distorted economies with multiple frictions. Using firm-level balance-sheet data and estimates of marginal tax rates, we find that tax heterogeneity reduces total factor productivity by about 3 percent. Our findings highlight the positive correlation between marginal tax rates and other distortions to capital and especially labor. This implies that tax rate heterogeneity exacerbates the distortionary effects of other frictions in the economy.
    Keywords: business taxation; aggregate productivity; TFP; misallocation
    JEL: D24 H25 O47
    Date: 2023–12–19
  5. By: Peter Warr (Australian National University, Canberra, Australia); Huy Quynh Nguyen (Hanoi School of Business and Management, Viet Nam National University, Hanoi, Viet Nam)
    Abstract: Viet Nam's 1986 programme of market-oriented economic reforms did not include the freedom of farmers to choose their crops independently. Large areas of land remain restricted to rice production. This paper studies the effects of this policy on agricultural productivity, using panel data from the Viet Nam Access to Resources Household Survey (VARHS), covering the years 2008 to 2016. The econometrics uses fixed effects methods with and without the additional use of instrumental variable methods to allow for the possible statistical endogeneity of the restrictions. The findings are that the crop choice restrictions reduced the overall productivity of annual crop land by about 5%, reduced the overall productivity of farm labour by about 8% and reduced the mean incomes of farm households by 5%-6%, implying increased levels of rural poverty. Moreover, rice output would have been no lower if the restrictions were removed
    Keywords: land restrictions, productivity, rice production, land policy
    JEL: Q15 C54
    Date: 2023–03–27
  6. By: Nizalova, Olena; Shepotylo, Oleksandr
    Abstract: This paper investigates the indirect economic impact of tuberculosis epidemic in one of the high-burden countries, focusing on the productivity at the individual level measured by the average wages and at firm level measured by the average total factor productivity (TFP). We use unique administrative data collected at the level of firms and regions for 2003-2009 and find that the ongoing tuberculosis (TB) epidemic has considerable indirect economic costs in terms of lost productivity and related inefficien- cies. First of all, both firms and individuals in regions with higher TB prevalence have significantly lower TFP and wages. Moreover, consistent with the Compensating Wage Differentials theory and after controlling for the TB prevalence, the risk of contracting the disease - TB incidence rate - is associated with higher wages and higher produc- tivity - a kind of premium for individuals and firms to operate in a risky environment. The latter can also be viewed as a source of inefficiency as this may prevent firms from entering more competitive markets. Additional analysis reveals strong spatial effects which are consistent with the infectious nature of the diseases and emphasize the im- portance of containing the epidemic. Overall, we estimate that a 10% decrease in the TB prevalence can lead to a 1.05% gain in GDP: 0.15% in terms of higher individual productivity and 0.89% in terms of firms' productivity.
    Keywords: Tuberculosis, Productivity, Regional Wage, Total Factor Productivity, TB Epidemic
    JEL: O18 I15 J24
    Date: 2023
  7. By: Ferro Gustavo; Gatti Nicolás
    Abstract: Experts give scores to wines, which are quality proxies for marketers and buyers. The production of wine quality is explained by a set of observable objective attributes, plus another set of unobservable and subjective (sensory) features, and randomness. We use a Stochastic Frontier Approach (SFA) to understand whether objective and subjective (sensory) characteristics of wines explain the differences in wine scores. We estimate a wine quality stochastic frontier production function, using a database of 1800 top-scored wines, in an 18 years-window encompassing objective determinants (price, production, year, grape, country, etcetera), being sensory aspects related to wine grading unobservable. We find that the variables included explain half of the “efficiency” in attaining scores and our results suggest that sensory variables may have a role in explaining inefficiency.
    JEL: D61 L66
    Date: 2022–11
  8. By: Michela Giorcelli
    Abstract: This paper studies to what extent the transfer of US managerial technologies to Europe after World War II contributed to closing the gap with US businesses. Between 1952 and 1958, the US government sponsored the Productivity Program, which promoted management training trips for European managers at US firms. Through the analysis of reports compiled by UK, France, Germany, and Italian participating firms, I first document that these companies claimed between 5 and 10% yearly productivity increase thanks to the program. The fact that European businesses were not forced to adopt the American management model, but could adapt it to their firm needs and existing business practices was a key aspect of the program’s success. Second, using data on US and Italian participating firms’ performance I show that Italian firms grew on average 7.8 percent faster than that of US companies in the ten years after the start of the program. Moreover, the distribution of productivity of Italian and US firms became more similar over years, confirming a performance convergence between these companies.
    JEL: M5 M50 N64 N73
    Date: 2023–12
  9. By: Huong-Giang Pham (Faculty of International Economics, Foreign Trade University, Viet Nam); Tuong-Anh T. Nguyen (Faculty of International Economics, Foreign Trade University, Viet Nam); Hoang-Nam Vu (Faculty of International Economics, Foreign Trade University, Viet Nam)
    Abstract: Conventional agricultural methods are putting considerable strain on developing countries' environments. This problem can be ameliorated through the adoption of Sustainable Agricultural Practices (SAPs), which can bring economic, ecological and social benefits for farmers, consumers and the overall economy. However, the adoption rates of SAPs remain low in many developing countries. It is therefore vital to provide empirical evidence on the improvement of agricultural productivity as it may assist policymakers in designing suitable policy as well as encourage farmers to adopt SAPs on their farms. This study analyses the impacts of different SAP adoption packages on land productivity and labour productivity in Viet Nam. This is the first attempt in the context of Viet Nam to investigate the economic effects of adopting different SAP packages including crop diversification (CD), conservation agriculture practices (CA) and a combination of those. Using panel Viet Nam Access to Resources Household Survey (VARHS) data with multinomial endogenous switching regressions and an instrumental variable helps reduce potential biases in impact evaluation that previous studies have not fully addressed. Results confirm that if a farmer adopts SAPs, it may raise his net profit per hectare by about 4 million Vietnamese Dong (D)/ha/year, whereas the agricultural income per hectare increases by about 4–6 million D/ha/year. Moreover, the joint adoption of multiple SAPs brings higher benefits (of about 2-4 more million D/ha/year) than single SAP adoption. These findings suggest that policymakers and related stakeholders should focus on promoting the adoption of a combination of crop diversification and conservation practices.
    Keywords: sustainable agricultural practices, multinomial endogenous switching regressions, household production, Viet Nam.
    JEL: D13 O13 Q12
    Date: 2023–03–27
  10. By: Colin Davis; Ken-ichi Hashimoto
    Abstract: This paper studies how national research subsidies affect productivity growth and national welfare through adjustments in the geographic location of research and development (R&D) across countries. Our two-country framework features a tension in the firm-level innovation location decision between accessing technical knowledge and sourcing low-cost high-skilled labor. With trade costs and imperfect international knowledge diffusion, the larger country has a greater share of industry and tends to host a larger share of innovation. In this setting, we find that an R&D subsidy expands the implementing country’s share of innovation and raises the rate of productivity growth. Although the non-implementing country experiences a welfare improvement, the rising cost of the policy generates a concave relationship between the R&D subsidy and the welfare of the implementing country, yielding an optimal R&D subsidy rate.
    Date: 2023–12
  11. By: Jacques Bughin
    Abstract: Generative artificial intelligence is invading the corporate suite and boardroom, surrounding the pros and cons of its use in the enterprise. Thefirst fundamental question is whether generative AI is truly a game changer, as evidenced by basic metrics such as productivity gains. We find thatit is, but that the benefits vary considerably from case to case, suggesting that managers need to do their homework to define their most favourableposition with respect to generative AI.
    Keywords: Generative artificial intelligence, AI
    Date: 2023–12

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